-----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, RHE1Pf7TB9+PdHmCYOyt16lV8ewN8QoyNdl6HU+zBnupWOtDwkCBL8pD2Sakzjck RyvpW/RwZDGoC3zeRKtZyQ== 0000912057-96-013513.txt : 19960702 0000912057-96-013513.hdr.sgml : 19960702 ACCESSION NUMBER: 0000912057-96-013513 CONFORMED SUBMISSION TYPE: S-4 PUBLIC DOCUMENT COUNT: 24 FILED AS OF DATE: 19960701 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: ARGOSY GAMING CO CENTRAL INDEX KEY: 0000895385 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-AMUSEMENT & RECREATION SERVICES [7900] IRS NUMBER: 371304247 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-07299 FILM NUMBER: 96589150 BUSINESS ADDRESS: STREET 1: 219 PIASA ST CITY: ALTON STATE: IL ZIP: 62002 BUSINESS PHONE: 6184747500 MAIL ADDRESS: STREET 1: 219 PIASA STREET CITY: ALTON STATE: IL ZIP: 62002 S-4 1 S-4 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 1, 1996 REGISTRATION NO. 333- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------------ FORM S-4 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ------------------------ ARGOSY GAMING COMPANY (Exact name of Registrant as specified in its charter) DELAWARE 37-1304247 (State or other jurisdiction (I.R.S. Employer of Identification Number) incorporation or organization) AND ITS GUARANTOR SUBSIDIARIES ILLINOIS ALTON GAMING COMPANY 37-1261292 LOUISIANA ARGOSY OF LOUISIANA, INC. 72-1265121 LOUISIANA CATFISH QUEEN PARTNERSHIP IN COMMENDAM 72-1274791 INDIANA THE INDIANA GAMING COMPANY 37-1314871 IOWA IOWA GAMING COMPANY 37-1329487 LOUISIANA JAZZ ENTERPRISES, INC. 72-1214771 MISSOURI THE MISSOURI GAMING COMPANY 37-1311505 MISSOURI THE ST. LOUIS GAMING COMPANY 37-1314873 (State of other jurisdiction (Exact name of Registrant as specified in its charter) (I.R.S. Employer of Identification Number) incorporation or organization)
------------------------------ 7999 (Primary Standard Industrial Classification Code Number) ------------------------------ 219 PIASA STREET ALTON, ILLINOIS 62002 (618) 474-7500 (Address, including zip code, and telephone number, including area code, of Registrant's principal executive offices) J. THOMAS LONG CHIEF EXECUTIVE OFFICER ARGOSY GAMING COMPANY 219 PIASA STREET ALTON, ILLINOIS 62002 (618) 474-7500 (Name, address, including zip code, and telephone number, including area code, of agent for service) ------------------------------ COPY TO: R. Cabell Morris, Jr. Winston & Strawn 35 West Wacker Drive Chicago, Illinois 60601 (312) 558-5600 ------------------------------ If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box: / / ------------------------------ CALCULATION OF REGISTRATION FEE
PROPOSED MAXIMUM PROPOSED MAXIMUM TITLE OF EACH CLASS OF SECURITIES AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF BEING REGISTERED REGISTERED PER UNIT (1) OFFERING PRICE (1) REGISTRATION FEE First Mortgage Notes due 2004..................... $235,000,000 100% $235,000,000 $81,034 Guarantees of each of the Guarantor Subsidiaries..................................... (2) (3) (3) None (3)
(1) In accordance with Rule 457(f)(2), the registration fee is calculated based on the book value, which has been computed as of July 1, 1996, of the outstanding 13 1/4% First Mortgage Notes due 2004 of Argosy Gaming Company to be cancelled in the exchange transaction hereunder. (2) The 13 1/4% First Mortgage Notes due 2004 of Argosy Gaming Company being registered will be guaranteed by each of Alton Gaming Company, Argosy of Louisiana, Inc., Catfish Queen Partnership in Commendam, Indiana Gaming Company, Iowa Gaming Company, Jazz Enterprises, Inc., The Missouri Gaming Company and The St. Louis Gaming Company. (3) No additional consideration will be paid by the recipients of the 13 1/4% First Mortgage Notes due 2004 for the Guarantees. Pursuant to Rule 437(n) under the Securities Act of 1933, no separate fee is payable for the Guarantees. ------------------------------ THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE. PROSPECTUS SUBJECT TO COMPLETION DATED JULY 1, 1996 [LOGO] OFFER TO EXCHANGE $1,000 IN PRINCIPAL AMOUNT OF ITS 13 1/4% FIRST MORTGAGE NOTES DUE 2004 WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT FOR EACH $1,000 IN PRINCIPAL AMOUNT OF ITS OUTSTANDING 13 1/4% FIRST MORTGAGE NOTES DUE 2004 THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON , 1996 UNLESS EXTENDED. ------------------------ Argosy Gaming Company, a Delaware Corporation (the "Company"), hereby offers to exchange (the "Exchange Offer") up to $235,000,000 in aggregate principal amount of its new 13 1/4% First Mortgage Notes due 2004 (the "Exchange Notes") for up to $235,000,000 in aggregate principal amount of its outstanding 13 1/4% First Mortgage Notes due 2004 (the "Old Notes" and, together with the Exchange Notes, the "Notes") that were issued and sold in a transaction exempt from registration under the Securities Act of 1933, as amended (the "Securities Act"). The terms of the Exchange Notes are substantially identical (including principal amount, interest rate, maturity, security and ranking) to the terms of the Old Notes for which they may be exchanged pursuant to the Exchange Offer, except that the Exchange Notes (i) are freely transferable by holders thereof (except as provided below) and (ii) are not entitled to certain registration rights and certain liquidated damages provisions which are applicable to the Old Notes under the Registration Rights Agreement (as defined herein). The Exchange Notes will be issued under the indenture governing the Old Notes. The Exchange Notes will be, and the Old Notes are, unconditionally guaranteed on a senior basis by Alton Gaming Company, The Missouri Gaming Company, The St. Louis Gaming Company, Iowa Gaming Company, Jazz Enterprises, Inc., Argosy of Louisiana, Inc., Catfish Queen Partnership in Commendam and The Indiana Gaming Company (the "Guarantors"). There will be no cash proceeds to the Company from the Exchange Offer. The Exchange Notes will bear interest from June 5, 1996. Holders of Old Notes whose Old Notes are accepted for exchange will be deemed to have waived the right to receive any payment in respect of interest on the Old Notes accrued from June 5, 1996 to the date of the issuance of the Exchange Notes. The Exchange Notes will bear interest at the rate of 13 1/4% per annum, payable semi-annually on June 1 and December 1 of each year, commencing December 1, 1996. The Company will not be required to make any mandatory redemption or sinking fund payments with respect to the Exchange Notes prior to maturity. The Exchange Notes are redeemable at the option of the Company, in whole or in part, at any time on or after June 1, 2000 at the redemption prices set forth herein, plus accrued and unpaid interest, if any, and Liquidated Damages (as defined herein), if any, thereon to the date of redemption. Upon a Change of Control (as defined herein), holders of the Exchange Notes will have the right to require the Company to purchase all or any of their Exchange Notes at 101% of the principal amount thereof, plus accrued and unpaid interest, if any, to the date of purchase. In addition, under certain circumstances, the Company will be required to offer to purchase Exchange Notes in various amounts at either 100% or 101% of the principal amount thereof, plus accrued and unpaid interest, if any, to the date of purchase in the event of certain asset sales, loss of certain licenses and certain events with respect to the Lawrenceburg Casino (as defined herein) and from certain distributions from the Lawrenceburg Casino. The Exchange Notes will, and the Old Notes do, rank senior in right of payment to all future and existing subordinated Indebtedness (as defined herein) of the Company and PARI PASSU with other senior Indebtedness of the Company. The Exchange Notes and the related guarantees will be, and the Old Notes and related guarantees are, secured, subject to certain prior liens and certain exceptions, by a first lien on substantially all the present assets of the Company and the current Guarantors, including (i) substantially all the assets used in the Company's Alton, Riverside, Baton Rouge and Sioux City properties, (ii) a pledge of all the capital stock of, and partnership interests in, the Company's Subsidiaries (as defined herein) owned by the Company and the Guarantors (excluding the Company's partnership interest in its Sioux City property), (iii) a pledge of intercompany notes, if any, payable to the Company and the Guarantors from their Subsidiaries, and (iv) an assignment of the proceeds of the management agreement relating to the Lawrenceburg Casino project. The collateral for the Exchange Notes will not, and for the Old Notes does not, include assets of the Company's Lawrenceburg Casino project. The indenture pursuant to which the Exchange Notes will be, and the Old Notes were, issued limits the ability of the Company and its Subsidiaries to incur additional Indebtedness. Under certain circumstances, the collateral securing the Notes may be subject to other liens securing Indebtedness, which liens will be PARI PASSU to the lien of the Exchange Notes. (CONTINUED ON NEXT PAGE) -------------------------- HOLDERS OF OLD NOTES SHOULD CAREFULLY CONSIDER THE MATTERS SET FORTH IN "RISK FACTORS" COMMENCING ON PAGE 16 OF THIS PROSPECTUS PRIOR TO MAKING A DECISION WITH RESPECT TO THE EXCHANGE OFFER. ------------------------ THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAVE THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. NEITHER THE ILLINOIS GAMING BOARD, THE MISSOURI GAMING COMMISSION, THE IOWA RACING AND GAMING COMMISSION, THE LOUISIANA GAMING CONTROL BOARD OR THE INDIANA GAMING COMMISSION NOR ANY OTHER STATE REGULATORY BODY HAS PASSED UPON THE ADEQUACY OR ACCURACY OF THIS OFFERING MEMORANDUM OR THE INVESTMENT MERITS OF THE SECURITIES OFFERED HEREBY. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL. THE DATE OF THIS PROSPECTUS IS , 1996. (COVER PAGE CONTINUED) The Old Notes were originally issued and sold on June 5, 1996 in a transaction not registered under the Securities Act, in reliance upon the exemption provided in Section 4(2) of the Securities Act and Rule 144A promulgated under the Securities Act. Accordingly, the Old Notes may not be reoffered, resold or otherwise pledged, hypothecated or transferred in the United States unless so registered or unless an applicable exemption from the registration requirements of the Securities Act is available. Based upon its view of interpretations provided to third parties by the Staff (the "Staff") of the Securities and Exchange Commission (the "Commission"), the Company believes that the Exchange Notes issued pursuant to the Exchange Offer in exchange for the Old Notes may be offered for resale, resold and otherwise transferred by holders thereof (other than any holder which is (i) an "affiliate" of the Company within the meaning of Rule 405 under the Securities Act (an "Affiliate"), (ii) a broker-dealer who acquired Old Notes directly from the Company or (iii) a broker-dealer who acquired Old Notes as a result of market making or other trading activities) without compliance with the registration and prospectus delivery provisions of the Securities Act provided that such Exchange Notes are acquired in the ordinary course of such holders' business and such holders are not engaged in, and do not intend to engage in, and have no arrangement or understanding with any person to participate in, a distribution of such Exchange Notes. Each broker-dealer that receives Exchange Notes for its own account pursuant to the Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Notes. The Letter of Transmittal that is filed as an exhibit to the Registration Statement of which this Prospectus is a part (the "Letter of Transmittal") states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. Broker-dealers who acquired Old Notes as a result of market making or other trading activities may use this Prospectus, as supplemented or amended, in connection with resales of the Exchange Notes. The Company has agreed that, for a period of 180 days after this Registration Statement is declared effective by the Commission, it will make this Prospectus available to any broker-dealer for use in connection with any such resale. Any holder who tenders in the Exchange Offer for the purpose of participating in a distribution of the Exchange Notes and any other holder that cannot rely upon such interpretations must comply with the registration and prospectus delivery requirements of the Securities Act in connection with a secondary resale transaction. Old Notes initially purchased by qualified institutional buyers were initially represented by two global Notes in registered form, registered in the name of a nominee of The Depository Trust Company ("DTC"), as depository. The Exchange Notes exchanged for Old Notes represented by the global Notes will be represented by one or more global Exchange Notes in registered form, registered in the name of the nominee of DTC. See "Description of Exchange Notes -- Book Entry, Delivery and Form." Exchange Notes issued to non-qualified institutional buyers in exchange for Old Notes held by such investors will be issued only in certificated, fully registered, definitive form. Except as described herein, Exchange Notes in definitive certificated form will not be issued in exchange for the global Exchange Note(s) or interests therein. The Old Notes and the Exchange Notes constitute new issues of securities with no established public trading market. Any Old Notes not tendered and accepted in the Exchange Offer will remain outstanding. To the extent that Old Notes are tendered and accepted in the Exchange Offer, a holder's ability to sell untendered, and tendered but unaccepted, Old Notes could be adversely affected. Following consummation of the Exchange Offer, the holders of any remaining Old Notes will continue to be subject to the existing restrictions on transfer thereof and the Company will have no further obligation to such holders to provide for the registration under the Securities Act of the Old Notes except under certain limited circumstances. See "Old Notes Registration Rights; Liquidated Damages." No assurance can be given as to the liquidity of the trading market for either the Old Notes or the Exchange Notes. The Exchange Offer is not conditioned upon any minimum aggregate principal amount of Old Notes being tendered or accepted for exchange. The Exchange Offer will expire at 5:00 p.m., New York City time, on , 1996, unless extended (the "Expiration Date"). The date of acceptance for exchange of the Old Notes (the "Exchange Date") will be the first business day following the Expiration Date, upon surrender of the Old Notes. Old Notes tendered pursuant to the Exchange Offer may be withdrawn at any time prior to the Expiration Date; otherwise such tenders are irrevocable. AVAILABLE INFORMATION The Company is subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance therewith files reports, proxy statements and other information with the Commission. The reports, proxy statements and other information filed by the Company with the Commission can be inspected and copied at the public reference facilities of the Commission at its principal office at Judiciary Plaza, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and at its regional offices at 500 W. Madison Street, 14th Floor, Chicago, Illinois 60606, and at Seven World Trade Center, 13th Floor, New York, New York 10048. Any interested party may obtain copies of such material at prescribed rates from the Public Reference Section of the Commission at its principal office at Judiciary Plaza, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE The Company's Annual Report on Form 10-K for the year ended December 31, 1995, Quarterly Report on Form 10-Q for the three months ended March 31, 1996, and Current Reports on Form 8-K dated February 26, 1996, March 15, 1996, March 19, 1996, and June 5, 1996 are hereby incorporated by reference. All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to the termination of the offering made hereby shall be deemed to be incorporated by reference in this Prospectus and to be a part hereof from the date of filing of such documents. Any statement contained herein or in a document incorporated or deemed to be incorporated herein by reference shall be deemed to be modified or superseded for purposes of this Prospectus to the extent that a statement contained in any subsequently filed document which is deemed to be incorporated by reference herein modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Propsectus. The Company will provide, without charge, to each person to whom a copy of this Prospectus is delivered, on the written or oral request of such person, a copy of any or all of the documents incorporated herein by reference (other than exhibits thereto). Written or telephone requests for such copies should be directed to the Company's principal office: Argosy Gaming Company, 219 Piasa Street, Alton, Illinois 62002, Attention: Director of Investor Relations (telephone: (618) 474-7500). 3 PROSPECTUS SUMMARY THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED INFORMATION AND CONSOLIDATED FINANCIAL STATEMENTS AND NOTES THERETO APPEARING ELSEWHERE IN THIS PROSPECTUS. EXCEPT AS OTHERWISE NOTED, ALL INFORMATION IN THIS PROSPECTUS IS PRESENTED AFTER GIVING EFFECT TO ALL TRANSACTIONS THAT ARE DESCRIBED IN THIS PROSPECTUS AS OCCURRING PRIOR TO OR SIMULTANEOUSLY WITH THE CLOSING OF THE EXCHANGE OFFER. UNLESS THE CONTEXT OTHERWISE REQUIRES, "COMPANY" AND "ARGOSY" WHEN USED IN THIS PROSPECTUS SHALL MEAN ARGOSY GAMING COMPANY AND ITS SUBSIDIARIES AND PREDECESSOR ENTITIES. THE COMPANY Argosy Gaming Company ("Argosy" or the "Company") is a leading multi-jurisdictional developer, owner and operator of riverboat and dockside casinos and related entertainment facilities in the midwestern and southern United States. The Company, through its subsidiaries, owns and operates the Alton Belle Casino in Alton, Illinois, serving the St. Louis metropolitan market; the Argosy Casino in Riverside, Missouri, serving the Kansas City metropolitan market; the Belle of Baton Rouge in Baton Rouge, Louisiana; and the Belle of Sioux City in Sioux City, Iowa. In a highly competitive application process, Indiana Gaming Company, L.P. ("Indiana Gaming L.P."), a limited partnership in which the Company is the general partner and holds a 57.5% partnership interest, received a certificate of suitability from the Indiana Gaming Commission to develop and operate a riverboat casino and related entertainment and support facilities in Lawrenceburg, Indiana (the "Lawrenceburg Casino"), which is located approximately 15 miles west of Cincinnati, Ohio. The Company is building what is anticipated to be one of the largest riverboat casinos in the United States and estimates that the total cost of developing the Lawrenceburg Casino project will be $210 million. The Lawrenceburg Casino is expected to draw from a population of approximately 1.6 million residents in the Cincinnati metropolitan area and approximately an additional 5.4 million people who reside within 100 miles of Lawrenceburg. The Company's business strategy emphasizes the phased development of attractive gaming and related entertainment facilities in gaming jurisdictions that the Company believes possess favorable long-term demographic and competitive characteristics. As part of this strategy, the Company endeavors to be an early entrant in emerging gaming markets, to establish a customer base and to develop its gaming properties in stages. The Company's casinos were the first gaming facilities to open in each of the St. Louis, Kansas City and Baton Rouge markets. By employing a phased development strategy, the Company believes it can reduce its initial capital investment and adapt the nature and scope of subsequent developments based on a continuing assessment of the size and competitive outlook of each of the Company's gaming markets. The Company intends to utilize management's proven ability to successfully open riverboat casino properties in new markets by continuing to pursue opportunities to develop or acquire (either independently or through joint ventures) riverboat, dockside and/or land-based gaming operations. The Company's operating strategy is to develop a loyal customer base by offering a variety of gaming and non-gaming entertainment amenities at attractive facilities that emphasize high standards of service and customer satisfaction. In each of its gaming markets, the Company establishes marketing programs that identify, target and attract local patrons typically residing within a 100-mile radius of its gaming facilities. The Company's marketing programs are designed to increase customer awareness, patronage and loyalty, as well as to encourage repeat business. The Company focuses and evaluates its marketing efforts through player tracking systems, slot clubs and preferred player clubs and utilizes mass advertising, direct mail and special promotions to attract customers within each of its gaming markets. CURRENT OPERATIONS ALTON BELLE CASINO, ALTON, ILLINOIS The Company commenced operations in Alton, Illinois in September 1991 as the first gaming facility to open in the St. Louis market and in the State of Illinois. The Alton Belle Casino is a three-deck contemporary style cruise liner featuring 21,000 square feet of gaming space with approximately 650 slot machines and 41 table games. The Alton Belle Casino also currently includes a 37,000-square foot, three-level floating 4 entertainment pavilion that features a sports and entertainment lounge, a 120-seat buffet, a 90-seat fine dining restaurant, conference facilities and a food court. Additionally, the Company is the only gaming operator in the St. Louis market that offers its customers off-track betting facilities. The Alton Belle Casino is located approximately 20 miles northeast of downtown St. Louis and generally draws from a population of approximately 2.5 million within the St. Louis metropolitan area and an additional 1.2 million within a 100-mile radius of the City of St. Louis. In particular, the primary target market of the Alton Belle Casino is the northern and eastern regions of the greater St. Louis metropolitan area, including certain regions of Illinois. The Company's management believes that its early entry into the St. Louis market has resulted in the development of a core base of customers, which, together with its data base of over 300,000 active customers, has enabled the Alton Belle Casino to remain competitive in the St. Louis market despite the significant increase in the number of gaming operations. The Company's Alton operations generated net revenues and earnings before interest, taxes, depreciation and amortization ("EBITDA") of $86.0 million and $26.7 million, respectively, for the year ended December 31, 1995 and $19.7 million and $5.0 million, respectively, for the three months ended March 31, 1996. ARGOSY CASINO, RIVERSIDE, MISSOURI The Argosy Casino began operations in Riverside, Missouri on June 22, 1994 as the first gaming facility to open in the Kansas City market. The Argosy Casino's riverboat is styled as a turn-of-the-century paddle wheel steamboat and features 32,900 square feet of gaming space with approximately 950 slot machines and 57 table games. The riverboat casino is complemented by an 85,000-square foot, land-based entertainment pavilion that opened on January 15, 1996. The new pavilion features a Mediterranean theme and includes over 14,000 square feet of banquet and conference facilities, a 78-seat specialty restaurant, a sports and entertainment lounge and a 350-seat buffet restaurant. A 624-space parking garage and a 1,262-space surface parking area are located adjacent to the pavilion. In August 1995, the Company began offering dockside gaming at the Argosy Casino and is considering adding a second dockside gaming facility in Riverside in order to increase the number of gaming positions and to offer its patrons staggered boarding times, thereby maximizing customer convenience. The Company has also recently entered into a letter of intent with a hotel developer/manager to develop, through a joint venture, a 200-room hotel at its Riverside facility. Pursuant to the letter of intent, which is subject to numerous conditions, the Company would contribute certain of its Riverside property to the joint venture and the developer/manager would contribute equity capital and make loans to the joint venture in an amount sufficient to construct the hotel. The Argosy Casino draws from a population of approximately 1.6 million in the greater Kansas City metropolitan area and an additional 900,000 within a 100-mile radius of Kansas City. The Argosy Casino is situated on a 55-acre site that is located approximately five miles from downtown Kansas City and offers convenient access from two major highways. Once competing gaming facilities that are currently under construction are completed, the Company believes that the Argosy Casino, which currently is the only existing or planned casino in the western Kansas City metropolitan area, will primarily attract customers who reside in the northwestern, western and southwestern regions of the Kansas City metropolitan area. The Company's Riverside operations generated net revenues and EBITDA of $94.1 million and $29.5 million, respectively, for the year ended December 31, 1995 and $23.9 million and $5.0 million, respectively, for the three months ended March 31, 1996. BELLE OF BATON ROUGE, BATON ROUGE, LOUISIANA The Belle of Baton Rouge began operations in Baton Rouge, Louisiana in September 1994 as the first riverboat gaming facility in the Baton Rouge market. The Belle of Baton Rouge is a three-level, ante-bellum themed riverboat casino that contains 28,900 square feet of gaming space with approximately 775 slot machines and 46 table games. The riverboat casino is complemented by the Company's adjacent, land-based entertainment development known as Catfish Town. The first phase of Catfish Town opened during 1995 and features a 250-seat entertainment lounge and sports bar, a 50-seat premium steakhouse, a 250-seat buffet/ coffee shop and conference facilities. The second phase of Catfish Town, an approximately 50,000-square foot entertainment facility, opened in April 1996 and features a climate-controlled, five-story glass atrium that will host a variety of entertainment functions, including banquets, parties, festivals, concerts and live 5 entertainment events. The third phase of the Catfish Town project will feature the build-out of approximately 150,000 square feet of leaseable retail space within the atrium complex that is expected to feature a variety of entertainment-related tenants, including specialty restaurants and specialty retail stores, entertainment venues, nightclubs and a microbrewery. The Company has improved customer accessability to the Belle of Baton Rouge by completing construction in October 1995 of a 733-space parking garage and by leasing in December 1995 a 271-space surface parking lot adjacent to Catfish Town. The Company is also pursuing opportunities to develop, through a joint venture, a 300-room hotel on the Company's property in Catfish Town. See "Risk Factors -- Louisiana Local Option Referendum to Restrict Gaming." The Belle of Baton Rouge draws from a population of approximately 540,000 in the Baton Rouge metropolitan area. The Company believes that the Belle of Baton Rouge will benefit from the entertainment, retail and hotel amenities expected to be offered at the Catfish Town development, from the facility's proximity to the Baton Rouge convention center and from its convenient access from Baton Rouge's two major interstate highways. The Belle of Baton Rouge casino generated net revenues and EBITDA of $50.3 million and $7.6 million, respectively, for the year ended December 31, 1995 and $13.8 million and $3.3 million, respectively, for the three months ended March 31, 1996. BELLE OF SIOUX CITY, SIOUX CITY, IOWA The Company became the manager of the Belle of Sioux City on October 4, 1994 and on December 1, 1994 became the 70% general partner of the Belle of Sioux City, L.P. The Company is the manager of the casino and receives a percentage management fee based upon the facility's adjusted gross gaming revenues (as defined in the management agreement). This fee was 4.5% through 1995 and increased to 6.5% in January 1996. The Belle of Sioux City is a three-level historic themed riverboat featuring approximately 11,800 square feet of gaming space with approximately 470 slot machines and 27 table games. The casino facility is complemented by an adjacent barge facility, which features buffet dining, a bar and a gift shop, and 274 surface parking spaces. The Belle of Sioux City draws from a population of approximately 80,000 in Sioux City and an additional 900,000 residents within a 100-mile radius of Sioux City. The Company's Sioux City operations generated net revenues and EBITDA (before the Company's management fee) of $22.0 million and $3.6 million, respectively, for the year ended December 31, 1995 and $5.1 million and $.6 million, respectively, for the three months ended March 31, 1996. OPERATIONS UNDER DEVELOPMENT LAWRENCEBURG CASINO, LAWRENCEBURG, INDIANA On June 30, 1995, Indiana Gaming L.P. received a certificate of suitability from the Indiana Gaming Commission to develop and operate a riverboat casino and entertainment complex in Lawrenceburg, Indiana, which is located approximately 15 miles west of Cincinnati, Ohio. The Company is the sole general partner of, and holds a 57.5% general partnership interest in, Indiana Gaming L.P. Conseco Entertainment, L.L.C. ("Conseco"), an indirect subsidiary of Conseco, Inc., holds a 29% limited partnership interest and certain other investors, including H. Steven Norton, Chief Operating Officer of the Company, who brought the opportunity to the Company concurrent with his initial employment, hold the remaining 13.5% limited partnership interest in Indiana Gaming L.P. The Lawrenceburg Casino is expected to draw from a population of approximately 1.6 million residents in the Cincinnati metropolitan area and an additional 5.4 million people who reside within 100 miles of Lawrenceburg, including the major metropolitan markets of Dayton and Columbus, Ohio; Indianapolis, Indiana; and, to a lesser extent, Lexington, Kentucky. The City of Lawrenceburg has major interstate highway access from each of these metropolitan areas. Indiana gaming law currently limits the number of gaming licenses to be issued in the state to a total of 11, including a maximum of 5 licenses along the Ohio River and a limit of one license per county. In addition, casino gaming is not currently permitted under the laws of either Ohio or Kentucky. As a result, the Company expects to face limited direct competition for gaming revenues upon the opening of the Lawrenceburg Casino. The next closest Indiana gaming facility to the Cincinnati market will be located approximately 15 miles south of Lawrenceburg and the principal traffic 6 route between the greater Cincinnati metropolitan area and the other facility passes Lawrenceburg. In addition, Indiana gaming law does not restrict the size of a licensee's gaming facility or place limits on customer losses or betting levels. The Company plans to open a temporary gaming facility in Lawrenceburg in the fourth quarter of 1996 and anticipates opening the permanent gaming facility not later than twelve months thereafter. The temporary facility will feature a leased 1,200-passenger gaming vessel with approximately 870 slot machines and 52 table games and an entertainment barge featuring ticketing, restaurant and bar facilities. For the permanent facility, Indiana Gaming L.P. is building what it believes to be one of the largest riverboat casinos in the United States, featuring approximately 90,000 square feet of gaming space on three levels. The permanent riverboat casino is expected to initially have approximately 2,600 gaming positions and accommodate approximately 4,400 passengers and crew members. It is anticipated that the permanent facility also will include a 300-room hotel, a 1,750-space parking garage, 2,000 additional surface parking spaces and a 120,000-square foot land-based entertainment pavilion and support facility featuring specialty restaurants, meeting and banquet rooms and a sports bar and entertainment lounge. The Company will manage the development, construction and operation of the Lawrenceburg Casino and will receive a management fee equal to 7.5% of the facility's EBITDA. Conseco will receive a financial advisory fee equal to 5% of the facility's EBITDA. The Company estimates that the total cost to open the temporary gaming facility and to construct the proposed permanent riverboat casino, land-based facilities and 300-room hotel will be approximately $210 million, which costs are being funded 57.5% by the Company and 42.5% by Conseco. Pursuant to the Lawrenceburg Casino partnership agreement, the Company and Conseco will fund on a pro rata basis any project costs between $210 million and $225 million and the Company is obligated to fund any project costs over $225 million. The Company's inability to satisfy its funding obligations for the Lawrenceburg Casino could result in a significant dilution of its interest in Indiana Gaming L.P. and its possible removal as the general partner. See "Lawrenceburg Casino Partnership Agreement" and "Risk Factors." As of June 30, 1996, approximately $ million of construction costs have been expended by Indiana Gaming L.P. for the Lawrenceburg Casino project, principally on progress payments on the construction of the riverboat casino, purchases of land and licensing costs. Construction projects, such as the Company's, entail significant risks, including shortages of materials or skilled labor, unforeseen engineering, environmental or geological problems, difficulties arising from statutes, regulations or actions of governmental bodies having jurisdiction or authority with regard to certain aspects of the project, work stoppages, weather interferences, floods, unanticipated cost increases and other problems. In addition, the number and scope of the licenses and approvals required to complete the construction of any project, particularly those pertaining to riverboat and dockside casino, hotel and other destination resort facilities, are extensive. The opening of the Lawrenceburg Casino is subject to the issuance of a gaming license in Indiana and while Indiana Gaming L.P. has been awarded a certificate of suitability, no assurance can be given that Indiana Gaming L.P. will have its certificate of suitability extended or be awarded its final gaming license or the other approvals necessary to open the Lawrenceburg Casino. See "Risk Factors." ------------------------ The Company was incorporated in Delaware in 1992. The Company's principal executive offices are located at 219 Piasa Street, Alton, Illinois 62002, and its telephone number is (618) 474-7500. 7 THE EXCHANGE OFFER The Exchange Offer........... The Company is offering to exchange (the "Exchange Offer") up to $235,000,000 aggregate principal amount of its new 13 1/4% First Mortgage Notes due 2004 (the "Exchange Notes") for up to $235,000,000 aggregate principal amount of its outstanding 13 1/4% First Mortgage Notes due 2004 that were issued and sold in a transaction exempt from registration under the Securities Act (the "Old Notes"). The Old Notes were initially offered and sold by Bear, Stearns & Co. Inc., Donaldson, Lufkin & Jenrette Securities Corporation, BA Securities, Inc. and Deutsche Morgan Grenfell/ C.J. Lawrence Inc., as the initial purchasers of the Old Notes (the "Initial Purchasers"), to certain institutional and accredited investors at a price of 100% of the principal amount thereof. The form and terms of the Exchange Notes are substantially identical (including principal amount, interest rate, maturity, security and ranking) to the form and terms of the Old Notes for which they may be exchanged pursuant to the Exchange Offer, except that the Exchange Notes are freely transferable by holders thereof except as provided herein (see "The Exchange Offer -- Terms of the Exchange" and "Terms and Conditions of the Letter of Transmittal") and are not entitled to certain registration rights and certain liquidation damages provisions that are applicable to the Old Notes under a registration rights agreement dated as of June 5, 1996 (the "Registration Rights Agreement") between the Company, the Guarantors and the Initial Purchasers. Exchange Notes issued pursuant to the Exchange Offer in exchange for the Old Notes may be offered for resale, resold and otherwise transferred by holders thereof (other than any holder which is (i) an Affiliate of the Company, (ii) a broker-dealer who acquired Old Notes directly from the Company or (iii) a broker-dealer who acquired Old Notes as a result of market-making or other trading activities), without compliance with the registration and prospectus delivery provisions of the Securities Act provided that such Exchange Notes are acquired in the ordinary course of such holders' business and such holders are not engaged in, and do not intend to engage in, and have no arrangement or understanding with any person to participate in, a distribution of such Exchange Notes. Minimum Condition............ The Exchange Offer is not conditioned upon any minimum aggregate principal amount of Old Notes being tendered or accepted for exchange. Expiration Date.............. The Exchange Offer will expire at 5:00 p.m., New York City time, on , 1996 unless extended (the "Expiration Date"). Exchange Date................ The first date of acceptance for exchange for the Old Notes will be the first business day following the Expiration Date. Conditions to the Exchange Offer....................... The obligation of the Company to consummate the Exchange Offer is subject to certain conditions. See "The Exchange Offer -- Conditions to the Exchange Offer." The Company reserves the right to terminate or amend the Exchange Offer at any time prior to the Expiration Date upon the occurrence of any such condition.
8 Withdrawal Rights............ Tenders of Old Notes pursuant to the Exchange Offer may be withdrawn at any time prior to the Expiration Date. Any Old Notes not accepted for any reason will be returned without expense to the tendering holders thereof as promptly as practicable after the expiration or termination of the Exchange Offer. Procedures for Tendering Old Notes....................... See "The Exchange Offer -- How to Tender." Federal Income Tax Consequences................ The exchange of Old Notes for Exchange Notes by tendering holders will not be a taxable exchange for federal income tax purposes, and such holders should not recognize any taxable gain or loss or any interest income as a result of such exchange. Use of Proceeds.............. There will be no cash proceeds to the Company from the exchange pursuant to the Exchange Offer. Effect on Holders of Old As a result of the making of this Exchange Offer, and upon Notes....................... acceptance for exchange of all validly tendered Old Notes pursuant to the terms of this Exchange Offer, the Company will have fulfilled a covenant contained in the terms of the Old Notes and the Registration Rights Agreement, and, accordingly, the holders of the Old Notes will have no further registration or other rights under the Registration Rights Agreement, except under certain limited circumstances. See "Old Notes Registration Rights; Liquidated Damages." Holders of the Old Notes who do not tender their Old Notes in the Exchange Offer will continue to hold such Old Notes and will be entitled to all the rights and limitations applicable thereto under the Indenture. All untendered, and tendered but unaccepted, Old Notes will continue to be subject to the restrictions on transfer provided for in the Old Notes and the Indenture. To the extent that Old Notes are tendered and accepted in the Exchange Offer, the trading market, if any, for the Old Notes not so tendered could be adversely affected. See "Risk Factors -- Consequences of Failure to Exchange Old Notes."
TERMS OF THE EXCHANGE NOTES The Exchange Offer applies to $235,000,000 aggregate principal amount of Old Notes. The form and terms of the Exchange Notes are substantially identical to the form and terms of the Old Notes except that the Exchange Notes have been registered under the Securities Act and, therefore, will not bear legends restricting the transfer thereof. The Exchange Notes will evidence the same debt as the Old Notes and will be entitled to the benefits of the Indenture. See "Description of Exchange Notes." Securities Offered........... $235,000,000 principal amount of 13 1/4% First Mortgage Notes due 2004. Maturity Date................ June 1, 2004. Interest Payment Dates....... June 1 and December 1 of each year, commencing December 1, 1996. Ranking and Security......... The Exchange Notes will be secured obligations of the Company and will rank senior in right of payment to all subordinated Indebtedness (as defined herein) of the Company and PARI PASSU in right of payment to all future and existing senior Indebtedness of the Company. The Exchange Notes and the related guarantees will be secured, subject to prior liens and certain exceptions, by substantially all the present assets of the Company and the current
9 Guarantors, including (i) substantially all the assets used in the Company's Alton, Riverside, Baton Rouge and Sioux City properties, (ii) a pledge of all the capital stock of, and partnership interests in, the Company's Subsidiaries owned by the Company and the Guarantors (excluding the Company's partnership interest in its Sioux City property), (iii) a pledge of intercompany notes, if any, payable to the Company and the Guarantors from their Subsidiaries, and (iv) an assignment of the proceeds of the management agreement with Indiana Gaming L.P. relating to the Lawrenceburg Casino. The collateral for the Exchange Notes will not include assets of the Lawrenceburg Casino; however, the collateral for the Exchange Notes will include a pledge of the Company's equity interest in, and notes evidencing capital loans advanced to, the Lawrenceburg Casino, as well as a pledge of the proceeds of the management fee payable to the Company. The collateral for the Exchange Notes will not include assets owned by the Sioux City partnership; however collateral for the Exchange Notes will include the riverboat owned by the Company and leased to such partnership. The indenture pursuant to which the Exchange Notes will be, and the Old Notes were, issued (the "Indenture") limits the ability of the Company and its Subsidiaries to incur additional Indebtedness. Under certain circumstances, the collateral securing the Exchange Notes may be subject to other liens securing other Indebtedness, which liens will be PARI PASSU to the lien of the Exchange Notes. The collateral for the Notes will not include assets of future Subsidiaries of the Company unless acquired with the proceeds of the sale of collateral or certain distributions from the Lawrenceburg Casino. See "Description of Exchange Notes -- Security for the Exchange Notes" and "-- Certain Covenants -- Limitation on Incurrence of Additional Indebtedness and Disqualified Capital Stock." Guarantees................... The Exchange Notes will be unconditionally guaranteed on a senior basis by each Guarantor. See "Description of Exchange Notes -- Guarantees." Mandatory Redemption......... The Company is not required to make mandatory redemption or sinking fund payments prior to the maturity of the Exchange Notes. Optional Redemption.......... The Exchange Notes will be redeemable at the option of the Company in whole or in part at any time on or after June 1, 2000 at the redemption prices set forth herein plus accrued and unpaid interest, if any, and Liquidated Damages, if any, thereon to the date of redemption. The Company will also have the option to redeem the Exchange Notes at any time if a holder is not found suitable by a gaming authority. See "Description of Exchange Notes -- Optional Redemption." Change of Control............ Upon a Change of Control (as defined herein), holders of the Exchange Notes will have the right to require the Company to purchase any or all of the Exchange Notes at a purchase price equal to 101% of the aggregate principal amount of the Exchange Notes plus accrued and unpaid interest thereon to the date of purchase. See "Description of Exchange Notes -- Certain Covenants -- Repurchase of Notes at the Option of the Holder upon a Change of Control."
10 Certain Covenants; Repurchase Obligation.................. The Indenture contains covenants restricting or limiting the ability of the Company and its Subsidiaries (which term, as defined in the Indenture, does not include any Unrestricted Subsidiaries) to, among other things, (i) pay dividends or make other restricted payments, (ii) incur additional indebtedness or issue certain preferred stock, (iii) create liens, (iv) create dividend or other payment restrictions affecting Subsidiaries, (v) enter into mergers or consolidations or make sales of all or substantially all assets of the Company, and (vi) enter into transactions with affiliates. In addition, under certain circumstances, the Company will be required to offer to purchase Exchange Notes in various amounts at either 100% or 101% of the principal amount thereof, plus accrued and unpaid interest, if any, and Liquidated Damages, to the date of purchase, in the event of certain asset sales, loss of certain licenses and certain events with respect to the Lawrenceburg Casino and from certain distributions from the Lawrenceburg Casino. See "Description of Exchange Notes." Special Status of Lawrenceburg Casino Project..................... Indiana Gaming L.P., formed for the sole purpose of developing the Lawrenceburg Casino project, is an Unrestricted Subsidiary of the Company. None of the assets of Indiana Gaming L.P. will be pledged as collateral; however, the Company's 57.5% partnership interest in, notes evidencing capital loans advanced to and the proceeds to be received as a management fee from Indiana Gaming L.P. will be pledged as collateral for the Exchange Notes. A portion of the proceeds of the offering of the Old Notes in the amount of $94.3 million was placed in a disbursement account under the control of a disbursement agent solely to fund the Company's share of the remaining capital obligations necessary to construct, open and complete the Lawrenceburg Casino project. Pursuant to the terms of the disbursement agreement governing the disbursement account, there are certain conditions and limitations affecting the ability of the Company to draw upon such funds. See "Description of Exchange Notes -- Cash Collateral and Disbursement Agreement." Approximately $91.3 million of these capital obligations will be invested in Indiana Gaming L.P. in the form of capital loans and $3 million will be invested as preferred equity. Investments by the Company in Indiana Gaming L.P., in the form of capital loans and common and preferred equity, will be pledged as collateral for the Exchange Notes. Any funds remaining in the disbursement account will be released to the Company upon final completion of the Lawrenceburg Casino project. A portion of the funds may also be released from the disbursement account to the extent the project can obtain and fund third-party financing for the hotel development. See "Lawrenceburg Casino Partnership Agreement." The Company's conduct with respect to Indiana Gaming L.P. will be subject to certain restrictive covenants. The Indenture requires the Company to make annual offers to purchase Exchange Notes in a principal amount equal to 50% of the distributions from Indiana Gaming L.P. (excluding management fees, interest income, preferred dividends and provisions for taxes, up to the amount of the
11 investment therein), and to make an offer to repurchase Exchange Notes with the proceeds of a sale of the assets of, or its partnership interest in, Indiana Gaming L.P. In addition, the Indenture provides that, as long as the Company is the general partner of Indiana Gaming L.P., the Company will prohibit Indiana Gaming L.P. from incurring any indebtedness that is recourse to the Company or that restricts the payment of dividends or other distributions from Indiana Gaming L.P. to the Company or a Guarantor. Furthermore, as long as the Company is general partner of Indiana Gaming L.P., the Indenture restricts the ability of the Company to amend the terms of the partnership agreement dealing with distributions or partnership purpose, which is limited to the operation of the Lawrenceburg Casino. Under certain circumstances, the Company may be removed as general partner of Indiana Gaming L.P., including upon a foreclosure by the Trustee under the Notes on the Company's equity interest in Indiana Gaming L.P. Cash Collateral and Disbursement Agreement...... Pursuant to the terms of the Indenture, the Company, the Trustee and LaSalle National Trust, N.A., as disbursement agent, entered into a Cash Collateral and Disbursement Agreement pursuant to which $94.3 million of the proceeds of the Offering were deposited into a disbursement account subject to the control of the disbursement agent. Funds in the disbursement account will be available to fund the Company's pro rata share of Lawrenceburg Casino project disbursements. Funds may be released from the disbursement account upon certification by the Company to the disbursement agent (i) as to the proposed use of the project disbursement in the Lawrenceburg Casino project in conformity with the construction budget, (ii) that the amounts held in the disbursement account plus amounts contractually obligated to be contributed by Conseco and third party equipment financing are sufficient to complete the Lawrenceburg Casino project, (iii) that Conseco is no more than 90 days past due on any prior capital call, PROVIDED, HOWEVER, that any amounts not funded by Conseco that have been funded by the Company (other than through the disbursement account) in an aggregate amount not to exceed $10 million at any one time will not be considered past due and (iv) as to the satisfaction of certain other conditions. A portion of the funds may also be released to the Company from the disbursement account upon completion of the Lawrenceburg Casino project and upon funding of hotel construction by third party lenders. The total amount of disbursements made by the disbursement agent shall not exceed $35 million prior to the next time the certificate of suitability granted by the Indiana Gaming Commission to Indiana Gaming L.P. is formally renewed or extended by the Indiana Gaming Commission for at least 120 days or, if earlier, the date gaming operations are commenced at the temporary gaming facility in Lawrenceburg. No disbursements may be made at any time if (i) Indiana Gaming L.P.'s certificate of suitability has been revoked or canceled or has expired or been suspended and has not been renewed by the Indiana Gaming Commission prior to issuance of a riverboat owner's license, (ii) Indiana Gaming L.P.'s application for
12 a permanent riverboat owner's license is denied by the Indiana Gaming Commission, (iii) Indiana Gaming L.P. is found unsuitable by the Indiana Gaming Commission, (iv) Indiana Gaming L.P. has its riverboat owner's license revoked or suspended by the Indiana Gaming Commission, (v) the Company or any of its subsidiaries is found unsuitable by the Indiana Gaming Commission, or (vi) the Company, any of its subsidiaries or Indiana Gaming L.P. shall have received notice from the Indiana Gaming Commission of the commencement of proceedings by the Indiana Gaming Commission, the stated purpose of which is to formally consider taking any of the foregoing actions. The agreement grants the Trustee a first priority security interest in the disbursement account, and permits the Trustee the right to access the disbursement account for certain payments of principal and interest, including the offer to purchase described under "Certain Covenants Relating to the Lawrenceburg Casino -- Repurchase of Exchange Notes on Certain Project Delays."
RISK FACTORS Holders of the Old Notes should carefully consider the matters set forth under the caption "Risk Factors" prior to making a decision with respect to the Exchange Offer. 13 SUMMARY CONSOLIDATED FINANCIAL DATA The following summary consolidated financial data has been derived from the consolidated financial statements of the Company and should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the Company's Consolidated Financial Statements and Notes thereto, included elsewhere in this Prospectus. The Company believes that the results of operations for each of the three years in the period ended December 31, 1995 are not readily comparable to each other because (i) the Alton Belle Casino commenced operations in September 1991, was substantially expanded in May 1993, was affected by severe flooding experienced in the St. Louis area in the summer of 1993 and was the only casino that operated in the St. Louis market until June 1993, (ii) the Argosy Casino in Riverside commenced operations on June 22, 1994 on a riverboat that offered only the limited forms of casino gaming then permitted under Missouri law, and on December 9, 1994 expanded its operations to offer additional casino gaming, including slot machines, (iii) the Belle of Baton Rouge commenced operations on September 30, 1994 through a 90% interest in a joint venture, which became a 100% subsidiary of the Company on June 6, 1995 (effective May 30, 1995), and (iv) the Company became the manager of the Belle of Sioux City on October 4, 1994 and on December 1, 1994 became the 70% general partner of Belle of Sioux City, L.P.
THREE MONTHS ENDED YEARS ENDED DECEMBER 31, MARCH 31, ------------------------------- -------------------- 1993 1994 1995 1995 1996 --------- --------- --------- --------- --------- (IN THOUSANDS, EXCEPT PER SHARE DATA AND RATIOS) INCOME STATEMENT DATA: Casino revenues............................................. $ 60,182 $ 138,425 $ 237,613 $ 56,593 $ 58,791 Net revenues................................................ 67,525 153,045 252,691 60,374 62,689 Income from operations...................................... 14,327 22,994 27,662 6,221 1,912 Interest expense............................................ 800 8,182 14,708 3,942 4,211 Net income (loss) (a)....................................... 10,825 9,635 6,953 1,468 (1,047) Net income (loss) per share................................. -- .40 .29 .06 (.04) Shares outstanding.......................................... -- 24,333 24,333 24,333 24,333 Pro forma net income (loss) per share (a)................... $ .38 -- $ .23 $ .05 -- Pro forma shares outstanding (a)............................ 23,764 -- 24,333 24,333 -- OTHER DATA: Riverboat casinos in operation (b).......................... 1 4 4 4 4 Casino square footage (b)................................... 20,982 94,546 94,546 94,546 94,546 Gaming positions (b)........................................ 967 4,025 4,127 4,127 4,127 Capital expenditures........................................ $ 36,027 $ 112,013 $ 71,854 $ 12,559 $ 29,283 Depreciation and amortization............................... 3,333 9,846 20,450 4,579 5,889 Development and preopening costs............................ 4,609 9,761 6,888 466 1,855 EBITDA (c).................................................. 17,660 32,840 48,112 10,800 7,801 Adjusted EBITDA(d).......................................... 19,137 37,940 54,078 11,359 10,540 Cash provided by (used in) Operating activities...................................... 15,419 24,783 49,932 14,474 5,756 Investing activities...................................... (65,434) (118,714) (86,644) (14,873) (29,415) Financing activities...................................... 54,670 104,818 34,580 (3,672) 35,629 Ratio of earnings to fixed charges (e)...................... 16.0x 2.3x 1.5x 1.5x --(e) Pro forma ratio of earnings to fixed charges (e)............ -- -- 1.3x -- --(e) Ratio of EBITDA to interest expense......................... 22.1x 4.0x 3.3x 2.7x 1.9x Ratio of Adjusted EBITDA to pro forma interest expense (f)........................................................ -- -- 1.2x -- 1.0x
14
AS OF MARCH 31, 1996 -------------------------- ACTUAL AS ADJUSTED (G) --------- --------------- (IN THOUSANDS) BALANCE SHEET DATA: Cash and cash equivalents............................................................ $ 28,129 $ 163,741 Total assets......................................................................... 344,925 483,285 Existing Bank Credit Facility........................................................ 71,000 -- Other Long-term debt, including current maturities................................... 124,202 359,202 Total stockholders' equity........................................................... 96,493 95,508
- --------------- (a) From their inception until a reorganization that was effected on February 25, 1993, certain predecessor entities of the Company elected to be treated as S Corporations under the Internal Revenue Code and were not generally subject to corporate income taxes. The pro forma net income amount for the year ended December 31, 1993 has been determined assuming the reorganization had occurred on January 1, 1993, resulting in the Company being treated as a C Corporation for tax purposes as of that date and to reflect the use of a portion of the net proceeds of the Company's initial public offering to retire debt. The pro forma tax provision for 1993 has been computed using an effective tax rate of 39%. See Notes 1 and 8 of the Notes to the Consolidated Financial Statements. In addition, pro forma net income per share for the three months ended March 31, 1995 and for the year ended December 31, 1995 reflects the Company's June 7, 1995 acquisition of Jazz Enterprises, Inc. (the "Jazz Acquisition") as if the Jazz Acquisition had occurred on January 1, 1995. The Company's pro forma net revenue, income from operations, interest expense and net income giving such effect to the Jazz Acquisition for the year ended December 31, 1995 is $252.7 million, $26.8 million, $15.5 million and $5.7 million, respectively. The Company's pro forma net revenue, income from operations, interest expense and net income giving such effect to the Jazz Acquisition for the three months ended March 31, 1995 is $60.4 million, $5.7 million, $4.4 million and $1.3 million respectively. See Note 7 of the Notes to Consolidated Financial Statements. (b) Data is as of end of period. (c) EBITDA is defined as earnings before interest, taxes, depreciation and amortization. EBITDA should not be construed as an alternative to operating income or net income (as determined in accordance with generally accepted accounting principles) as an indicator of the Company's operating performance, or as an alternative to cash flows generated by operating, investing and financing activities (as determined in accordance with generally accepted accounting principles) as an indicator of cash flow or a measure of liquidity. EBITDA is presented solely as supplemental disclosure because management believes that it is a widely used measure of operating performance in the gaming industry and for companies with a significant amount of depreciation and amortization. The Company has other significant uses of cash flows, including capital expenditures, which are not reflected in EBITDA. (d) Adjusted EBITDA is EBITDA adjusted to add back $1.4 million of flood costs in 1993, $5.1 million of pre-opening costs in 1994, a $3.5 million non-cash write off of notes receivable related to a discontinued St. Louis development, a $.3 million accrual related to a fine in Louisiana and $2.1 million in pre-opening costs in 1995. For the three months ended March 31, 1995, adjusted EBITDA is EBITDA adjusted to add back a $.3 million accrual related to a fine in Louisiana and $.2 million of pre-opening costs, and for the three months ended March 31, 1996, adjusted EBITDA is EBITDA adjusted to add back $1.5 million in professional and other fees related to its response to a Marion County, Indiana grand jury document subpoena and the related termination of a private placement of first mortgage notes and $1.6 million in pre-opening expenses and further adjusted to subtract a $.3 million reversal of an accrual related to a fine in Louisiana. (e) The ratio of earnings to fixed charges has been computed by dividing earnings available for fixed charges (income before income taxes plus fixed charges less capitalized interest) by fixed charges (interest expense plus capitalized interest and one third of rental expense (the portion deemed representative of the interest factor)). The Company's earnings were inadequate to cover fixed charges for the three months ended March 31, 1996 by approximately $3.6 million. The pro forma ratio of earning to fixed charges reflects the net increase in interest expense related to the issuance of that portion of the Old Notes necessary to retire amounts outstanding under the Company's former bank credit facility (the "Former Bank Credit Facility") as of December 31, 1995 and March 31, 1996. The Former Bank Credit Facility was repaid in full and terminated with a portion of the net proceeds received by the Company in connection with the Offering of the Old Notes. The Company's earnings were inadequate to cover pro forma fixed charges for the three months ended March 31, 1996 by approximately $4.2 million. (f) Adjusted to give effect to the issuance and sale by the Company of the Old Notes and the application of that portion of the net proceeds therefrom used to retire the Former Bank Credit Facility as if such transactions had occurred on January 1, 1995. See "Use of Proceeds." (g) Adjusted to give effect to the issuance and sale by the Company of the Old Notes and the application of that portion of the estimated net proceeds therefrom used to retire the Former Bank Credit Facility as set forth under "Use of Proceeds," including an approximately $1.0 million after-tax extraordinary charge arising from the accelerated writeoff of deferred finance costs related to the early extinguishment of the Former Bank Credit Facility. See "Capitalization" and "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Overview." As adjusted cash and cash equivalents includes the $94.3 million of cash that was deposited into the cash collateral and disbursement account under the control of a disbursement agent solely for use in connection with developing the Lawrenceburg Casino project. See "Description of Exchange Notes -- Cash Collateral and Disbursement Agreement." 15 RISK FACTORS IN ADDITION TO OTHER INFORMATION CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS, BEFORE TENDERING THEIR OLD NOTES FOR THE EXCHANGE NOTES OFFERED HEREBY, HOLDERS OF OLD NOTES SHOULD CONSIDER CAREFULLY THE FOLLOWING FACTORS, WHICH MAY BE GENERALLY APPLICABLE TO THE OLD NOTES AS WELL AS TO THE EXCHANGE NOTES: CONSEQUENCES OF FAILURE TO EXCHANGE OLD NOTES Holders of Old Notes who do not exchange their Old Notes for Exchange Notes pursuant to the Exchange Offer will continue to be subject to the restrictions on transfer of such Old Notes, as set forth in the legend thereon, as a consequence of the issuance of the Old Notes pursuant to exemptions from, or in transactions not subject to, the registration requirements of the Securities Act and applicable state securities laws. In general, the Old Notes may not be offered or sold, unless registered under the Securities Act and applicable state securities laws, or pursuant to an exemption therefrom. Except under certain limited circumstances, the Company does not intend to register the Old Notes under the Securities Act. In addition, any holder of Old Notes who tenders in the Exchange Offer for the purpose of participating in a distribution of the Exchange Notes may be deemed to have received restricted securities and, if so, will be required to comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale transaction. To the extent Old Notes are tendered and accepted in the Exchange Offer, the trading market, if any, for the Old Notes not so tendered could be adversely affected. See "The Exchange Offer" and "Old Notes Registration Rights; Liquidated Damages." SUBSTANTIAL INDEBTEDNESS At March 31, 1996, as adjusted to give effect to the offering of the Old Notes and the use of the estimated net proceeds therefrom, the Company's total indebtedness would have been approximately $359.2 million, its total stockholders' equity would have been approximately $95.5 million and its total capitalization would have been approximately $454.7 million. See "Capitalization." After giving effect to the offering of the Old Notes, the pro forma ratio of earnings to fixed charges for the fiscal year ended December 31, 1995 was 1.3x and earnings were inadequate to cover pro forma fixed charges for the three months ended March 31, 1996 by approximately $4.2 million. The substantial leverage and capital commitments of the Company have important consequences for holders of the Old Notes and Exchange Notes (the "Noteholders"), including the risk that the Company may not generate sufficient cash flow from its subsidiaries operations to pay principal of, and interest on, indebtedness and to meet its capital expenditure requirements. The Company's indebtedness includes $115 million principal amount of 12% Convertible Subordinated Notes that have a final maturity of June 1, 2001. In addition, the operating and financial restrictions contained in the Indenture and future indebtedness could affect the Company, including without limitation, restrictions relating to the incurrence of additional indebtedness for working capital, capital expenditures, acquisitions or general corporate purposes, the distribution of cash to stockholders, the making of certain investments and restricted payments, mergers and sales of assets and the creation of liens. Such restrictions could have the following effects: (i) the Company's ability to obtain additional financing may be significantly impaired; (ii) the Company's ability to respond quickly to increased competition and other market forces may be limited; (iii) the Company's ability to pursue additional gaming opportunities will be limited; and (iv) the Company's vulnerability to weak general economic conditions may be greater than it would otherwise be absent such restrictions. The ability of the Company to meet its debt service requirements and to engage in various significant corporate transactions that may be important to its business will be dependent upon future operating performance and the opening of the Lawrenceburg Casino project, each of which is subject to financial, economic, competitive, regulatory and other factors affecting the Company, many of which are beyond the Company's control. These inherent uncertainties are compounded as a result of the limited history of the riverboat gaming industry. Since a substantial portion of its cash flow from operations must be dedicated to the payment of interest on outstanding debt, there can be no assurance that the Company's cash flow from operations will be sufficient to meet its debt service requirements and other obligations or to repay its indebtedness at maturity. If the Company is unable to generate sufficient cash flow, it could be required to adopt one or more alternatives, such as reducing or delaying planned capital expenditures, selling assets, 16 restructuring debt or obtaining additional capital. However, the Company's ability to raise funds by selling assets is greatly restricted by the Indenture and its ability to effect equity offerings is dependent on the Company's results of operations and market conditions. There can be no assurance that any of such alternatives will be feasible on satisfactory terms, and resorting to alternative sources of funds could impair the Company's competitive position and reduce its future cash flow. See "Management's Discussion and Analysis of Financial Condition and Results of Operations." FORECLOSURE RESTRICTIONS In the event of an "Event of Default" by the Company under the Indenture, before the Trustee or the Noteholders can foreclose or take possession of the pledged stock of or partnership interest in any of the Company's subsidiaries or certain of the Company's or its subsidiaries' assets, the Trustee or such Noteholders may have to file applications with the gaming commissions of Illinois, Missouri, Louisiana, Indiana and Iowa and other jurisdictions in which the Company's gaming assets are located, be investigated and be licensed by such jurisdiction's gaming commissions. This process can take several months and, accordingly, the ability of the Trustee or any Noteholder to foreclose could be substantially delayed or impaired. Moreover, no assurance can be given that either the Trustee or any Noteholder will be found suitable by such gaming commissions. Additionally, the Trustee and the Noteholders may be prohibited from taking possession of that portion of the collateral that constitutes gaming equipment and machinery by applicable state and federal law. In an Event of Default by the Company, before the Trustee or Noteholders can take possession of or sell any collateral constituting security for the Notes, the Trustee or such Noteholders, in addition to complying with applicable state gaming laws, will have to comply with all applicable federal and state judicial or non-judicial foreclosure and sale laws. Such laws may include cure provisions, mandatory sale notice provisions, manner of sale provisions and redemption period provisions. Such provisions may significantly increase the time associated with taking possession or the sale of any collateral. Failure to comply with any applicable provision could void the foreclosure on or sale of such collateral. In addition, licensing requirements may limit the number of potential bidders in a foreclosure sale, may delay the sale and may adversely affect the sale price of the Company's assets. See "Regulatory Matters." CERTAIN BANKRUPTCY CONSIDERATIONS The right of the Trustee to repossess and dispose of the collateral for the Notes upon the occurrence of an Event of Default on the Notes is likely to be significantly impaired by applicable bankruptcy law if a bankruptcy proceeding were to be commenced by or against the Company, whether by a Noteholder or another creditor (including a junior creditor), prior to such repossession and disposition. Under applicable bankruptcy law, secured creditors such as the Noteholders are prohibited from repossessing their security from a debtor in a bankruptcy case, or from disposing of security repossessed from such debtor, without bankruptcy court approval. Moreover, applicable bankruptcy law permits the debtor to continue to retain and to use the collateral even though the debtor is in default under the applicable debt instruments, provided that the secured creditor is given "adequate protection." The meaning of the term "adequate protection" may vary according to circumstances, but it is intended in general to protect the value of the secured creditor's interest in the collateral and may include cash payments or the granting of additional security, at such time and in such amount as the court in its discretion may determine, for any diminution in the value of the collateral as a result of the stay of repossession or disposition or any use of the collateral by the debtor during the pendency of the bankruptcy case. In view of the lack of a precise definition of the term "adequate protection" and the broad discretionary powers of a bankruptcy court, it is impossible to predict how long payments under the Notes could be delayed following commencement of a bankruptcy case, whether or when the Trustee could repossess or dispose of the collateral for the Notes or whether or to what extent the Noteholders would be compensated for any delay in payment or loss of value of the collateral for the Notes through the requirement of "adequate protection." FRAUDULENT TRANSFER CONSIDERATIONS The obligation of each of the Guarantors of the Notes and the grant by each such Guarantor of a security interest in its assets may be subject to review under state or federal fraudulent transfer laws. Under such laws, if a court, in a lawsuit by an unpaid creditor or representative of creditors of a Guarantor, such as a trustee in bankruptcy or such Guarantor as debtor-in possession, were to find that at the time such obligation 17 was incurred or the security interest granted, such Guarantor, among other things, (a) did not receive fair consideration or reasonably equivalent value therefore and (b) either (i) was insolvent, (ii) was rendered insolvent, (iii) was engaged in a business or transaction for which its remaining unencumbered assets constituted unreasonably small capital, or (iv) intended to incur or believed that it would incur debts beyond its ability to pay as such debts matured, such court could avoid such Guarantor's obligation under its guarantee and the grant of the security interest, and direct the return of any payments made under the guarantee to such Guarantor or to a fund for the benefit of its creditors. Moreover, regardless of the factors identified in the foregoing clauses (i) through (iv), such court could avoid such obligation and such security interest, and direct such repayment, if it found that the obligation was incurred or the security interest granted with intent to hinder, delay, or defraud such Guarantor's creditors. In that event, the Noteholders would have to rely solely on the Company's pledge of such Guarantor's capital stock, partnership interests and intercompany notes owed to the Company, if any, and would have to look for repayment to other Guarantors whose guarantee obligations had not been avoided. The measure of insolvency for purposes of the foregoing will vary depending upon the law of the jurisdiction being applied. Generally, however, an entity would be considered insolvent if the sum of its debts is greater than all of its property at a fair valuation or if the present fair salable value of its assets is less than the amount that will be required to pay its probable liability on its existing debts as they become absolute and matured. COMPETITION The casino gaming industry is characterized by intense competition from a large number of participants, including riverboat casinos, dockside casinos, land-based casinos, video lottery and poker machines in locations other than casinos, Native American gaming and other forms of gaming in the United States. Gaming industry competition is particularly intense in each of the markets where the Company operates and is likely to increase as other operators open new or expanded facilities in the future. Historically, the Company has been an early entrant in each of its markets; however, as its competitors have opened properties in these markets, the Company's operating results in these markets have been negatively affected. The Company expects that many of its competitors will have more gaming industry experience, will be larger and will have significantly greater financial and other resources than the Company. In addition, certain of its direct competitors may have superior facilities and or operating conditions in terms of (i) dockside versus cruising riverboat gaming, (ii) the amenities offered by the competing casino and its related support and entertainment facilities, (iii) convenient parking facilities, (iv) ease of accessibility to the casino site, and (v) favorable tax or regulatory factors. Given these factors, substantial increased competition could have a material adverse affect on the Company's existing and proposed operations. The Company expects increasing competition at its existing gaming operations, particularly in the St. Louis and Kansas City markets. As a result, the Company expects the results of operations at its Alton and Riverside casinos will be negatively affected as new competitors open or existing competitors expand their facilities. Moreover, increased competition could limit new opportunities for the Company or result in the saturation of certain gaming markets. The Company also has competed with, and assumes it will continue to compete with, a number of bidders for a limited number of licenses and permits to conduct gaming. In any jurisdiction where the Company may commence operations, it also will face competition for desirable sites and qualified personnel. A summary of the current competitive environment in each of the markets in which the Company has casino operations follows: ALTON, ILLINOIS FACILITY. The Company's Alton riverboat casino faces competition from three other riverboat casinos currently operating in the St. Louis area and expects increasing levels of competition in the future. Two casino facilities are located in the downtown St. Louis area, one providing dockside gaming on the Mississippi riverfront in the Gateway Arch area of downtown St. Louis and the other providing gaming on a cruising riverboat from East St. Louis, Illinois. Another casino is located in the northwest St. Louis suburb of St. Charles, Missouri and offers dockside gaming on two vessels with staggered entry times. A fourth casino complex in the St. Louis market is under construction in the northwest suburb of Maryland Heights, Missouri, which will include two independently owned facilities, each of which are expected to 18 operate two dockside vessels. This casino complex is expected to open in the first quarter of 1997. The operating results of the Company's Alton casino have in the past been negatively impacted by additional competitors in the St. Louis market and will in the future be further negatively impacted by the additional competition expected in St. Louis. Because Missouri gaming law does not limit the number of licenses that may be granted, there could be substantial increases in the number of gaming operations in the St. Louis area. Specifically, the Company is aware of several casino operators that are exploring gaming opportunities in the St. Louis area. RIVERSIDE, MISSOURI FACILITY. The Argosy Casino in Riverside faces competition from two other casinos currently operating in the Kansas City area that offer dockside gaming. Two additional casino operators have commenced construction of gaming facilities in Kansas City, both of which are expected to open in the second half of 1996. In addition, one existing Kansas City competitor has commenced construction of expanded facilities, including a second gaming vessel that recently opened. The Company anticipates that its results of operations in Riverside will be negatively impacted by the increased competition expected in the Kansas City market. Because Missouri gaming law does not limit the number of licenses that may be granted, there could be substantial increases in the number of gaming operations in the Kansas City area. To a lesser extent, the Argosy Casino also competes with a riverboat casino in St. Joseph, Missouri and may also compete with potential casinos in other areas of Missouri where local voters have or may approve gaming. In addition, the legalization of casino gaming in Kansas would have a material adverse effect on the Company's Riverside casino. BATON ROUGE, LOUISIANA FACILITY. The Company's Baton Rouge riverboat casino faces competition from one riverboat casino located in downtown Baton Rouge, a land-based Native American casino located approximately 70 miles away and multiple casinos throughout Louisiana. In Louisiana, licenses for 15 riverboat gaming casinos and one New Orleans land-based casino have been granted, which is the maximum number of licenses currently authorized in the state, and 12 vessels are currently operating. Numerous Native American casinos are also operating throughout Louisiana, as well as more than 15,000 video poker machines that are located in bars, restaurants and truck stops. In addition to Baton Rouge, riverboat casinos are currently operating in New Orleans, Shreveport/Bossier City and Lake Charles, Louisiana. The land-based casino in New Orleans has filed for bankruptcy, has closed its temporary gaming facility and has halted construction on its permanent facility located adjacent to the French Quarter. See "Risk Factors -- Louisiana Local Option Referendum to Restrict Gaming." SIOUX CITY, IOWA FACILITY. The Company's Sioux City riverboat casino faces competition from two nearby land-based Native American casinos, slot machines at a pari-mutuel race track in Council Bluffs, Iowa, and from two riverboat casinos in the Council Bluffs, Iowa/Omaha, Nebraska market, which opened in January 1996. PROPOSED LAWRENCEBURG, INDIANA PROJECT. The Company expects to face limited direct competition for gaming revenues in the Lawrenceburg, Indiana market upon the opening of the Company's Lawrenceburg riverboat casino at a temporary facility, which is anticipated in the fourth quarter of 1996, and at a permanent facility, which is anticipated to open not later than twelve months thereafter. Indiana gaming law currently limits the number of licenses to operate riverboat casinos on the Ohio River to five in total and a maximum of one per county. In addition, casino gaming is not currently permitted under the laws of neighboring Ohio and Kentucky. Along the Ohio River, a certificate of suitability has been granted to a gaming operator in Rising Sun, Indiana, which is located in Ohio County approximately 15 miles south of Lawrenceburg. The competing Rising Sun casino is currently under development and may open during the same time period as or prior to the Company's Lawrenceburg Casino. In addition a riverboat owner's license was issued on December 4, 1995 to an operator in Evansville, Indiana, which is located in Vanderburgh County, Indiana, approximately 200 miles southwest of Lawrenceburg. Of the remaining two licenses designated for Ohio River counties, a certificate of suitability was recently awarded to an operator in Harrison County, which is west of Louisville, Kentucky, approximately 100 miles from Lawrenceburg. The final Ohio River license is being pursued by several operators of proposed gaming projects in (i) Switzerland County, which is approximately 40 miles south of Lawrenceburg, (ii) other Indiana counties located west of Louisville, Kentucky in which local referenda to authorize gaming have passed, and (iii) the two Indiana 19 counties adjacent to Louisville, Kentucky; however, local referenda seeking to authorize gaming in these two counties have failed. The legalization of casino gaming in the States of Ohio or Kentucky or the expansion of the number of gaming licenses in Indiana could significantly increase competition and have a material adverse effect upon the Company's proposed Lawrenceburg Casino. MARION COUNTY, INDIANA GRAND JURY DOCUMENT SUBPOENA On or after March 15, 1996, the Company, its partners in the Lawrenceburg Casino project and certain other individuals and entities were served with document request subpoenas issued by the Office of the Prosecuting Attorney of Marion County, Indiana in connection with a grand jury investigation entitled: STATE OF INDIANA V. ORIGINAL INVESTIGATION-OFFICIAL MISCONDUCT. Indiana law requires that at the time a target of an investigation is determined, that entity or person must be so advised by the Office of the Prosecuting Attorney. On March 23, 1996 the Company was advised by the Marion County prosecutor that no target subpoenas had been issued by the grand jury in its investigation as of that date. However, there can be no assurance that targets will not be identified as further information and documents are obtained and considered by the grand jury. Due to the confidential nature of grand jury proceedings, the Company is not aware of the specific subject matter or matters of the investigation. The Company believes it has fully complied with its subpoena, and has been informed by its partners that they will do the same. The subpoenas request information regarding the current or prior ownership interest in the Company and the partners of Indiana Gaming L.P. by the individuals or entities described below. The subpoenas also request that the Company and its partners produce a broad category of documents including documents regarding employment and other agreements, gifts, payments and correspondence between the Company and any of its partners on the one hand and several business entities and individuals, including an Indiana state legislator, certain Indiana lobbyists, and certain Lawrenceburg, Indiana city officials and businessmen, on the other hand. The Company has learned that this legislator has served as an employee of a subsidiary of Conseco, Inc., the parent company of the 29% limited partner in Indiana Gaming L.P., since September 1995. Additionally, the Company has learned that such state legislator has served since September 1993 as a consultant to a major Indiana engineering firm that is engaged in many state and local government funded construction projects. That engineering firm also serves as lead engineer for the Lawrenceburg Casino project. On May 24, 1996, the Indiana House Legislative Ethics Committee voted to reprimand, but take no further action against, this legislator for failing to properly report the foregoing employment and consulting arrangements on his 1993, 1994 and 1995 statements of economic interests. The Company believes that neither it nor any entity controlled by or person employed by the Company has engaged, and has been informed by representatives of its partners that they have not engaged, in any unlawful conduct in the pursuit by or granting to Indiana Gaming L.P. of the Lawrenceburg gaming license. Because the grand jury proceedings are unlikely to be concluded quickly, on March 25, 1996, a former U.S. Attorney and his law firm were retained to conduct, as special independent counsel (the "special independent counsel"), an internal investigation into the activities and actions of the Company and the entities controlled by and persons employed by the Company with respect to (i) the hiring by Conseco, Inc. and the Indiana engineering firm of the state legislator, (ii) the endorsement of Indiana Gaming L.P. by the City of Lawrenceburg and the financial affairs of certain Lawrenceburg officials with respect to such endorsement and the awarding of the certificate of suitability by the Indiana Gaming Commission, and (iii) their lobbying efforts in furtherance of the Indiana legislature's enactment of legislation authorizing gaming and limiting gaming licenses to one per county. A special committee of independent directors of the Company has been appointed to supervise and coordinate the special independent counsel's investigation. The special independent counsel has not investigated Conseco, Inc. or the other limited partners of Indiana Gaming L.P. The Company has been advised that Conseco, Inc., with the assistance of outside counsel, has conducted its own internal investigation of matters that may be the subject of the grand jury proceedings and such investigation found no wrongdoing by Conseco, Inc. or any person or entity it controls, or is controlled by, and that Conseco, Inc. intends to review with the Company's special independent counsel the findings of its investigation. 20 From March 25 to April 15, 1996, the special independent counsel conducted its investigation and issued an interim report in which it concluded that it found no evidence that the Company or any entity controlled by or person employed by the Company had any involvement in, or knowledge of, the relationship between the state legislator and Conseco, Inc. or the Indiana engineering firm, or attempted to improperly influence any City of Lawrenceburg official, state legislator or Indiana Gaming Commission member or staff member in connection with the endorsement of the partnership by the City of Lawrenceburg and the awarding of the certificate of suitability to Indiana Gaming L.P. With regard to lobbying, including the lobbying with respect to one gaming license per county legislation, the special independent counsel found no evidence that either the Company or any entity controlled by or person employed by the Company attempted to unduly influence any legislator in any way. However, no investigation was made of any lobbyist's records, activities or expenditures, nor were any outside lobbyists interviewed. The special independent counsel also audited the Company's compliance with the lobbying disclosure statute in Indiana and found only technical errors in the Company's lobbying disclosure statements. No evidence was found that these technical errors were intentional or designed to hide any lobbying activity. In conducting its investigation, the special independent counsel, among other things, reviewed numerous boxes of documents produced by the executive and Lawrenceburg offices of the Company and extensively interviewed the nine Company officers and employees most closely related to the Lawrenceburg Casino project, as well as the principal of R.J. Investments, Inc., a 4% limited partner of Indiana Gaming L.P. No assurance can be given, however, that the nature and scope of the investigation conducted by the special independent counsel, which among other things was conducted under severe time pressure and was limited to the Company and the entities controlled by and persons employed by the Company, was sufficient to uncover conduct that might be considered unlawful. In the event that the Company, any entity controlled by the Company, any person employed by the Company, Indiana Gaming L.P. or any of its partners is found by the Marion County prosecutor to have engaged in unlawful conduct, there is no assurance what effect such action would have on Indiana Gaming L.P.'s certificate of suitability or, after issuance, the Indiana gaming license. In the event Conseco or one of the Company's other partners in the Lawrenceburg Casino project is determined by the Indiana Gaming Commission to be unsuitable for the ownership of a gaming license or to have engaged in unlawful conduct, the terms of Indiana Gaming L.P.'s partnership agreement provide that Indiana Gaming L.P. shall redeem 100% of such unsuitable partner's interest in the partnership for an amount equal to such partner's capital account. In the event that a partner is determined by the Indiana Gaming Commission to be unsuitable for ownership after the issuance of the gaming license, the terms of Indiana Gaming L.P.'s partnership agreement provide that Indiana Gaming L.P. shall redeem 100% of such unsuitable partner's interest for an amount equal to 90% of the "appraised value" of that partner's interest, determined in accordance with the terms of the partnership agreement. The purchase price is payable in five annual installments, only from available cash flow or sale or financing proceeds of the partnership, and bears interest at "prime." If such event were to occur with respect to Conseco prior to the completion of the Lawrenceburg Casino project, the Company would have to fund any remaining construction costs of the Lawrenceburg Casino project which were to have been funded by Conseco. No assurance can be given that the Company would be able to obtain funds sufficient for this purpose. Also, there can be no assurance that the Indiana Gaming Commission will not take other actions such as suspending, revoking or failing to renew Indiana Gaming L.P.'s certificate of suitability, delaying the issuance of or failing to issue Indiana Gaming L.P. a gaming license or, after issuance, revoking or suspending such gaming license. Therefore, there can be no assurance that the grand jury investigation will not lead to events having a material adverse effect on the Company. PROJECT DEVELOPMENT RISKS As part of its growth strategy, the Company is undertaking significant development projects at its Baton Rouge and Lawrenceburg properties. Construction projects, such as the Company's, entail significant risks, including shortages of materials or skilled labor, unforeseen engineering, environmental or geological problems, difficulties arising from statutes, regulations or actions of governmental bodies having jurisdiction or authority with regard to certain aspects of the project, work stoppages, weather interferences, floods, unanticipated cost increases and other problems. In addition, the number and scope of the licenses and 21 approvals required to complete the construction of any project, particularly those pertaining to riverboat and dockside casino, hotel and other destination resort facilities, are extensive. The anticipated completion and opening dates of these projects are based on budgets, conceptual design documents and schedule estimates prepared by the Company and its consultants that are subject to change, which could result in significant variances to the currently anticipated scope and costs of the development projects and the anticipated completion dates. Unexpected concessions required by local, state, or federal regulatory authorities could involve significant additional costs and delay scheduled openings of facilities, including either the temporary or permanent facilities in Lawrenceburg. Moreover, the estimated total costs of the Lawrenceburg Casino project of $210 million, which is significantly larger in size and scope than any of the Company's previous development projects, are based upon initial budgets that are more susceptible to change. While the Company has selected an architect and general contractor for the Lawrenceburg Casino project and has entered into a maximum price contract for, and begun construction of, a riverboat casino, it has not yet entered into a guaranteed maximum price contract for the remaining development. In addition, site development activities have not commenced at either the temporary or permanent facilities and cannot commence until Indiana Gaming L.P. receives a variety of permits. Therefore, the planned opening of the Lawrenceburg Casino at the temporary facility in the fourth quarter of 1996, as well as the opening of the permanent facility 12 months thereafter, require the timely receipt of permits and prompt commencement of construction of the land based, berthing, and support facility improvements upon receipt of required permits and no substantial delays in the construction schedule. Significant cost overruns or delays in the scheduled openings of the Company's current projects, or the inability of the Lawrenceburg gaming market to meet the Company's operating expectations, would have a material adverse effect on the Company. Pursuant to the Lawrenceburg partnership agreement, the Company is obligated to fund 57.5% of any project costs between the budgeted $210 million total project cost and $225 million. The Company is obligated to fund the entire amount of any project costs over $225 million. The Company's inability to satisfy its funding obligations for the Lawrenceburg Casino project could result in a significant dilution of its interest in Indiana Gaming L.P. and its possible removal as the general partner. See "Risk Factors -- Certain Risks Under the Lawrenceburg Casino Partnership Agreement" and "Lawrenceburg Casino Partnership Agreement." Development of the Lawrenceburg Casino project will require the Company to (i) acquire rights to traverse, use and/or improve certain parcels of property owned by third parties, including the abandonment of a portion of an existing rail line, in order to gain direct, construction and emergency access to the property, (ii) acquire access to water, sewer, gas, electric and other necessary utility services which presently do not provide services to the site and which may require extension of existing utility service facilities across existing rights of way and other property owned by third parties, and (iii) acquire permits from the U.S. Army Corps of Engineers (the "Corps") and the Indiana Department of Natural Resources ("IDNR") to modify the existing riverfront to accommodate large scale riverboat gaming activities. In particular, prior to securing the Corps permit for the permanent site, Indiana Gaming L.P., as a part of the process, has prepared and submitted significant archaeological studies that have revealed that cultural remains may be located on the site, and simulation studies regarding the effect of the Lawrenceburg Casino on the historic district of the City of Lawrenceburg. Any delays in review of the studies by the Corps or in implementation of corrective measures to address conditions revealed by such studies could delay the issuance of the permit from the Corps. Further, the ultimate permit received from the Corps could include conditions that could have a material adverse effect on the costs of or result in a material delay in the commencement and/or completion of the construction of the temporary or permanent facilities. The Company has been informed that the permit for the temporary site will include a condition that riverboat gambling may not commence at the temporary site until the permit for the permanent site has been issued. Timely completion of the temporary casino is also contingent upon receipt of a waiver of certain prohibitions on dredging during fish spawning season (generally April through June) from the IDNR. The Company anticipates that construction of the temporary facilities will take at least 100 days after the receipt of the temporary site permit from the Corps and the waiver from the IDNR. In addition, the Company must obtain Corps approval prior to commencing construction of off-site parking lots for the temporary facility. Further, in order for the Company to complete the permanent facility within 12 months after opening the temporary facility, as required by Indiana law, the Company will be required to commence construction of certain portions of the permanent facility prior to 22 issuance of the final permit for the permanent site from the Corps. Although any such preliminary construction would be within the parameters preliminarily set forth by the Corps, there can be no assurance that the final permit would not require modification to all or any portion of such preliminary construction, or that a final permit from the Corps will be issued. The docking site for the temporary casino is controlled by the City of Lawrenceburg. The City of Lawrenceburg and Indiana Gaming L.P. have entered into a Development Agreement which, among other things, provides for the City to lease the docking site for the temporary casino to Indiana Gaming L.P. pursuant to certain statutorily prescribed procedures. The City of Lawrenceburg has commenced the statutory procedures for the lease of the docking site for the temporary facility; however, the City of Lawrenceburg has not yet entered into a lease with Indiana Gaming L.P. The City of Lawrenceburg has also assumed principal responsibility for obtaining the necessary permits from the Corps and IDNR for the temporary site. The City of Lawrenceburg obtained the IDNR permit on March 29, 1996; however, an adjacent landowner has filed an appeal to the issuance of the permit with the IDNR alleging that he has an interest in the City of Lawrenceburg property that is the subject of the permit. The Company believes that the challenge is without merit as the disputed property lies within a public street right of way that dates back to the time of the original city plat. Any delay in the entry into a lease between the City of Lawrenceburg and Indiana Gaming L.P. of the docking site for the temporary casino, or stay or revocation of the IDNR permit, could delay commencement of construction of the temporary facility and such delay could increase the costs of, or result in a delay in, the commencement of gaming operations at the temporary facility. In addition, the Lawrenceburg site is potentially located in protected wetlands areas. Indiana Gaming L.P. has agreed to an extensive wetlands mitigation plan in Lawrenceburg and is taking appropriate steps to further investigate the Lawrenceburg Casino site. Although the Company does not believe that the existence of wetlands or other protected areas will prohibit or have a significant adverse impact on the Company's ability to develop its temporary and permanent sites, there can be no assurance that further investigation will not reveal adverse conditions or that claims relating to such matters may not arise in the future, which could have a material adverse effect on the costs of, or result in a material delay in opening either temporary or permanent gaming facilities at such site. Indiana Gaming L.P. is a defendant, along with the City of Lawrenceburg, in a lawsuit seeking to invalidate a street vacation proceeding for a portion of the permanent casino site. The plaintiffs in the lawsuit have requested alternate relief which would require Indiana Gaming L.P. to provide direct access across the permanent casino site to certain adjacent land owners. The Company does not believe that the impact to the project or the costs of providing such alternative relief are significant. However, invalidation of the street vacation and corresponding denial of access to certain portions of the permanent casino site could increase the costs of, or result in a delay in, the commencement of gaming operations at the permanent facility. In addition, the opening of the Lawrenceburg Casino is subject to the issuance of a gaming license in Indiana and while Indiana Gaming L.P. has been awarded a certificate of suitability, the certificate of suitability must be extended by the Indiana Gaming Commission until the issuance of a gaming license, and no assurance can be given that the certificate of suitability will be extended or that Indiana Gaming L.P. will be awarded its final gaming licence or the other approvals necessary to open the Lawrenceburg Casino. See "Risk Factors -- Gaming Regulation -- Licensing and Regulation by Gaming and Local Authorities." There can be no assurance that the Company will obtain the rights, utility services, licenses, permits and approvals necessary to undertake or complete any of its development plans, or that such rights, utility services, licenses, permits and approvals will be obtained within the anticipated time frame or will be sufficient to conduct its business as currently anticipated. An example of a project development risk of a nature described above occurred on April 12, 1996, when the Company received a letter from the Corps notifying the Company that the Corps had suspended the processing of Indiana Gaming L.P.'s permit application for the permanent site for the Lawrenceburg Casino project pending the conclusion of the Corps investigation of whether the placement of job trailers on the project site without prior Corps authorization adversely impacted subsurface archeology. The Company was able to timely respond to the Corps request because all pertinent work had previously been completed by the Company's archeological and engineering consultants and professionals and on May 16, 1996, the Corps lifted the suspension and resumed processing of Indiana Gaming L.P.'s permit application. The Company believes that the five week suspension of its permanent site Corps permit application has not affected the 23 timing of the opening of the Company's temporary and permanent gaming facilities in Lawrenceburg. No assurance can be given, however, that other events will not arise that could result in significant delays or increased costs in the opening of its temporary or permanent Lawrenceburg Casino. The building trades organization in the Lawrenceburg area, the umbrella labor group representing the various construction labor unions, has requested that Indiana Gaming L.P. enter into a project agreement which would require that construction work at the Lawrenceburg site be performed by union contractors. The Company has indicated a willingness to enter into an agreement providing that some portion of the construction work at the Lawrenceburg site would be performed by union contractors. However, the building trades organization has insisted upon 100% utilization of union contractors. To date, Indiana Gaming L.P. has not retained any non-union contractors, but anticipates that non-union contractors will be engaged to perform certain work at the Lawrenceburg site. The Company cannot predict the effect of undertaking construction at the Lawrenceburg site without a project agreement or the impact of hiring non-union contractors to perform any portion of that work. Any labor action by the building trades organization or any individual labor union or other group, including strikes, work stoppages, pickets, or other campaigns, could delay construction and the opening of the temporary and permanent gaming facilities in Lawrenceburg. CERTAIN RISKS UNDER THE LAWRENCEBURG CASINO PARTNERSHIP AGREEMENT The Lawrenceburg Casino partnership agreement provides that the Company's wholly-owned subsidiary, The Indiana Gaming Company, can be removed as general partner of the partnership by the limited partners under certain limited circumstances, including: (i) a material breach (after notice and expiration of applicable cure periods) of certain material provisions of the partnership agreement dealing with such things as distributions to partners or the failure to obtain the required consent of the limited partners for certain major decisions; (ii) conviction of embezzlement or fraud; (iii) certain bankruptcy events; (iv) if The Indiana Gaming Company's partnership interest is less than 40% due to sales or dilution for failure to pay required capital; (v) a final unappealable judgment against The Indiana Gaming Company in excess of $25 million which is uninsured and remains unsatisfied, unreleased or unstayed for 180 days; (vi) certain acts constituting "gross mismanagement;" (vii) if The Indiana Gaming Company fails to fund project costs in excess of $215 million (after expiration of applicable notice and cure periods); and (viii) if the Trustee under the Notes were to foreclose on the Company's pledge of its partnership interest in the partnership. Upon removal as general partner, the general partnership interest of The Indiana Gaming Company becomes a "special limited partner" interest with rights to partner distributions but only limited voting rights on partnership matters. Also, if the reason for the removal is an event described in clause (i), (ii), (iii), (v), (vi) or (viii) above, the limited partners may acquire all, but not less than all, of The Indiana Gaming Company's interest for the fair market value thereof determined by an appraisal process. The Lawrenceburg partnership agreement provides that: (i) after the third anniversary date of commencement of operations at the Lawrenceburg Casino, each limited partner has the right to sell its interest to the other partners (pro rata in accordance with their respective percentage interests) or (ii) at any time after a deadlock by the parties with respect to significant items in any annual operating budget of the partnership for budget year 1999 and thereafter, any partner has a right to sell its interest to the other partners (the limited partner pursuant to clause (i) and the partner desiring to sell pursuant to clause (ii) are hereinafter referred to as a "Selling Partner" and the non-selling partners are hereinafter referred to as the "Non-Selling Partners"). The partnership agreement provides that after the Selling Partner gives notice of its intent to sell, the Selling Partner and Non-Selling Partners shall have 60 days to attempt in good faith to agree to a purchase price. If within such period of time no such agreement is reached, then the Selling Partner's interest shall be appraised pursuant to an appraisal process to determine the fair market value thereof. After the fair market value of the Selling Partner's interest is determined by the appraisal process, the Non-Selling Partners have 60 days to reject such sale at that price, and if the Non-Selling Partners decline to purchase the interest of the Selling Partner at the appraisal price, then the general partner is to solicit bids and sell all of the assets of the Partnership within twelve months to the highest bidder and Indiana Gaming L.P. will be dissolved. No assurances can be given that The Indiana Gaming Company, if it is a Non-Selling Partner, will have or will be able to obtain sufficient funds to acquire any Selling Partner's interests in 24 the circumstances provided for above or that The Indiana Gaming Company will choose to make such purchase and therefore the assets of the partnership would have to be sold to the highest bidder as provided above. In addition, the partnership agreement provides all partners with a right of first refusal on transfers of partnership interest. A foreclosure by the Trustee on the Company's pledge of its partnership interest shall be deemed a transfer giving rise to a right of first refusal. See "Lawrenceburg Casino Partnership Agreement." GAMING REGULATION LICENSING AND REGULATION BY GAMING AND LOCAL AUTHORITIES. The ownership and operation of casino gaming facilities are subject to extensive state and local regulation. The states of Illinois, Missouri, Louisiana, Iowa and Indiana and the applicable local authorities require various licenses, findings of suitability, registrations, permits and approvals to be held by the Company and its subsidiaries as well as the officers and directors of the Company and its subsidiaries. The Illinois Gaming Board, the Missouri Gaming Commission, the Louisiana Gaming Control Board, the Iowa Racing and Gaming Commission and the Indiana Gaming Commission (herein collectively referred to as "Applicable Gaming Commissions") may, among other things, limit, condition, suspend, fail to renew or revoke a license or approval to own an equity interest in the Company or any of its subsidiaries, for any cause deemed reasonable by such licensing authority. The suspension, failure to renew or revocation of any of the Company's licenses or the levy on the Company of substantial fines or forfeiture of assets would have a material adverse effect on the business of the Company. In certain circumstances, the Applicable Gaming Commissions have the authority to approve certain distributions from the Subsidiaries to the Company. To date, the Company has obtained all governmental licenses, registrations, permits and approvals necessary for the operation of its current gaming activities. However, gaming licenses and related approvals are deemed to be privileges under Illinois, Missouri, Louisiana, Iowa and Indiana law, and no assurances can be given that any new licenses, permits and approvals that may be required in the future will be given or that existing ones will not be revoked or fail to be renewed. In addition, the loss of a license in one jurisdiction could trigger the loss of a license or effect the Company's eligibility for a license in another jurisdiction. On June 30, 1995, Indiana Gaming L.P. received a certificate of suitability from the Indiana Gaming Commission to develop and operate the Lawrenceburg Casino. The certificate of suitability was initially extended by the Indiana Gaming Commission until June 28, 1996 and has been further temporarily extended until such time in the third quarter of 1996 as the Indiana Gaming Commission can conduct a formal extension hearing. A riverboat casino license will be issued only upon satisfaction of the conditions of the certificate of suitability and the requirements of the Indiana Gaming Commission and other applicable law, which include, among other things, completion of the vessel, acquisition of necessary permits or approvals from federal, state and local authorities and readiness to commence operations. The certificate of suitability issued to Indiana Gaming L.P. must be extended by the Indiana Gaming Commission in order to accommodate the expected opening of the temporary facility in the fourth quarter of 1996. Further, Indiana law permits the Indiana Gaming Commission to permit a riverboat to dock at a temporary site for a period not exceeding one year after award of the license at which point the permanent facility must be opened. The certificate of suitability requires expenditures of at least $200 million and further requires Indiana Gaming L.P. to make additional payments to the City of Lawrenceburg equal to a percentage of annual gross gaming receipts ranging in amount from five percent (for up to $150 million in adjusted gross receipts) to 14 percent (for adjusted gross receipts over $300 million). Failure to comply with the foregoing conditions and/or failure to commence riverboat excursions (at either the temporary or permanent facilities) at such time as required by the Indiana Gaming Commission could result in the revocation of the certificate of suitability or the license. Further, the Indiana Gaming Commission may place restrictions, conditions, or requirements on the permanent riverboat owner's license. There can be no assurance that Indiana Gaming L.P. will be able to comply with the terms of the certificate of suitability, that it will be extended until such time as a gaming license is issued, that the permanent and temporary facilities will open in a timely fashion or that a riverboat casino license for Lawrenceburg, Indiana will ultimately be granted to Indiana Gaming L.P. Before the 25 Lawrenceburg Casino becomes operational, additional definitive agreements must be negotiated and executed, gaming facilities must be constructed, and a number of further conditions must be satisfied (including the licensing of Indiana Gaming L.P. and their respective employees and the receipt of all requisite permits). There can be no assurance that the Lawrenceburg Casino will become operational. The approval of the Applicable Gaming Commissions is required for any material debt or equity financing. No assurance can be given that the Company will obtain the required approvals for future financings. RISK OF ADVERSE CHANGES IN LAWS AND REGULATIONS. As described below, in 1996, legislation was adopted in Louisiana requiring local electoral confirmations of gaming activities. No assurance can be given that the voters of East Baton Rouge Parish will not vote to prohibit riverboat gaming or that another jurisdiction where the Company conducts gaming operations will not introduce similar or otherwise restrictive legislation. In addition, regulations with respect to the conduct of gaming activities and the obligations of gaming companies in any jurisdiction in which the Company has gaming operations are subject to change and could impose additional operating, financial or other burdens on the conduct of the Company's business. Moreover, legislation to prohibit or limit gaming may be introduced in the future in states where gaming has been legalized. The enactment of any such legislation or regulatory changes in jurisdictions where the Company operates gaming facilities could have a material adverse effect on the Company. RISK OF LEGALIZATION OF GAMING IN JURISDICTIONS ADJACENT TO THE COMPANY'S OPERATIONS. Casino gaming is currently prohibited in several jurisdictions adjacent to Missouri and Indiana. As a result, residents of these jurisdictions, principally Kansas, Ohio and Kentucky, comprise or are expected to comprise a significant portion of the patrons of the Company's casino in Riverside, Missouri and proposed Lawrenceburg Casino. The legalization of casino gaming in Kansas would have a material adverse effect on the Company because the Company's Riverside casino is currently the only casino located in the western portion of the Kansas City market and therefore, residents of Kansas comprise a significant target market. The legalization of casino gaming in Ohio or Kentucky would have a material adverse effect on the Company's proposed Lawrenceburg Casino because a substantial portion of the Lawrenceburg Casino's customers are anticipated to be residents of Ohio and Kentucky. See "Regulatory Matters -- Legislative and Regulatory Considerations in Certain Adjacent Jurisdictions." LOUISIANA LOCAL OPTION REFERENDUM TO RESTRICT GAMING On April 19, 1996, the Louisiana legislature approved legislation mandating local option elections on a parish-by-parish basis to determine whether to prohibit or continue to permit three individual types of gaming in Louisiana. The referendum will be brought before the Louisiana voters at the time of the 1996 presidential election and will determine whether each of the following types of gaming will be prohibited or permitted in the following described Louisiana parishes: (i) the operation of video draw poker devices in each parish; (ii) the conduct of riverboat gaming in each parish that is contiguous to a statutorily designated river or waterway or (iii) the conduct of land-based casino gaming operations in Orleans Parish. If a majority of the voters in a parish elect to prohibit one or more of the above-described gaming activities in such parish, then no license or permit shall be issued to conduct such prohibited gaming activity in such parish and no such gaming activity may be permitted in that parish. If, however, riverboat gaming was previously permitted in such parish, the legislation permits the current gaming operator to continue riverboat gaming in that parish until the expiration of its gaming license. Further, in parishes where riverboat gaming is currently authorized and voters elect to prohibit riverboat gaming, the legislation provides that the gaming license shall not be reissued or transferred to any parish other than a parish in which a riverboat upon which gaming is conducted is berthed. In addition, the Louisiana legislature approved a joint resolution to submit to Louisiana voters at the time of the 1996 presidential election for their approval a proposed constitutional amendment that, among other things, would require the voters in a parish where riverboat gaming exists to approve additional riverboat gaming in that parish. If approved, this constitutional amendment would represent a further impediment to the Company's ability to move the Belle of Baton Rouge to another Louisiana parish in the event that the voters of East Baton Rouge Parish vote to prohibit riverboat gaming. 26 There can be no assurance that the voters of the Belle of Baton Rouge's parish, East Baton Rouge Parish, will not vote to prohibit riverboat gaming at the time of the 1996 presidential election. If a vote to prohibit riverboat gaming occurred, the Company would be required to discontinue gaming activity upon expiration of its current gaming license in September 1999. The discontinuance of gaming operations in East Baton Rouge Parish would have a material adverse effect on the Company, both in terms of the loss of revenues and cash flow generated by the Belle of Baton Rouge and the impairment of the significant capital investment that the Company has in its riverboat casino and related facilities, including the Catfish Town development. In addition, if the Company were unable to move its riverboat casino to another Louisiana parish and therefore lost its Louisiana gaming license, under the terms of the Indenture, the Company would be required to repurchase a principal amount of Notes equal to four times the contribution of the Belle of Baton Rouge to the consolidated EBITDA of the Company during the four full fiscal quarters preceding the loss of the Louisiana gaming license. See "Description of Exchange Notes -- Certain Covenants -- Repurchase on Loss of Material Casino." Further, the current legislation does not provide for any moratorium that must expire before future local elections on gaming could be mandated or allowed. Even if the voters of East Baton Rouge Parish elected to continue to permit riverboat gaming at the time of the 1996 presidential election, there can be no assurance that future local elections on gaming activities will not occur, that East Baton Rouge Parish voters will not subsequently vote to discontinue riverboat gaming in that parish or that Louisiana will not mandate other electoral confirmations or otherwise limit, restrict or prohibit gaming in Louisiana. The uncertainty resulting from the upcoming local option election on the continuance of riverboat gaming in East Baton Rouge Parish will also have a negative impact on the ability of the Company to lease the retail space in Catfish Town and to obtain financing for its planned hotel development in Catfish Town. LOSS OF A RIVERBOAT OR DOCKSIDE FACILITY FROM SERVICE; FLOODING The Company's revenues to date have been generated primarily by its gaming operations conducted on riverboat casinos, which are supplemented by dockside entertainment and support facilities. A riverboat or dockside facility could be lost from service for a variety of reasons, including casualty, forces of nature, mechanical failure or extended or extraordinary maintenance or inspection. In addition, U.S. Coast Guard regulations require a hull inspection for all riverboats at five-year intervals. To comply with this inspection requirement, which could take a substantial amount of time, the riverboats must be taken to a U.S. Coast Guard approved dry docking facility. The Belle of Sioux City riverboat was removed from service on April 13, 1996 for such a hull inspection. The riverboat arrived at an approved dry docking facility on April 16, 1996, passed its inspection and returned to service on May 9, 1996. No interruption in gaming operations occurred in Sioux City as a result of the hull inspection process, as the Company temporarily transferred gaming operations to the original Alton Belle prior to removing the Belle of Sioux City from service. The current Alton Belle riverboat is due for this inspection in mid-1998 and both the Belle of Baton Rouge and Argosy Casino in Riverside riverboats in mid-1999. The severe flooding which occurred along the Mississippi River in metropolitan St. Louis during the summer of 1993 caused the Company to experience decreased attendance and increased operating expenses. See "Management's Discussion and Analysis of Financial Condition and Results of Operations." The Company again experienced flooding in May 1995 at both the Alton, Illinois and Riverside, Missouri sites; however, the flooding did not result in any significant decrease in attendance or increase in expenses at either site. All of the Company's riverboat casino sites are vulnerable to the risk of future flooding. Any flood or other severe weather condition that might occur in the future could adversely affect attendance and increase expenses, and could lead to the loss of use of a riverboat or dockside facility for an extended period. The loss of any riverboat from service, the inability to use a dockside facility or the loss of parking or land-based facilities could have a material adverse effect on the Company's financial results. POTENTIAL INCOME TAX LIABILITY As a result of a certain shareholder loan transaction, a predecessor entity to the Company (the "Predecessor") could be subject to federal and certain state income taxes (plus interest and penalties, if any) because it may have failed to satisfy all of the requirements of the S Corporation provisions of the Internal 27 Revenue Code (the "Code") relating to the prohibition concerning a second class of stock. An audit is currently being conducted by the Internal Revenue Service (the "IRS") of the Company's federal income tax returns for the 1992 and 1993 tax years and the IRS has asserted the S Corporation status of the Predecessor as an issue. Although the IRS has yet to make a formal claim of deficiency, if the IRS successfully challenges the Predecessor's S Corporation status, the Company would be required to pay federal and certain state income tax taxes on the Predecessor's taxable income from the commencement of its operations until February 25, 1993 (plus interest and penalties, if any, thereon until the date of payment). The Company estimates that this potential tax liability could be up to approximately $11.6 million, including interest through March 31, 1996, but excluding penalties, if any, none of which has been reserved on the books of the Company. While the Company believes the Predecessor has legal authority for its position that it is not subject to federal and certain state income taxes because it met the S Corporation requirements, no assurances can be given that the Predecessor's position will be upheld. This contingent tax liability could have a material adverse effect on the Company's results of operations, financial position and cash flows. No provision has been made for this contingency in the Company's consolidated financial statements appearing elsewhere in this Offering Memorandum. HOTEL AND RETAIL REAL ESTATE DEVELOPMENT BUSINESS RISKS As part of its current expansion program, the Company is pursuing the development of hotels in Baton Rouge, Riverside and Lawrenceburg. In addition, the Company is also currently developing a retail real estate project as part of its Catfish Town development in Baton Rouge. The Company has no experience in hotel or retail real estate development or management and each of these projects will be subject to all of the risks inherent in the establishment of a new enterprise. In addition, numerous permits and approvals are required for the development of hotel and retail real estate projects, and no assurance can be given that such permits and approvals can or will be obtained. Although the Company may enter into management and/or development contracts with experienced hotel management companies with respect to certain or all of its proposed hotels, there can be no assurance that such contracts will be entered into or entered into on terms favorable to the Company. In addition, the uncertainty resulting from the upcoming local option election on the continuance of riverboat gaming in East Baton Rouge Parish will have a negative impact on the ability of the Company to lease the retail space in Catfish Town and to obtain financing for its planned hotel development in Catfish Town. JOINT VENTURE RISKS The Company is pursuing its Lawrenceburg Casino project and, as part of its growth strategy, is likely to pursue additional expansion opportunities by entering into joint ventures. The development and opening of the Lawrenceburg Casino project is dependent upon the ability of the Company's joint venture partner to contribute or loan to the joint venture its share of the necessary funds. In addition, any management dispute between the Company and a joint venture partner or the failure of any such partner to become licensed or to meet its obligations, with respect to the development of the Lawrenceburg or any other potential joint venture project, may have a material adverse effect on the Company's business. GAMING TAXATION AND FEES The Company believes that the prospect of significant additional tax revenue is one of the primary reasons why new jurisdictions have legalized gaming. As a result, gaming operators are typically subject to significant taxes and fees in addition to normal federal and state corporate income taxes. Such taxes and fees are subject to increase at any time. For example, a number of bills have been recently introduced in the Illinois legislature proposing a graduated gaming tax that would impose a maximum tax on Illinois casinos far in excess of the current 20% wagering tax on adjusted gaming receipts. The Governor of Illinois has publicly supported such a graduated gaming tax and has proposed a state budget which is in part predicated on additional revenues being generated from an increase in the gaming taxes. The proposed bills are still pending and no assurance can be given that one or a combination of these bills will not become law or that similar legislation will not be introduced, in Illinois or in other jurisdictions, in the future. 28 The Company pays substantial taxes and fees with respect to its operations and will likely incur similar burdens in any other jurisdiction in which it conducts gaming operations in the future. Any material increase, or the adoption of additional taxes or fees, could have a material adverse effect on the Company's future financial results. POTENTIAL CHALLENGE TO CERTIFICATE OF SUITABILITY FOR LAWRENCEBURG CASINO BY UNSUCCESSFUL APPLICANT On March 6, 1996 Indiana Gaming Company received a letter from counsel to Schilling Casino Corporation, d/b/a Empire Casino & Resort ("Empire") advising the Company that Empire intends to take legal action to seek a revocation or cancellation of the certificate of suitability issued by the Indiana Gaming Commission to Indiana Gaming L.P. on June 30, 1995 to develop and operate the Lawrenceburg Casino. Empire was one of the 10 unsuccessful applicants competing for the Lawrenceburg gaming license. Empire has advised Indiana Gaming L.P. that it intends to file an application with the Indiana Gaming Commission seeking revocation of the certificate of suitability and that if such application is unsuccessful, Empire has stated that it intends to file a civil action challenging the Indiana Gaming Commission's authority to issue the certificate of suitability and finally, if any such civil action is unsuccessful, to file an appeal from the denial of Empire's application, which denial Empire deems to occur upon the issuance of the gaming license to Indiana Gaming L.P. Among the grounds stated by Empire for its actions are: (i) the application process followed by the Indiana Gaming Commission did not afford Empire due process; (ii) Indiana Gaming L.P. will not be able to commence gaming operations prior to June 28, 1996 due to the failure to obtain the necessary permits and an inability to obtain the necessary financing for the project; (iii) Indiana Gaming L.P. made misrepresentations to the Indiana Gaming Commission during the licensing hearings; and (iv) the endorsement of Indiana Gaming L.P. by the City of Lawrenceburg was without legal authority. There can be no assurance that any actions of Empire will not result in a delay in the opening of the temporary gaming facility in Lawrenceburg presently scheduled for the fourth quarter of 1996 or the opening of the permanent gaming facility scheduled twelve months later. Additionally, the Company cannot predict the response of the Indiana Gaming Commission or City of Lawrenceburg to any such actions of Empire. CONTROL BY DIRECTORS AND EXECUTIVE OFFICERS The directors and executive officers of the Company presently own or control in the aggregate approximately 40% of the outstanding shares of Common Stock. Accordingly, the directors and executive officers will effectively be able to control the outcome of all matters requiring stockholder approval, including the election of the Company's directors, thereby controlling the management, policies and business operations of the Company. Such control could have the effect of entrenching current management and delaying or discouraging a takeover of the Company. 29 USE OF PROCEEDS There will be no cash proceeds to the Company resulting from the Exchange Offer. The Company used the net proceeds received from the offering of the Old Notes (approximately $225.6 million, after deducting the estimated expenses of the offering of the Old Notes) (i) to fund the Company's share of the estimated remaining construction costs of the Lawrenceburg Casino project, including the development and opening of a temporary gaming facility ($94.3 million), (ii) to repay all indebtedness outstanding under the Former Bank Credit Facility ($91.4 million), which facility was terminated upon such repayment and (iii) for general corporate purposes ($39.9 million). Borrowings under the Former Credit Facility were incurred to fund (a) a portion of the costs incurred in connection with the Company's acquisition of Jazz Enterprises, Inc., (b) a portion of the construction costs of the recent expansion projects at the Company's Riverside and Baton Rouge casinos, and (c) the Company's share of the initial costs of developing the Lawrenceburg Casino project. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Liquidity and Capital Resources." For a more complete discussion of the Company's expansion and development projects, see "Business." The portion of the proceeds used for funding the construction costs of the Lawrenceburg Casino project are being held in a disbursement account. Pursuant to the terms of the disbursement agreement governing the disbursement account, there are certain conditions and limitations affecting the ability of the Company to draw upon such funds. See "Description of Exchange Notes -- Cash Collateral and Disbursement Agreement." Until required for the foregoing purposes, the net proceeds of the offering of the Old Notes are being invested in short-term, investment grade, interest bearing securities. THE EXCHANGE OFFER PURPOSE OF THE EXCHANGE OFFER The sole purpose of the Exchange Offer is to fulfill the obligations of the Company and the Guarantors with respect to the registration of the Old Notes. The Old Notes were originally issued and sold on June 5, 1996 (the "Issue Date"). Such sales were not registered under the Securities Act in reliance upon the exemption provided by Section 4(2) of the Securities Act and Rule 144A promulgated under the Securities Act. In connection with the sale of the Old Notes, the Company, the Guarantors and the Initial Purchasers entered into a registration rights agreement dated June 5, 1996 (the "Registration Rights Agreement") pursuant to which the Company and the Guarantors agreed, for the benefit of the holders of Old Notes, that they will, at their cost, (i) within 30 days after the date of original issue of the Old Notes use their respective reasonable best efforts to file a registration statement in accordance with the Securities Act (an "Exchange Offer Registration Statement") with the Commission with respect to a registered offer to exchange the Old Notes for the Exchange Notes, which will have terms substantially identical in all material respects to the Old Notes and (ii) use their reasonable best efforts to cause such Exchange Offer Registration Statement to be declared effective under the Securities Act within 120 days after such issue date. Upon such Exchange Offer Registration Statement being declared effective, the Company agreed to offer to holders of Old Notes who are able to make certain representations an opportunity to exchange properly tendered Old Notes for Exchange Notes. The Company has agreed to keep the Exchange Offer open for not less than 30 days (or longer if required by applicable law) after the date notice of such Exchange Offer is mailed to the holders of Old Notes. In the event that applicable interpretations of the staff of the Commission do not permit the Company to effect the Exchange Offer, or if for any other reason the Exchange Offer is not consummated within 165 days of the date of original issue of the Old Notes, the Company and the Guarantors will, at their own expense, use their reasonable best efforts to (a) as promptly as practicable, file a shelf registration statement covering resales of the Old Notes (a "Shelf Registration Statement"), (b) cause such Shelf Registration Statement to be declared effective under the Securities Act and (c) keep effective such Shelf Registration Statement until the earlier of 36 months following the date of original issue of the Old Notes and such time 30 as all of the Old Notes have been sold thereunder or otherwise cease to be a Transfer Restricted Security (as defined in the Registration Rights Agreement). The Company and the Guarantors will, in the event a Shelf Registration Statement is required to be filed by them, provide to each holder of Old Notes copies of the prospectus which is a part of such Shelf Registration Statement, notify each such holder of Old Notes when such Shelf Registration Statement for the Old Notes has become effective and take certain other actions as are required to permit unrestricted resales of the Old Notes. A holder of Old Notes who sells such Old Notes pursuant to the Shelf Registration Statement generally would be required to be named as a selling security holder in the related prospectus and to deliver a prospectus to purchasers, will be subject to certain of the civil liability provisions under the Securities Act in connection with such sales and will be bound by the provisions of the Registration Rights Agreement which is applicable to such a holder (including certain indemnification and contribution rights and obligations). If (a) neither the Exchange Offer Registration Statement nor a Shelf Registration Statement is declared effective by the Commission on or prior to the 120th day after the date of original issuance of the Notes (the "Effectiveness Target Date"), (b) an Exchange Offer Registration Statement becomes effective and the Company and the Guarantors fail to consummate the Exchange Offer within 45 days of the earlier of the effectiveness of such registration statement or the Effectiveness Target Date, or (c) the Shelf Registration Statement is declared effective but thereafter ceases to be effective or usable in connection with resales of Old Notes during the period specified in the Registration Rights Agreement (each such event referred to in clauses (a) through (c) above a "Registration Default"), then the Company and the Guarantors will be required to pay Liquidated Damages to each Noteholder. See "Old Notes Registration Rights; Liquidated Damages." TERMS OF THE EXCHANGE The Company hereby offers to exchange, upon the terms and subject to the conditions set forth herein and the Letter of Transmittal accompanying the Registration Statement of which this Prospectus is a part (the "Letter of Transmittal"), $1,000 in principal amount of Exchange Notes for each $1,000 in principal amount of Old Notes. The Terms of the Exchange Notes are substantially identical to the terms of the Old Notes for which they may be exchanged pursuant to this Exchange Offer, except that the Exchange Notes will generally be freely transferable by holders thereof, and the holders of the Exchange Notes (as well as remaining holders of any Old Notes) are not entitled to certain registration rights and certain liquidated damages provisions which are applicable to the Old Notes under the Registration Rights Agreement. The Exchange Notes will evidence the same debt as the Old Notes and will be entitled to the benefits of the Indenture. See "Description of Exchange Notes." The Exchange Offer is not conditioned upon any minimum aggregate principal amount of Old Notes being tendered or accepted for exchange. Based on its view of interpretations set forth in no-action letters issued by the Staff to third parties, the Company believes that Exchange Notes issued pursuant to the Exchange Offer in exchange for the Old Notes may be offered for resale, resold and otherwise transferred by holders thereof (other than any holder which is (i) an Affiliate of the Company, (ii) a broker-dealer who acquired Old Notes directly from the Company or (iii) a broker-dealer who acquired Old Notes as a result of market making or other trading activities) without compliance with the registration and prospectus delivery provisions of the Securities Act provided that such Exchange Notes are acquired in the ordinary course of such holders' business, and such holders are not engaged in, and do not intend to engage in, and have no arrangement or understanding with any person to participate in, a distribution of such Exchange Notes. Any broker-dealer that resells Exchange Notes that were received by it for its own account pursuant to the Exchange Offer and any broker or dealer that participates in a distribution of such Exchange Notes may be deemed to be an "underwriter" within the meaning of the Securities Act and any profit on any such resale of Exchange Notes and any commissions or concessions received by any such persons may be deemed to be underwriting compensation under the Securities Act. Each broker-dealer that receives Exchange Notes for its own account pursuant to the Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Notes. The Letter of Transmittal states that by so acknowledging, and by delivering a prospectus, a 31 broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. Broker-dealers who acquired Old Notes as a result of market making or other trading activities may use this Prospectus, as supplemented or amended, in connection with resales of Exchange Notes. The Company has agreed that, for a period of 180 days after the Registration Statement is declared effective, it will make this Prospectus available to any broker-dealer for use in connection with any such resale. Any holder who tenders in the Exchange Offer for the purpose of participating in a distribution of the Exchange Notes or any other holder that cannot rely upon such interpretations must comply with the registration and prospectus delivery requirements of the Securities Act in connection with a secondary resale transaction. Tendering holders of Old Notes will not be required to pay brokerage commissions or fees or, subject to the instructions in the Letter of Transmittal, transfer taxes with respect to the exchange of the Old Notes pursuant to the Exchange Offer. The Exchange Notes will bear interest from June 5, 1996. Holders of Old Notes whose Old Notes are accepted for exchange will be deemed to have waived the right to receive any payment in respect of interest on the Old Notes accrued from June 5, 1996 to the date of the issuance of the Exchange Notes. The Exchange Notes will bear interest at a rate of 13 1/4% per annum, payable semi-annually on June 1 and December 1 of each year, commencing December 1, 1996. EXPIRATION DATE; EXTENSIONS; TERMINATION; AMENDMENTS The Exchange Offer expires on the Expiration Date. The term "Expiration Date" means 5:00 p.m., New York City time, on , 1996 unless the Company in its sole discretion extends the period during which the Exchange Offer is open, in which event the term "Expiration Date" means the latest time and date on which the Exchange Offer, as so extended by the Company, expires. The Company reserves the right to extend the Exchange Offer at any time and from time to time prior to the Expiration Date by giving written notice to First National Bank of Commerce (the "Exchange Agent") and by timely public announcement communicated by no later than 5:00 p.m. on the next business day following the Expiration Date, unless otherwise required by applicable law or regulation, by making a release to the Dow Jones News Service. During any extension of the Exchange Offer, all Old Notes previously tendered pursuant to the Exchange Offer will remain subject to the Exchange Offer. The initial Exchange Date will be the first business day following the Expiration Date. The Company expressly reserves the right to (i) terminate the Exchange Offer and not accept for exchange any Old Notes for any reason, including if any of the events set forth below under "Conditions to the Exchange Offer" shall have occurred and shall not have been waived by the Company and (ii) amend the terms of the Exchange Offer in any manner, whether before or after any tender of the Old Notes. If any such termination or amendment occurs, the Company will notify the Exchange Agent in writing and will either issue a press release or give written notice to the holders of the Old Notes as promptly as practicable. Unless the Company terminates the Exchange Offer prior to 5:00 p.m., New York City time, on the Expiration Date, the Company will exchange the Exchange Notes for Old Notes on the Exchange Date. If the Company waives any material condition to the Exchange Offer, or amends the Exchange Offer in any other material respect, and if at the time that notice of such waiver or amendment is first published, sent to given to holders of Old Notes in the manner specified above, the Exchange Offer is scheduled to expire at any time earlier than the expiration of a period ending on the fifth business day from, and including, the date that such notice is first so published, sent or given, then the Exchange Offer will be extended until the expiration of such period of five business days. This Prospectus and the related Letter of Transmittal and other relevant materials will be mailed by the Company to record holders of Old Notes and will be furnished to brokers, banks and similar persons whose names, or the names of whose nominees, appear on the lists of holders for subsequent transmittal to beneficial owners of Old Notes. 32 HOW TO TENDER The tender to the Company of Old Notes by a holder thereof pursuant to one of the procedures set forth below will constitute an agreement between such holder and the Company in accordance with the terms and subject to the conditions set forth herein and in the Letter of Transmittal. GENERAL PROCEDURES A holder of an Old Note may tender the same by (i) properly completing and signing the Letter of Transmittal or a facsimile thereof (all references in this Prospectus to the Letter of Transmittal shall be deemed to include a facsimile thereof) and delivering the same, together with the certificate or certificates representing the Old Notes being tendered and any required signature guarantees (or a timely confirmation of a book-entry transfer (a "Book-Entry Confirmation") pursuant to the procedure described below), to the Exchange Agent at its address set forth on the back cover of this Prospectus on or prior to the Expiration Date or (ii) complying with the guaranteed delivery procedures described below. If tendered Old Notes are registered in the name of the signer of the Letter of Transmittal and the Exchange Notes to be issued in exchange therefor are to be issued (and any untendered Old Notes are to be reissued) in the name of the registered holder, the signature of such signer need not be guaranteed. In any other case, the tendered Old Notes must be endorsed or accompanied by written instruments of transfer in form satisfactory to the Company and duly executed by the registered holder and the signature on the endorsement or instrument of transfer must be guaranteed by a bank, broker, dealer, credit union, savings association, clearing agency or other institution (each an "Eligible Institution") that is a member of a recognized signature guarantee medallion program within the meaning of Rule 17Ad-15 under the Exchange Act. If the Exchange Notes and/or Old Notes not exchanged are to be delivered to an address other than that of a registered holder appearing on the note register for the Old Notes, the signature on the Letter of Transmittal must be guaranteed by an Eligible Institution. Any beneficial owner whose Old Notes are registered in the name of a broker, dealer, commercial bank, trust company or other nominee and who wishes to tender Old Notes should contact such holder promptly and instruct such holder to tender Old Notes on such beneficial owner's behalf. If such beneficial owner wishes to tender such Old Notes himself, such beneficial owner must, prior to completing and executing the Letter of Transmittal and delivering such Old Notes, either make appropriate arrangements to register ownership of the Old Notes in such beneficial owner's name or follow the procedures described in the immediately preceding paragraph. The transfer of record ownership may take considerable time. BOOK-ENTRY TRANSFER The Exchange Agent will make a request to establish an account with respect to the Old Notes at The Depository Trust Company (the "Book-Entry Transfer Facility") for purposes of the Exchange Offer within two business days after receipt of this Prospectus, and any financial institution that is a participant in the Book-Entry Transfer Facility's systems may make book-entry delivery of Old Notes by causing the Book-Entry Transfer Facility to transfer such Old Notes into the Exchange Agent's account at the Book-Entry Transfer Facility in accordance with the Book-Entry Transfer Facility's procedures for transfer. However, although delivery of Old Notes may be effected through book-entry transfer at the Book-Entry Transfer Facility, the Letter of Transmittal, with any required signature guarantees and any other required documents, must, in any case, be transmitted to and received by the Exchange Agent at the address specified on the back cover of this Prospectus on or prior to the Expiration Date or the guaranteed delivery procedures described below must be complied with. THE METHOD OF DELIVERY OF OLD NOTES AND ALL OTHER DOCUMENTS IS AT THE ELECTION AND RISK OF THE HOLDER. IF SENT BY MAIL, IT IS RECOMMENDED THAT REGISTERED MAIL, RETURN RECEIPT REQUESTED, BE USED, PROPER INSURANCE BE OBTAINED, AND THE MAILING BE MADE SUFFICIENTLY IN ADVANCE OF THE EXPIRATION DATE TO PERMIT DELIVERY TO THE EXCHANGE AGENT ON OR BEFORE THE EXPIRATION DATE. Unless an exemption applies under the applicable law and regulations concerning "backup withholding" of federal income tax, the Exchange Agent will be required to withhold, and will withhold, 31% of the gross proceeds otherwise payable to a holder pursuant to the Exchange Offer if the holder does not provide 33 his taxpayer identification number (social security number or employer identification number, as applicable) and certify that such number is correct. Each tendering holder should complete and sign the main signature form and the Substitute Form W-9 included as part of the Letter of Transmittal, so as to provide the information and certification necessary to avoid backup withholding, unless an applicable exemption exists and is proved in a manner satisfactory to the Company and the Exchange Agent. GUARANTEED DELIVERY PROCEDURES If a holder desires to accept the Exchange Offer and time will not permit a Letter of Transmittal or Old Notes to reach the Exchange Agent before the Expiration Date, a tender may be effected if the Exchange Agent has received at its office listed on the Letter of Transmittal on or prior to the Expiration Date a letter, telegram or facsimile transmission from an Eligible Institution setting forth the name and address of the tendering holder, the principal amount of the Old Notes being tendered, the names in which the Old Notes are registered and, if possible, the certificate numbers of the Old Notes to be tendered, and stating that the tender is being made thereby and guaranteeing that within three New York Stock Exchange trading days after the date of execution of such letter, telegram or facsimile transmission by the Eligible Institution, the Old Notes, in proper form for transfer, will be delivered by such Eligible Institution together with a properly completed and duly executed Letter of Transmittal (and any other required documents). Unless Old Notes being tendered by the above-described method (or a timely Book-Entry Confirmation) are deposited with the Exchange Agent within the time period set forth above (accompanied or preceeded by a properly completed Letter of Transmittal and any other required documents), the Company may, at its option, reject the tender. Copies of a Notice of Guaranteed Delivery which may be used by Eligible Institutions for the purposes described in this paragraph are available from the Exchange Agent. A tender will be deemed to have been received as of the date when the tendering holder's properly completed and duly signed Letter of Transmittal accompanied by the Old Notes (or a timely Book-Entry Confirmation) is received by the Exchange Agent. Issuances of Exchange Notes in exchange for Old Notes tendered pursuant to a Notice of Guaranteed Delivery or letter, telegram or facsimile transmission to similar effect (as provided above) by an Eligible Institution will be made only against deposit of the Letter of Transmittal (and any other required documents) and the tendered Old Notes (or a timely Book-Entry Confirmation). All questions as to the validity, form, eligibility (including time of receipt) and acceptance for exchange of any tender of Old Notes will be determined by the Company, whose determination will be final and binding. The Company reserves the absolute right to reject any or all tenders not in proper form or the acceptances for exchange of which may, in the opinion of counsel to the Company, be unlawful. The Company also reserves the absolute right to waive any of the conditions of the Exchange Offer or any defect or irregularities in tenders of any particular holder whether or not similar defects or irregularities are waived in the case of other holders. Neither the Company, the Exchange Agent nor any other person will be under any duty to give notification of any defects or irregularities in tenders or shall incur any liability for failure to give any such notification. The Company's interpretation of the terms and conditions of the Exchange Offer (including the Letter of Transmittal and the instructions thereto) will be final and binding. TERMS AND CONDITIONS OF THE LETTER OF TRANSMITTAL The Letter of Transmittal contains, among other things, the following terms and conditions, which are part of the Exchange Offer. The party tendering Old Notes for exchange (the "Transferor") exchanges, assigns and transfers the Old Notes to the Company and irrevocably constitutes and appoints the Exchange Agent as the Transferor's agent and attorney-in-fact to cause the Old Notes to be assigned, transferred and exchanged. The Transferor represents and warrants that it has full power and authority to tender, exchange, assign and transfer the Old Notes and to acquire Exchange Notes issuable upon the exchange of such tendered Old Notes, and that, when the same are accepted for exchange, the Company will acquire good and unencumbered title to the tendered Old Notes, free and clear of all liens, restrictions, charges and encumbrances and not subject to any adverse claim. The Transferor also warrants that it will, upon request, execute and deliver any additional documents deemed by the Company to be necessary or desirable to complete the exchange, assignment and 34 transfer of tendered Old Notes. The Transferor further agrees that acceptance of any tendered Old Notes by the Company and the issuance of Exchange Notes in exchange therefor shall constitute performance in full by the Company of its obligations under the Registration Rights Agreement and that the Company shall have no further obligations or liabilities thereunder (except in certain limited circumstances). All authority conferred by the Transferor will survive the death or incapacity of the Transferor and every obligation of the Transferor shall be binding upon the heirs, legal representatives, successors, assigns, executors and administrators of such Transferor. By tendering Old Notes and executing the Letter of Transmittal, the Transferor certifies that (i) any Exchange Notes to be received by it will be acquired in the ordinary course of its business, (ii) it has no arrangement with any person to participate in the distribution of the Exchange Notes and (iii) it is not an "affiliate," as defined in Rule 405 of the Securities Act, of the Company, or if it is an affiliate of the Company, it will comply with the registration and prospectus delivery requirements of the Securities Act to the extent applicable. In addition, if the Transferor is not a broker-dealer, it will be required to represent that it is not engaged in, and does not intend to engage in, the distribution of the Exchange Notes. If the holder is a broker-dealer that will receive Exchange Notes for its own account in exchange for Old Notes that were acquired as a result of market making activities or other trading activities, it will be required to acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Notes. WITHDRAWAL RIGHTS Old Notes tendered pursuant to the Exchange Offer may be withdrawn at any time prior to the Expiration Date. For a withdrawal to be effective, a written or facsimile transmission notice of withdrawal must be timely received by the Exchange Agent at its address set forth on the back cover of this Prospectus prior to the Expiration Date. Any such notice of withdrawal must specify the person named in the Letter of Transmittal as having tendered Old Notes to be withdrawn, the certificate numbers of Old Notes to be withdrawn, the principal amount of Old Notes to be withdrawn, a statement that such holder is withdrawing his election to have such Old Notes exchanged, and the name of the registered holder of such Old Notes, and must be signed by the holder in the same manner as the original signature on the Letter of Transmittal (including any required signature guarantees) or be accompanied by evidence satisfactory to the Company that the person withdrawing the tender has succeeded to the beneficial ownership of the Old Notes being withdrawn. The Exchange Agent will return the properly withdrawn Old Notes promptly following receipt of notice of withdrawal. All questions as to the validity of notices of withdrawals, including time of receipt, will be determined by the Company, and such determination will be final and binding on all parties. ACCEPTANCE OF OLD NOTES FOR EXCHANGE; DELIVERY OF EXCHANGE NOTES Upon the terms and subject to the conditions of the Exchange Offer, the acceptance for exchange of Old Notes validly tendered and not withdrawn and the issuance of the Exchange Notes will be made on the Exchange Date. For the purposes of the Exchange Offer, the Company shall be deemed to have accepted for exchange validly tendered Old Notes when, as and if the Company has given written notice thereof to the Exchange Agent. The Exchange Agent will act as agent for the tendering holders of Old Notes for the purposes of receiving Exchange Notes from the Company and causing the Old Notes to be assigned, transferred and exchanged. Upon the terms and subject to conditions of the Exchange Offer, delivery of Exchange Notes to be issued in exchange for accepted Old Notes will be made by the Exchange Agent promptly after acceptance of the tendered Old Notes. Old Notes not accepted for exchange by the Company will be returned without expense to the tendering holders (or in the case of Old Notes tendered by book-entry transfer into the Exchange Agent's account at the Book-Entry Transfer Facility pursuant to the procedures described above, such non-exchanged Old Notes will be credited to an account maintained with such Book-Entry Transfer Facility) promptly following the Expiration Date or, if the Company terminates the Exchange Offer prior to the Expiration Date, promptly after the Exchange Offer is so terminated. 35 CONDITIONS TO THE EXCHANGE OFFER Notwithstanding any other provision of the Exchange Offer, or any extension of the Exchange Offer, the Company will not be required to issue Exchange Notes in respect of any properly tendered Old Notes not previously accepted and may terminate the Exchange Offer (by oral or written notice to the Exchange Agent and by timely public announcement communicated by no later than 5:00 p.m. on the next business day following the Expiration Date, unless otherwise required by applicable law or regulation, by making a release to the Dow Jones News Service) or, at its option, modify or otherwise amend the Exchange Offer, if (a) there shall be threatened, instituted or pending any action or proceeding before, or any injunction, order or decree shall have been issued by, any court or governmental agency or other governmental regulatory or administrative agency or commission, (i) seeking to restrain or prohibit the making or consummation of the Exchange Offer or any other transaction contemplated by the Exchange Offer, (ii) assessing or seeking any damages as a result thereof or (iii) resulting in a material delay in the ability of the Company to accept for exchange or exchange some or all of the Old Notes pursuant to the Exchange Offer; (b) any statute, rule, regulation, order or injunction shall be sought, proposed, introduced, enacted, promulgated or deemed applicable to the Exchange Offer or any of the transactions contemplated by the Exchange Offer by any government or governmental authority, domestic or foreign, or any action shall have been taken, proposed or threatened, by any government, governmental authority, agency or court, domestic or foreign, that in the reasonable judgment of the Company might directly or indirectly result in any of the consequences referred to in clauses (a)(i) or (ii) above or, in the reasonable judgment of the Company, might result in the holders of Exchange Notes having obligations with respect to resales and transfers of Exchange Notes which are greater than those described in the interpretations of the Staff referred to on the cover page of this Prospectus, or would otherwise make it inadvisable to proceed with the Exchange Offer; or (c) a material adverse change shall have occurred in the business, condition (financial or otherwise), operations, or prospects of the Company. The foregoing conditions are for the sole benefit of the Company and may be asserted by it with respect to all or any portion of the Exchange Offer regardless of the circumstances (including any action or inaction by the Company) giving rise to such condition or may be waived by the Company in whole or in part at any time or from time to time in its sole discretion. The failure by the Company at any time to exercise any of the foregoing rights will not be deemed a waiver of any such right, and each right will be deemed an ongoing right which may be asserted at any time or from time to time. In addition, the Company has reserved the right, notwithstanding the satisfaction of each of the foregoing conditions, to terminate or amend the Exchange Offer. Any determination by the Company concerning the fulfillment or nonfulfillment of any conditions will be final and binding upon all parties. In addition, the Company will not accept for exchange any Old Notes tendered and no Exchange Notes will be issued in exchange for any such Old Notes, if at such time any stop order shall be threatened or in effect with respect to the Registration Statement of which this Prospectus constitutes a part or qualification of the Indenture under the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"). EXCHANGE AGENT First National Bank of Commerce has been appointed as the Exchange Agent for the Exchange Offer. Letters of Transmittal must be addressed to the Exchange Agent at: BY MAIL: BY HAND DELIVERY/OVERNIGHT DELIVERY: Trust Security Services Trust Security Services First National Bank of Commerce First National Bank of Commerce P.O. Box 60279 210 Baronne Street New Orleans, Louisiana 70160-0279 Basement Level Attention: Rebecca Norton New Orleans, Louisiana 70112 Attention: Rebecca Norton
Telephone: (504) 623-7581 Facsimile: (504) 623-1095 36 Delivery to an address other than as set forth herein, or transmissions of instructions via a facsimile or telex number other than the ones set forth herein, will not constitute a valid delivery. SOLICITATION OF TENDERS; EXPENSES The Company has not retained any dealer-manager or similar agent in connection with the Exchange Offer and will not make any payments to brokers, dealers or others for soliciting acceptances of the Exchange Offer. The Company will, however, pay the Exchange Agent reasonable and customary fees for its services and will reimburse it for reasonable out-of-pocket expenses in connection therewith. The Company will also pay brokerage houses and other custodians, nominees and fiduciaries the reasonable out-of-pocket expenses incurred by them in forwarding tenders for their customers. The expenses to be incurred in connection with the Exchange Offer, including the fees and expenses of the Exchange Agent and printing, accounting, legal fees and miscellaneous expenses will be paid by the Company and are estimated to be approximately $150,000. No person has been authorized to give any information or to make any representations in connection with the Exchange Offer other than those contained in this Prospectus. If given or made, such information or representations should not be relied upon as having been authorized by the Company. Neither the delivery of this Prospectus nor any exchange made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the Company since the respective dates as of which information is given herein. The Exchange Offer is not being made to (nor will tenders be accepted from or on behalf of) holders of Old Notes in any jurisdiction in which the making of the Exchange Offer or the acceptance thereof would not be in compliance with the laws of such jurisdiction. However, the Company may, at its discretion, take such action as it may deem necessary to make the Exchange Offer in any such jurisdiction and extend the Exchange Offer to holders of Old Notes in such jurisdiction. In any jurisdiction the securities laws or blue sky laws of which require the Exchange Offer to be made by a licensed broker or dealer, the Exchange Offer is being made on behalf of the Company by one or more registered brokers or dealers that are licensed under the laws of such jurisdiction. APPRAISAL RIGHTS HOLDERS OF OLD NOTES WILL NOT HAVE DISSENTERS' RIGHTS OR APPRAISAL RIGHTS IN CONNECTION WITH THE EXCHANGE OFFER. FEDERAL INCOME TAX CONSEQUENCES The exchange of Old Notes for Exchange Notes by tendering holders will not be a taxable exchange for federal income tax purposes, and such holders should not recognize any taxable gain or loss or any interest income as a result of such exchange. OTHER Participation in the Exchange Offer is voluntary and holders of Old Notes should carefully consider whether to accept the terms and conditions thereof. Holders of the Old Notes are urged to consult their financial and tax advisors in making their own decisions on what action to take with respect to the Exchange Offer. As a result of the making of, and upon acceptance for exchange of all validly tendered Old Notes pursuant to the terms of this Exchange Offer, the Company will have fulfilled a covenant contained in the terms of the Old Notes and the Registration Rights Agreement. Holders of the Old Notes who do not tender their Old Notes in the Exchange Offer will continue to hold such Old Notes and will be entitled to all the rights, and limitations applicable thereto, under the Indenture, except for any such rights under the Registration Rights Agreement which by their terms terminate or cease to have further effect as a result of the making of this Exchange Offer. See "Description of Exchange Notes." All untendered Old Notes will continue to be subject to the restriction on transfer set forth in the Indenture. To the extent that Old Notes are tendered and accepted in the Exchange Offer, the trading market, if any, for any remaining Old Notes could be adversely affected. See "Risk Factors -- Consequences of Failure to Exchange Old Notes." The Company may in the future seek to acquire untendered Old Notes in open market or privately negotiated transactions, through subsequent exchange offers or otherwise. The Company has no present plan to acquire any Old Notes that are not tendered in the Exchange Offer. 37 CAPITALIZATION The following table sets forth the cash and cash equivalents, short-term indebtedness and total capitalization of the Company as of March 31, 1996 on an actual basis and as adjusted to reflect the issuance and sale of the Old Notes and the application of the net proceeds therefrom.
AT MARCH 31, 1996 -------------------------- ACTUAL AS ADJUSTED ---------- -------------- (IN THOUSANDS) Cash and cash equivalents................................................... $ 28,129 $ 163,741(a) ---------- -------------- ---------- -------------- Total debt (b): Existing Bank Credit Facility............................................. $ 71,000 $ -- Notes offered hereby...................................................... 235,000 Note payable.............................................................. 9,202 9,202 Convertible Subordinated Notes............................................ 115,000 115,000 ---------- -------------- Total debt.............................................................. 195,202 359,202 Stockholders' equity: Preferred stock; $.01 par value per share; 10,000,000 shares authorized; none outstanding......................................................... -- -- Redeemable common stock; $.01 par value per share; 85 shares authorized; none outstanding......................................................... -- -- Common stock; $.01 par value per share; 60,000,000 shares authorized; 24,333,333 shares outstanding (c)........................................ 243 243 Capital in excess of par value............................................ 71,865 71,865 Retained earnings......................................................... 24,385 23,400(d) ---------- -------------- Total stockholders' equity.............................................. 96,493 95,508 ---------- -------------- Total capitalization........................................................ $ 291,695 $ 454,710 ---------- -------------- ---------- --------------
- --------------- (a) Such amount includes restricted cash in the amount of $94.3 million that upon consummation of the offering of the Old Notes was deposited in a disbursement account under the control of a disbursement agent solely for use in connection with developing the Lawrenceburg Casino project. Pursuant to the terms of the disbursement agreement governing the disbursement account, there are certain conditions and limitations affecting the ability of the Company to draw upon such funds. See "Description of Exchange Notes -- Cash Collateral and Disbursement Agreement" and "-- Certain Covenants -- Limitation on Use of Proceeds." (b) For a further description of the Company's debt, see "Description of Certain Indebtedness" and Note 3 of Notes to Consolidated Financial Statements. In March 1995, the Company entered into the Former Bank Credit Facility pursuant to which the Company could borrow up to $20 million under a revolving line of credit and up to an additional $80 million which would be available under an expansion line for the Company's expansion projects. The total indebtedness outstanding under the Former Bank Credit Facility was $91.4 million on the closing date of the offering of the Old Notes. In connection with the offering of the Old Notes, all amounts outstanding under the Former Bank Credit Facility were repaid in full and the Company terminated the facility. (c) Does not include 2,500,000 shares of common stock available under the Company's 1993 Employee Stock Option Plan (of which options covering 2,445,253 shares are outstanding, options covering 569,705 shares of which are exercisable as of the date of this Offering Memorandum) and 50,000 shares of common stock available under the Company's 1993 Directors Option Plan (of which options covering 21,000 shares are outstanding, options covering 17,000 shares of which are exercisable as of the date of this Offering Memorandum). (d) Reflects an approximately $1.6 million pre-tax non-cash extraordinary charge ($1.0 million net of tax) arising from the accelerated writeoff of deferred finance costs related to the early extinguishment of the Existing Bank Credit Facility. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Overview." 38 SELECTED CONSOLIDATED FINANCIAL DATA The selected consolidated financial data for the Company presented below under the captions "Income Statement Data" and "Balance Sheet Data" for and as of the end of each of the five years ended December 31, 1995 are derived from the Consolidated Financial Statements of the Company which have been audited by Ernst & Young LLP, independent auditors. The selected income statement data for the three months ended March 31, 1995 and 1996 and the selected balance sheet data at March 31, 1995 and 1996 have been derived from the unaudited condensed consolidated financial statements which are also included in this Prospectus and include all adjustments, consisting of normal recurring accruals, that the Company considers necessary for a fair presentation of its consolidated financial position and results of operations for such periods. The following information should be read in conjunction with the consolidated financial statements and notes thereto, and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included elsewhere in this Prospectus. The Company believes that the results of operations for each of the five years in the period ended December 31, 1995, are not readily comparable to each other because (i) the Alton Belle Casino commenced operations in September 1991, was substantially expanded in May 1993, was affected by severe flooding experienced in the St. Louis area in the summer of 1993 and was the only casino that operated until June 1993, (ii) the Argosy Casino in Riverside commenced operations on June 22, 1994 on a riverboat that offered only the limited forms of casino gaming then permitted under Missouri law and on December 9, 1994 expanded its operations to offer additional casino gaming, including slot machines, (iii) the Belle of Baton Rouge commenced operations on September 30, 1994 through a 90% interest in a joint venture, which became a 100% subsidiary of the Company on June 6, 1995 (effective May 30, 1995), and (iv) the Company became the manager of the Belle of Sioux City on October 4, 1994 and on December 1, 1994 became the 70% general partner of the Belle of Sioux City, L.P.
THREE MONTHS ENDED YEARS ENDED DECEMBER 31, MARCH 31, ------------------------------------------------------ -------------------- 1991(A) 1992 1993 1994 1995 1995 1996 --------- --------- --------- --------- ---------- --------- --------- (IN THOUSANDS, EXCEPT PER SHARE DATA) INCOME STATEMENT DATA: Revenues: Casino.............................. $ 10,703 $ 49,742 $ 60,182 $ 138,425 $ 237,613 $ 56,593 $ 58,791 Admissions.......................... 2,975 5,990 6,440 12,177 15,300 4,168 1,995 Food, beverage and other............ 1,267 3,544 4,381 12,036 18,537 3,703 6,055 Less: promotional allowances........ (826) (1,257) (3,478) (9,593) (18,759) (4,090) (4,152) --------- --------- --------- --------- ---------- --------- --------- Net revenues.................... 14,119 58,019 67,525 153,045 252,691 60,374 62,689 Costs and expenses: Casino.............................. 5,478 19,521 25,308 64,997 117,725 28,987 29,071 Food, beverage and other............ 1,009 2,827 4,490 11,876 17,242 4,160 5,276 Other operating expenses............ 1,203 3,346 5,078 9,897 16,910 3,384 4,368 Selling, general and administrative..................... 1,634 5,207 8,903 23,674 45,814 12,577 14,318 Depreciation and amortization....... 656 2,089 3,333 9,846 20,450 4,579 5,889 Development and preopening.......... 1,569 -- 4,609 9,761 3,411 466 1,855 Flood costs (b)..................... -- -- 1,477 -- -- -- -- Retirement benefit (c).............. -- 1,595 -- -- -- -- -- Notes receivable writeoff........... -- -- -- -- 3,477 -- -- --------- --------- --------- --------- ---------- --------- --------- 11,549 34,585 53,198 130,051 225,029 54,153 60,777 --------- --------- --------- --------- ---------- --------- --------- Income from operations.......... 2,570 23,434 14,327 22,994 27,662 6,221 1,912 Other income (expense): Interest income..................... -- -- 1,254 1,081 436 98 90 Interest expense: Amortization of accommodation fee............................ (1,549) (6,951) -- -- -- -- -- Other........................... (328) (931) (800) (8,182) (14,708) (3,942) (4,211) --------- --------- --------- --------- ---------- --------- --------- Income before income taxes and minority interest.................... 693 15,552 14,781 15,893 13,390 2,377 (2,209) Income tax benefit (expense).......... (34) (338) (3,956) (6,453) (6,621) (934) 867 Minority interest..................... -- -- -- 195 184 25 295 --------- --------- --------- --------- ---------- --------- --------- Net income (loss)............... $ 659 $ 15,214 $ 10,825 $ 9,635 $ 6,953 $ 1,468 $ (1,047) --------- --------- --------- --------- ---------- --------- --------- --------- --------- --------- --------- ---------- --------- ---------
39
THREE MONTHS ENDED YEARS ENDED DECEMBER 31, MARCH 31, ------------------------------------------------------ -------------------- 1991(A) 1992 1993 1994 1995 1995 1996 --------- --------- --------- --------- ---------- --------- --------- (IN THOUSANDS, EXCEPT PER SHARE DATA) Net income (loss) per share........... -- -- -- $ 0.40 $ 0.29 $ 0.06 $ (0.04) Shares outstanding.................... -- -- -- 24,333 24,333 24,333 24,333 Ratio of earnings to fixed charges (d).................................. 1.2x 3.0x 16.0x 2.3x 1.5x 1.5x --(d) Pro forma ratio of earnings to fixed charges (d).......................... -- -- -- -- 1.3x --(d) Pro forma net income per share (e).... $ .36 $ .38 $ -- $ .23 Pro forma shares outstanding (e)...... 20,552 23,764 -- 24,333 24,333 BALANCE SHEET DATA (AT END OF PERIOD): Cash and cash equivalents............. $ 2,088 $ 2,749 $ 7,404 $ 18,291 $ 16,159 $ 14,220 $ 28,129 Total assets.......................... 23,596 21,022 94,635 232,831 309,882 242,270 344,925 Long-term debt including current maturities........................... 10,452 4,693 4,332 115,431 169,702 119,118 195,202 Total stockholders' equity............ 547 2,812 80,952 90,587 97,540 92,055 96,493
- --------------- (a) The income statement data for the year ended December 31, 1991 includes preopening expenses associated with the developmental stage of the Company through September 10, 1991, the date the Company was granted a gaming license by the Illinois Gaming Board. The Company received no operating revenues prior to September 10, 1991. (b) During the early summer and early fall of 1993, the St. Louis metropolitan area experienced severe flooding along the Mississippi river front. While the Company remained operational during the flooding, it experienced an increase in expenses to remain operational and its attendance during the period declined. See "Management's Discussion and Analysis of Financial Condition and Results of Operations." (c) Represents a fully vested retirement benefit that is payable to an officer of the Company and was expensed in its entirety during 1992. (d) The ratio of earnings to fixed charges has been computed by dividing earnings available for fixed charges (income before income taxes plus fixed charges less capitalized interest) by fixed charges (interest expense plus capitalized interest and one third of rental expense (the portion deemed representative of the interest factor)). The Company's earnings were inadequate to cover fixed charges for the three months ended March 31, 1996 by approximately $3.6 million. The pro forma ratio of earning to fixed charges reflects the net increase in interest expense related to the issuance of that portion of the Old Notes necessary to retire amounts outstanding under the Former Bank Credit Facility as of December 31, 1995 and March 31, 1996. The Company's earnings were inadequate to cover pro forma fixed charges for the three months ended March 31, 1996 by approximately $4.2 million. (e) From their inception until a reorganization that was effected on February 25, 1993, certain predecessor entities of the Company elected to be treated as S Corporations under the Internal Revenue Code and were not generally subject to corporate income taxes. The pro forma net income amount for the years ended December 31, 1992 and 1993 have been determined assuming the reorganization had occurred on January 1, 1992 resulting in the Company being treated as a C Corporation for tax purposes as of that date and to reflect the use of a portion of the net proceeds of the Company's initial public offering to retire debt. The pro forma tax provision for 1993 has been computed using an effective tax rate of 39%. The pro forma tax provision for 1992 has been computed using an effective tax rate of 51%, which differs from the statutory rate principally due to an an assumed difference between book and tax treatment of amortization of the $8.5 million accomodation fee paid to a stockholder of a predecessor entity of the Company. See Notes 1, 4, 8 and 11 of the Notes to the Consolidated Financial Statements. In addition, pro forma net income per share for the year ended December 31, 1995 reflects the Jazz Acquisition as if it had occurred on January 1, 1995. The Company's pro forma net revenue, income from operations, interest expense and net income giving such effect to the Jazz Acquisition for the year ended December 31, 1995 is $252.7 million, $26.8 million, $15.5 million and $5.7 million, respectively. The Company's pro forma net revenue, income from operations, interest expense and net income giving such effect to the Jazz Acquisition for the three months ended March 31, 1995 is $60.4 million, $5.7 million, $4.4 million and $1.3 million, respectively. See Note 7 of the Notes to Consolidated Financial Statements. 40 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH, AND IS QUALIFIED IN ITS ENTIRETY BY, THE CONSOLIDATED FINANCIAL STATEMENTS AND THE NOTES THERETO INCLUDED ELSEWHERE IN THIS PROSPECTUS. OVERVIEW The Company opened its first riverboat casino, the Alton Belle Casino, in Alton, Illinois in September 1991. Subsequently, the Company opened the Argosy Casino in Riverside, Missouri in June 1994; the Belle of Baton Rouge in Baton Rouge, Louisiana in September 1994; and through a management agreement, the Belle of Sioux City in Sioux City, Iowa in October 1994. The Company, through a 70% general partnership interest, began consolidating the results of the Belle of Sioux City on January 1, 1995. In addition, the Company, through its 57.5% equity interest in Indiana Gaming L.P., is developing the Lawrenceburg Casino project, which the Company anticipates opening with a temporary gaming facility in the fourth quarter of 1996 and with a permanent gaming facility, not later than 12 months thereafter. The Company's results of operations for the year ended December 31, 1993 reflect only the operations of the Alton Belle Casino. The results of operations for the year ended December 31, 1994 reflect a full year of operations of the Alton Belle Casino, and reflect operations from the Argosy Casino in Riverside, Belle of Baton Rouge and Belle of Sioux City from their respective opening dates. The results of operations for the year ended December 31, 1995 reflect a full year of operations for each of the Company's four existing gaming properties. The Company believes that the results of operations for the years ended December 31, 1993, 1994 and 1995, are not readily comparable to each other, and may not be indicative of results of operations for future periods, due to the operational impact at the Alton Belle Casino of the severe flooding in the St. Louis area in 1993, the timing of the opening of the Company's properties, certain changes in Missouri gaming regulations, and substantial present and expected future increases in gaming competition in all of the Company's gaming markets. The Company will face increased competition in the St. Louis and Kansas City areas as new riverboat casinos are expected to open in these markets. Accordingly, the Company belives that it may be more difficult in the future to sustain historical levels of operating revenues and profitability at certain of its properties. During the fourth quarter of 1995 and for the first two months of 1996, the Company experienced severe weather conditions at its two primary revenue generating gaming facilities, the Alton Belle Casino and the Argosy Casino in Riverside, and accordingly, both revenue and EBITDA were below management's expectations. The Company also experienced increased levels of competition at these two gaming facilities during the first quarter of 1996, as compared to the first quarter of 1995, which has negatively impacted profitability at these two facilities. The Company expects competition to further increase during the remaining three quarters of 1996 and into 1997 and accordingly, expects profitability at these two facilities to be below levels generated in the comparable prior year periods. To respond to competitive pressures in the Kansas City market, the Company opened in mid-January 1996 a new $45 million entertainment pavilion at the Argosy Casino in Riverside featuring nightclub, restaurant and conference facilities. The initial response to the new Riverside facility, in terms of increased customer patronage, has been strong. Management believes that the newly expanded Riverside facility has been, and will continue for the foreseeable future, favorably received by the Kansas City gaming market as a high quality, competitive gaming property. Further, for both competitive and capacity reasons, the Company is considering opening a second vessel for the Argosy Casino in Riverside. In addition, in connection with the offering of the Old Notes all amounts outstanding under the Former Bank Credit Facility were repaid in full and the Company terminated the credit facility. As a result, the Company incurred an approximately $1.6 million pre-tax non-cash extraordinary charge ($1.0 million net of tax or $0.04 per share) in the second quarter of 1996 to reflect the accelerated writeoff of deferred finance costs related to the early extinguishment of the Former Bank Credit Facility. The factors described in this and the preceding paragraph, together with the increased interest expense associated with increased borrowings under the Former Bank Credit Facility and the offering of the Old Notes and increased depreciation and 41 preopening expenses associated with the Company's recently opened land-based entertainment pavilion in Riverside, the Baton Rouge Catfish Town development and Lawrenceburg project and professional fees incurred in connection with the Indiana grand jury document subpeona and special independent counsel report, are likely to result in the Company's revenues, EBITDA and net income for the first half of 1996 being significantly less than reported in the comparable 1995 period. The following table highlights the results of operations for the Company's operating subsidiaries (amounts in thousands):
THREE MONTHS ENDED YEARS ENDED DECEMBER 31, MARCH 31, --------------------------------- -------------------- 1993 1994 (1) 1995 1995 1996 --------- ---------- ---------- --------- --------- GROSS REVENUES Alton Belle Casino.......................... $ 71,003 $ 104,038 $ 89,262 $ 20,840 $ 20,290 Argosy Casino Riverside..................... 37,224 106,946 26,305 26,614 Belle of Baton Rouge/Catfish Town........... 20,976 52,729 11,920 14,470 Belle of Sioux City......................... 22,500 5,399 5,217 --------- ---------- ---------- --------- --------- Total Properties.......................... $ 71,003 $ 162,238 $ 271,437 $ 64,464 $ 66,591 --------- ---------- ---------- --------- --------- --------- ---------- ---------- --------- --------- NET REVENUES Alton Belle Casino.......................... $ 67,525 $ 96,983 $ 85,992 $ 20,140 $ 19,663 Argosy Casino Riverside..................... 35,351 94,058 23,353 23,904 Belle of Baton Rouge/Catfish Town........... 20,319 50,639 11,574 13,795 Belle of Sioux City......................... 21,994 5,311 5,084 --------- ---------- ---------- --------- --------- Total Properties.......................... $ 67,525 $ 152,653 $ 252,683 $ 60,378 $ 62,446 --------- ---------- ---------- --------- --------- --------- ---------- ---------- --------- --------- INCOME FROM OPERATIONS Alton Belle Casino (2)...................... $ 19,909 $ 28,817 $ 22,446 $ 5,319 $ 3,919 Argosy Casino Riverside (3)................. 2,472 22,057 6,111 2,488 Belle of Baton Rouge/Catfish Town (4)(5).... 2,843 1,222 (1,396) 1,774 Belle of Sioux City (2)..................... 3,137 993 414 --------- ---------- ---------- --------- --------- Total Properties.......................... $ 19,909 $ 34,132 $ 48,862 $ 11,027 $ 8,595 --------- ---------- ---------- --------- --------- --------- ---------- ---------- --------- --------- EBITDA (6) Alton Belle Casino (2)...................... $ 23,225 $ 32,728 $ 26,734 $ 6,348 $ 4,951 Argosy Casino Riverside (3)................. 6,450 29,452 7,672 4,986 Belle of Baton Rouge/Catfish Town (4)(5).... 3,995 7,056 (94) 3,306 Belle of Sioux City (2)..................... 3,610 1,027 599 --------- ---------- ---------- --------- --------- Total Properties.......................... $ 23,225 $ 43,173 $ 66,852 $ 14,953 $ 13,842 --------- ---------- ---------- --------- --------- --------- ---------- ---------- --------- ---------
- ------------ (1) The operations of the Belle of Sioux City have not been included as they are not material. (2) Income from operations is presented before consideration of management fees or intercompany charges paid to the Company and, in the case of the Belle of Sioux City, before the 30% minority interest. (3) Income from operations and EBITDA for the Argosy Casino in Riverside for the year ended December 31, 1994 and the three months ended March 31, 1996 reflect the incurrence of $2.5 million and $.3 million, respectively, of preopening expenses. The Argosy Casino in Riverside opened on June 22, 1994. The land-based entertainment pavilion at the Riverside casino opened on January 15, 1996. (4) Income from operations and EBITDA for the Belle of Baton Rouge for the year ended December 31, 1994 reflect the incurrence of $2.6 million of preopening expenses. The Belle of Baton Rouge opened September 30, 1994. (5) Includes operating loss of approximately $1.2 million for the year ended December 31, 1995, and $.5 million for the three months ended March 31, 1996, primarily depreciation and amortization related to the Catfish Town land based development in Baton Rouge. (6) EBITDA is defined as earnings before interest, taxes, depreciation and amortization and is presented before any management fees or intercompany charges paid to the Company. EBITDA should not be construed as an alterative to operating income, or net 42 income (as determined in accordance with generally accepted accounting principles) as an indicator of the Company's operating performance, or as an alternative to cash flows generated by operating, investing and financing activities (as determined in accordance with generally accepted accounting principles) as an indicator of cash flow or a measure of liquidity. EBITDA is presented solely as a supplemental disclosure because management believes that it is a widely used measure of operating performance in the gaming industry and for companies with a significant amount of depreciation and amortization. The Company has other significant uses of cash flows, including capital expenditures, which are not reflected in EBITDA. RESULTS OF OPERATIONS THREE MONTHS ENDED MARCH 31, 1996 COMPARED TO THREE MONTHS ENDED MARCH 31, 1995 CASINO -- Casino revenues for the three months ended March 31, 1996 increased to $58.8 million from $56.6 million for the three months ended March 31, 1995. Alton casino revenues decreased from $19.2 million to $18.5 million due to severe weather conditions in January and February 1996. Riverside casino revenues increased from $21.0 million to $22.2 million due to the opening of the Company's permanent land based entertainment pavilion on January 15, 1996, offset by the severe weather conditions experienced in January and February 1996. Baton Rouge casino revenues increased $1.9 million from $11.4 million to $13.3 million. Sioux City casino revenues decreased $.2 million to $4.9 million due to severe weather conditions in January and February 1996. Casino expenses remained constant at approximately $29 million for the three months ended March 31, 1996 as compared to the three months ended March 31, 1995. Gaming taxes and admission taxes increased to $11.4 million and $4.6 million, respectively, for the three month period ended March 31, 1996 from $11.0 million and $4.3 million respectively in 1995 which is proportionate with the increases in casino revenues and customer boardings. Other casino operating expenses remained approximately the same in 1996 as in 1995. FOOD, BEVERAGE AND OTHER -- Food, beverage and other revenues increased $2.4 million to $6.1 million for the three month period ended March 31, 1996 primarily due to increased food, beverage and other sales at the expanded Riverside and Baton Rouge facilities. Riverside revenues increased from $1.1 million to $2.5 million while Baton Rouge revenues increased from $.6 million to $1.1 million. Alton and Sioux City food, beverage and other revenues remained stable compared to the three month period ended March 31, 1995. Food beverage and other net profit improved $1.3 million to $.8 million for the three months ended March 31, 1996 due primarily to improved operating efficiencies in the Company's food and beverage operations. OTHER OPERATING EXPENSES -- Other operating expenses increased $1.0 million to $4.4 million for the three months ended March 31, 1996. This increase is primarily due to the opening of the permanent land-based entertainment pavilion at Riverside, the addition of the restaurant barge in Sioux City and the additional services needed for the severe weather conditions in January and February 1996 experienced at the Alton, Riverside and Sioux City casinos. SELLING, GENERAL AND ADMINISTRATIVE -- Selling, general and administrative expenses increased $1.7 million to $14.3 million for the three months ended March 31, 1996. Increases of $.4 million and $.2 million, respectively, in Alton and Riverside relate primarily to increases in advertising expenses due to increased competition and the opening of the Riverside permanent facility. Additionally, the Company recorded a charge of approximately $1.5 million in professional and other fees related to its response to a Marion County, Indiana grand jury document subpoena and the related termination of a private placement of first mortgage notes. DEPRECIATION AND AMORTIZATION -- Depreciation and amortization increased $1.3 million from $4.6 million for the three months ended March 31, 1995 to $5.9 million for the three months ended March 31, 1996. This increase is primarily due to increased depreciation in Riverside in connection with the Company's land based entertainment pavilion which opened on January 15, 1996 at an approximate cost of $45 million. DEVELOPMENT AND PREOPENING COSTS -- Development and preopening costs increased from $.5 million for the three month period ending March 31, 1995 to $1.9 million for the three month period ending March 31, 1996. The primary increase is due to expenses related to developing the casino in Lawrenceburg, Indiana, which has an anticipated opening date for the temporary facility of the fourth quarter of 1996. 43 INTEREST EXPENSE -- Net interest expense increased $.3 million to $4.1 million for the three months ended March 31, 1996. The increase is attributable to interest expense on a higher level of borrowings on the $100 million revolving secured line of credit. YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994 Consolidated net revenues rose to $252.7 million for the year ended December 31, 1995 from $153.0 million for the year ended December 31, 1994. Net revenues in Alton decreased to $86.0 million from $97.0 million due primarily to the full year effect of increased competition in the St. Louis market beginning in May 1994 and by the addition of slot machines in Missouri casinos in December 1994. Additionally, due to competitive circumstances the Company ceased charging admissions in Alton in November 1994. Admission revenue in Alton was $7.1 million during the year ended December 31, 1994. Net revenues in Riverside increased $58.7 million to $94.1 million as the casino was open for a full year with full scale gaming compared with offering games of skill in 1994. Net revenues contributed in Baton Rouge were $50.3 million, for the year ended December 31, 1995 versus $20.3 million in 1994. CASINO -- Casino revenues for the year ended December 31, 1995 increased to $237.6 million from $138.4 million for the year ended December 31, 1994. Riverside, Baton Rouge and Sioux City contributed casino revenues of $86.4 million, $48.9 million and $20.9 million, respectively, for the year ended December 31, 1995 verses a combined $49.6 million in 1994. Alton casino revenues decreased from $88.9 million to $81.4 million due to increased competition in the St. Louis area. Casino and other operating expenses increased approximately $59.7 million over 1994 due to the operating expenses of the Riverside, Baton Rouge and Sioux City casinos. Of this increase, gaming taxes and admissions taxes increased $18.9 million and $8.8 million, respectively, which is proportionate with the increases in casino revenues and customer boardings. The remaining casino and other operating expenses were $17.5 million and $7.6 million in Baton Rouge and Sioux City, respectively for the year ended December 31, 1995. The remaining casino and other operating expenses at Riverside increased $12.1 million to $23.1 million as a result of the casino being open for a full year in 1995 compared with six months in 1994. FOOD, BEVERAGE AND OTHER -- Food, beverage and other revenues increased $6.5 million over the prior year to $18.5 million. Alton's food, beverage and other revenues decreased slightly to $7.8 million as compared to $8.1 million for the year ended December 31, 1994. Riverside, Baton Rouge and Sioux City contributed $5.2 million, $3.5 million and $1.6 million, respectively, for the year ended December 31, 1995 versus a combined $3.5 million in 1994. Food, beverage and other net profit margin improved from $.2 million for the year ended December 31, 1994 to $1.3 million for the year ended December 31, 1995. SELLING, GENERAL AND ADMINISTRATIVE -- Selling, general and administrative expenses increased $22.1 million to $45.8 million for the year ended December 31, 1995. Alton's selling, general and administrative expenses decreased $1.2 million to $9.6 million for the year ended December 31, 1995 due to a concentrated effort to refocus marketing strategies. The additional increase is due to the Company operating three additional casinos for a full year in 1995 and other costs associated with the Company's substantial growth during this period. DEPRECIATION AND AMORTIZATION -- Depreciation and amortization expense increased from $9.8 million to $20.4 million primarily as a result of opening three new casinos in 1994. DEVELOPMENT AND PREOPENING COSTS -- Development and preopening costs decreased from $9.8 million to $6.9 million for the year ended December 31, 1995, due primarily to costs related to the opening of the three new casinos in 1994. During the year ended December 31, 1995 the Company recorded a $3.5 million charge primarily related to loans made pursuant to a lease option related to the development of a downtown St. Louis casino. Preopening costs for the year ended December 31, 1994 for Riverside and Baton Rouge were $2.5 million and $2.6 million, respectively. INTEREST EXPENSE -- Net interest expense increased to $14.3 million for the year ended December 31, 1995, compared to $7.1 million for the year ended December 31, 1994. The primary reason for the increase 44 was the full year effect of the 12% Convertible Subordinated Notes which were issued in June 1994 and increased borrowings on the line of credit in the year ended December 31, 1995. The increased borrowings were used by the Company to fund its expansion projects in Baton Rouge, Riverside and Lawrenceburg. YEAR ENDED DECEMBER 31, 1994 COMPARED TO YEAR ENDED DECEMBER 31, 1993. Consolidated net revenues rose from $67.5 million for the year ended December 31, 1993 to $153.0 million for the year ended December 31, 1994. Net revenues in Alton increased from $67.5 million to $97.0 million due to operating the larger Alton Belle II for a full year in 1994. In addition, the Riverside and Baton Rouge casinos, generated net revenues of $35.4 million and $20.3 million, respectively. CASINO -- Casino revenues for the year ended December 31, 1994 increased to $138.4 million from $60.2 million in 1993. Riverside and Baton Rouge contributed $29.6 million and $20.0 million, respectively for the year ended December 31, 1994. Casino revenues in Alton increased to $88.9 million from $60.2 million mainly due to the full year of operations of the larger Alton Belle II which opened in May 1993. Casino and other operating expenses increased approximately $44.5 million due to the opening of the Riverside and Baton Rouge casinos in 1994. Of this increase, gaming taxes and admission taxes increased $15.4 and $6.5 million, respectively, which is proportionate with the increases in casino revenues and customer boardings. The remaining casino and other operating expenses were $11.0 million and $5.6 million in Riverside and Baton Rouge, respectively for the year ended December 31, 1994. The remaining Alton casino and other operating expenses increased to $21.7 million for the year ended December 31, 1994 from $15.8 million in 1993 due to the full year of operations of the Alton Belle II in 1994. FOOD, BEVERAGE AND OTHER -- Food, beverage and other revenue increased $7.7 million over the prior year to $12.0 million. Alton's food, beverage and other revenue increased from $4.4 in 1993 to $8.1 million in 1994 due to the expanded food and beverage facilities at the Alton Belle II being open for an entire year and severe flooding during 1993. Riverside and Baton Rouge contributed $2.5 million and $1.0 million, respectively for the year ended December 31, 1994. Food, beverage and other net profit margin improved from ($.1) million for the year ended December 31, 1993 to $.2 million for the year ended December 31, 1994. SELLING, GENERAL AND ADMINISTRATIVE -- Selling, general and administrative expenses increased $14.8 million to $23.7 million for the year ended December 31, 1994. This increase is due primarily to the Company opening two new casinos in Riverside and Baton Rouge, expanded advertising, promotional and bus programs as a result of increased competition from three casino in the St. Louis area, and increased corporate personnel, legal and professional, insurance and other costs associated with the Company's growth efforts. DEPRECIATION AND AMORTIZATION -- Depreciation and amortization expense increased $6.5 million in 1994 to $9.8 million primarily as a result of opening the Riverside and Baton Rouge casinos and the purchase of a gaming vessel which was in use in Sioux City, Iowa. DEVELOPMENT, PREOPENING AND RELATED COSTS -- Development and preopening costs increased $5.2 million to $9.8 million for the year ended December 31, 1994 due to approximately $2.6 and $2.5 million of preopening expenses associated with the Company's Baton Rouge and Riverside casinos, respectively as well as costs associated with unsuccessful gaming opportunities and related referenda costs. INTEREST EXPENSE -- Net interest expense increased to $7.1 million for the year ended December 31, 1994 compared to net interest income of $0.5 million in 1993. The primary reason for the increase is the issuance of the 12% Convertible Subordinated Notes in June 1994 and the interest incurred on a revolving line of credit, which was outstanding from January 29, 1994 through June 6, 1994. LIQUIDITY AND CAPITAL RESOURCES In the three months ended March 31, 1996 the Company generated cash flows from operating activities of $5.8 million compared to $14.5 million for the same period in 1995. The decrease in cash flow is primarily attributed to decreased operating margins and increased preopening and development expenses in 1996 compared to 1995 and, additionally, to the timing of expenditures related to operating accounts payable. 45 In the three months ended March 31, 1996, the Company used cash flows for investing activities of $29.4 million versus $14.9 million for the three months ended March 31, 1995. The primary use of funds was the investment of $29.3 million in property, plant and equipment. Riverside, Lawrenceburg and the Catfish Town facility at Baton Rouge had capital expenditures of $10.6 million, $9.6 million and $7.5 million, respectively, for the three-month period ended March 31, 1996. The primary uses of funds for the three-month period ending March 31, 1995 were increases in notes receivable of $2.3 million and capital expenditures of $12.6 million. During the three months ended March 31, 1996, the Company generated $35.6 million in cash flows from financing activities compared to using $3.7 million of cash flows from financing activities for the same period in 1995. The primary sources of cash flows in 1996 were $25.5 million of proceeds from the bank line of credit and $10.4 million in capital contributions from the Company's partner in Lawrenceburg. In the year ended December 31, 1995, the Company generated cash flows from operating activities of $49.9 million compared to $24.8 million for 1994 due primarily to the full year effect of the opening of the Argosy Casino in Riverside on June 22, 1994, the opening of the Belle of Baton Rouge on September 30, 1994 and the opening of the Belle of Sioux City on October 4, 1994. In the year ended December 31, 1995, the Company used cash flows for investing activities of $86.6 million, compared to $118.7 million in 1994. The primary uses for the year ended December 31, 1995 were the investment of approximately $23.4 million for the construction of the Company's project in Baton Rouge, approximately $36.0 million in connection with the Company's permanent facility in Riverside, Missouri and $9.4 million relating to the acquisition of Jazz Enterprises, Inc. on June 6, 1995. The primary uses in 1994 were capital expenditures of $112.0 million, and advances of $9.6 million in notes receivable to certain of its investment partners offset by sales of $4.3 million of marketable securities. During the year ended December 31, 1995, the Company generated $34.6 million of cash flows from financing activities compared to $104.8 million for 1994. In 1995 the primary sources of funds were borrowings under the Company's line of credit of $45.5 million offset by $6.5 million in payments of debt and installment contracts and $2.4 million of deferred finance costs. The primary source of these funds in 1994 was $115 million in proceeds from the sale of its 12% Convertible Subordinated Notes in June 1994 offset by $7.0 million in payments on long-term debt and installment contracts and a $4.8 million increase in other assets. As of March 31, 1996, the Company had approximately $28.1 million of cash and cash equivalents and $1.9 million of marketable securities. On March 8, 1995, the Company entered into its $100 million Former Bank Credit Facility. The Company repaid all borrowings outstanding under and terminated the Former Bank Credit Facility with a portion of the net proceeds from the offering of the Old Notes. The Company has made a significant investment in property and equipment and plans to make significant additional investments at its existing properties and into additional jurisdictions, particularly Lawrenceburg, Indiana. As a result of its June 1995 acquisition of Jazz, the Company is now the developer of the Catfish Town real estate project in Baton Rouge, Louisiana. The Company estimates that the completion of the Catfish Town project will cost an additional approximately $ million as of June 30, 1996. Further, if the Predecessor's status as an S Corporation, which has been asserted as an issue by the IRS during an ongoing audit, is successfully challenged, the Company currently estimates that it would require up to approximately $11.6 million (excluding penalties) to fund the potential income tax liability. See "Risk Factors -- Potential Income Tax Liability." The Company estimates that the total costs of opening a temporary gaming facility and completing the permanent Lawrenceburg Casino and entertainment project is approximately $210 million. As of June 30, 1996, approximately $ million had been expended on the project. Of the remaining $ million in Lawrenceburg construction costs, approximately $25 million is anticipated to be funded through equipment financing from third party lenders and approximately $ million will be funded by the Company and Conseco, 57.5% of which will be funded by the Company and 42.5% of which will be funded by Conseco. In 46 the event project costs exceed the budgeted $210 million total project cost the Company and Conseco will fund such costs on the same percentages up to a total project cost of $225 million. Any project costs in excess of $225 million must be funded solely by the Company. The Company will use $94.3 million of the net proceeds of the offering of the Old Notes to finance its share of remaining Lawrenceburg construction costs including the development and opening of both the temporary and permanent gaming facilities up to a total project cost of $225 million. DESCRIPTION OF CERTAIN INDEBTEDNESS FORMER BANK CREDIT FACILITY The Company's Former Bank Credit Facility was a $100 million senior secured line of credit consisting of a $20 million revolving line of credit and an $80 million expansion line of credit. The total indebtedness outstanding under the Former Bank Credit Facility was $91.4 million on the closing date of the offering of the Old Notes. In connection with the offering of the Old Notes, all amounts outstanding under the Former Bank Credit Facility were paid in full and the Company terminated the facility. CONVERTIBLE SUBORDINATED NOTES The Company's $115 million of aggregate outstanding 12% Convertible Subordinated Notes due 2001 (the "Convertible Notes") bear interest, payable semi-annually, at an annual rate of 12% per year. The Convertible Notes are convertible into shares of Common Stock at any time at or prior to maturity at a conversion price of $17.70 per share, subject to adjustment under certain circumstances as described in the indenture governing the Convertible Notes. Accordingly, each $1,000 principal amount of Convertible Notes is convertible into 56.50 shares of Common Stock, subject to adjustment, for an aggregate of 6,497,500 shares. The Convertible Notes are redeemable, in whole or in part, at the option of the Company at any time on or after June 1, 1997 at the redemption price of 106% of the principal amount, declining ratably to par on June 1, 2000, plus accrued and unpaid interest to the date of redemption. In addition, upon the occurrence of a Change of Control (as defined in the indenture governing the Convertible Notes), or if the Common Stock is not listed as required, each holder of Convertible Notes will have the right to require the Company to purchase all or any part of such holder's Convertible Notes, at 101% of the principal amount thereof, plus accrued and unpaid interest to the date of purchase. The Convertible Notes are subordinated in right of payment to all existing and future senior indebtedness of the Company (including the Notes) and will be structurally subordinated to all liabilities (including trade payables) of the Company's subsidiaries. The indenture governing the Convertible Notes does not include any covenants limiting or restricting the Company's or its subsidiaries' ability to incur any additional indebtedness. The indenture governing the Convertible Notes contains covenants which limit certain transactions with affiliates of the Company and mergers, sales of all or substantially all of the assets of the Company and consolidations. NOTES PAYABLE --- JAZZ ACQUISITION As of March 31, 1996, the Company had notes payable of $9.2 million to Jazz Enterprises, Inc. ("Jazz"), which represents the present value of deferred payments due to the shareholders of Jazz incurred in connection with the Company's June 7, 1995 acquisition of 100% of the common stock of Jazz. Jazz was the 10% limited partner in the Belle of Baton Rouge. The Company made initial payments to the Jazz shareholders totaling $8.5 million, and is obligated to pay the former Jazz shareholders $1.35 million annually for ten years and $500,000 for an additional ten years thereafter. As a result of such transaction, the Company acquired Jazz's 10% minority limited partnership interest in the Belle of Baton Rouge casino and all of Jazz's interest in the Catfish Town retail real estate development. The Company's acquisition of Jazz enabled the Company to cancel the prior lease agreement between Jazz and the partnership pursuant to which the partnership was obligated to pay a lease fee which ranged from 6% to 10% of adjusted gross receipts. See Note 7 of Notes to Consolidated Financial Statements. See "Business -- Legal Proceedings." 47 BUSINESS GENERAL The Company, is a leading multi-jurisdictional developer, owner and operator of riverboat and dockside casinos and related entertainment facilities in the midwestern and southern United States. The Company, through its subsidiaries, owns and operates riverboat casinos in Alton, Illinois, Riverside, Missouri, Baton Rouge, Louisiana and Sioux City, Iowa. In June 1995, Indiana Gaming Company, L.P., a limited partnership ("Indiana Gaming L.P.") in which the Company is the general partner and has a 57.5% partnership interest, received a certificate of suitability from the Indiana Gaming Commission to develop and operate a riverboat casino and related entertainment and support facilities in Lawrenceburg, Indiana, which is located approximately 15 miles west of Cincinnati, Ohio. The Company's business strategy emphasizes the phased development of attractive gaming and related entertainment facilities in gaming jurisdictions that the Company believes possess favorable long-term demographic and competitive characteristics. As part of this strategy, the Company endeavors to be an early entrant in emerging gaming markets, to establish a customer base and to develop its gaming properties in stages. The Company's casinos were the first gaming facilities to open in each of the St. Louis, Kansas City and Baton Rouge markets. By employing a phased development strategy, the Company believes it can reduce its initial capital investment and adapt the nature and scope of subsequent developments based on a continuing assessment of the size and competitive outlook of each of the Company's gaming markets. The Company intends to utilize management's proven ability to successfully open riverboat casino properties in new markets by continuing to pursue opportunities to develop or acquire (either independently or through joint ventures) riverboat, dockside and/or land-based gaming operations. The Company's operating strategy is to develop a loyal customer base by offering a variety of gaming and non-gaming entertainment amenities at attractive facilities that emphasize high standards of service and customer satisfaction. In each of its gaming markets, the Company establishes marketing programs that identify, target and attract local patrons typically residing within a 100-mile radius of its gaming facilities. The Company's marketing programs are designed to increase customer awareness, patronage and loyalty, as well as to encourage repeat business. The Company focuses and evaluates its marketing efforts through player tracking systems, slot clubs and preferred player clubs and utilizes mass advertising, direct mail and special promotions to attract customers within each of its gaming markets. CURRENT OPERATIONS ALTON BELLE CASINO, ALTON, ILLINOIS The Company commenced operations in Alton, Illinois in September 1991 as the first gaming facility to open in the St. Louis market and in the State of Illinois. Following the success of the Company's original riverboat casino, the Alton Belle, the Company built and opened a larger three-deck contemporary style cruise liner that provides casino style gaming on the Mississippi River at Alton, Illinois, approximately 20 miles northeast of downtown St. Louis. The Alton Belle Casino features 21,000 square feet of gaming space with approximately 650 slot machines and 41 table games for a total of approximately 950 gaming positions. The Alton Belle Casino can board up to approximately 1,500 passengers including a typical crew and casino staff of 180 employees. The Alton Belle Casino also currently includes a 37,000-square foot, three-level floating entertainment pavilion that features a sports and entertainment lounge, a 120-seat buffet, a 90-seat fine dining restaurant, conference facilities and a food court. Additionally, the Company is the only gaming operator in the St. Louis market that offers its customers off-track betting facilities. Parking is available at an adjacent city-owned surface parking facility and at two sites in the city of Alton, to and from which the Company provides valet parking as well as free shuttle service. The Alton Belle Casino typically conducts ten two-hour Mississippi River cruises seven days of the week. Since November 1994, the Alton Belle Casino has not charged an admission fee. Illinois gaming law permits dockside gaming only when inclement weather or mechanical failure prevents a riverboat from cruising. At such times, the Alton Belle Casino remains dockside and operates on its normal schedule. 48 The Alton Belle Casino generally draws from a population of approximately 2.5 million within the St. Louis metropolitan area and an additional 1.2 million within a 100-mile radius of the City of St. Louis. In particular, the primary target market of the Alton Belle Casino is the northern and eastern regions of the greater St. Louis metropolitan area, including certain regions of Illinois. The Company's management believes that its early entry into the St. Louis market has resulted in the development of a core base of customers, which, together with its data base of over 300,000 active customers, has enabled the Alton Belle Casino to remain competitive in the St. Louis market despite the significant increase in the number of gaming operations. During May 1995 the Alton, Illinois area experienced flooding; however the flood waters did not reach the flood levels of 1993 and the operations of the Alton Belle Casino were not negatively impacted. During the Great Flood of 1993 the Company developed an emergency flood plan that was implemented in response to the May 1995 flooding. ARGOSY CASINO, RIVERSIDE, MISSOURI The Argosy Casino began operations in Riverside, Missouri on June 22, 1994 as the first gaming facility to open in the Kansas City market. The Argosy Casino's riverboat is styled as a turn-of-the-century paddle wheel steamboat and features 32,900 square feet of gaming space with approximately 950 slot machines and 57 tables games for a total of approximately 1,375 gaming positions. The Company has constructed a new land-based landing and entertainment pavilion, which opened on January 15, 1996 at a cost of approximately $45 million. The 85,000-square foot, land-based entertainment pavilion features a Mediterranean theme and includes over 14,000 square feet of banquet and conference facilities, a 78-seat specialty restaurant, a sports and entertainment lounge and a 350-seat buffet restaurant. A 624-space parking garage and a 1,262-space surface parking area are located adjacent to the new pavilion. The Company has also recently entered into a letter of intent with a hotel developer/manager to develop, through a joint venture, a 200-room hotel at its Riverside facility. Pursuant to the letter of intent, which is subject to numerous conditions, the Company would contribute certain of its Riverside property to the joint venture and the developer/manager would contribute equity capital and make loans to the joint venture in an amount sufficient to contruct the hotel. In August 1995, the Company began offering dockside gaming at the Argosy Casino and is considering adding a second dockside gaming facility in Riverside in order to increase the number of gaming positions and to offer its patrons staggered boarding times, thereby maximizing customer convenience. The Argosy Casino typically conducts 9 two-hour Missouri River "cruises" seven days a week, with an additional "cruise" on Friday and Saturday evenings. The Argosy Casino operates throughout the entire year. The Company is currently operating dockside pursuant to the temporary order of the Missouri Gaming Commission. Ordinarily, Missouri gaming law permits dockside gaming when inclement weather or mechanical failure prevents a riverboat from cruising. At such times, the Argosy Casino operates on its normal schedule. When Argosy first opened its Riverside casino, Missouri law only permitted games of skill, specifically poker, craps and "twenty-one" (blackjack). Subsequently, on December 9, 1994, the Argosy Casino began offering full-scale casino gaming, including roulette, big six and slot machines, after approval by Missouri voters in November 1994 of a proposition authorizing games of chance. The Argosy Casino draws from a population of approximately 1.6 million in the greater Kansas City metropolitan area and an additional 900,000 within a 100-mile radius of Kansas City. The Argosy Casino is situated on a 55-acre site that is located approximately five miles from downtown Kansas City and offers convenient access from two major highways. Once competing gaming facilities that are currently under construction are completed, the Company believes that the Argosy Casino, which currently is the only existing or planned casino in the western Kansas City metropolitan area, will primarily attract customers who reside in the northwestern, western and southwestern regions of the Kansas City metropolitan area. The Company leases a portion of its site from the City of Riverside, Missouri, pursuant to a five-year land lease agreement with a minimum aggregate rent of $5 million for the entire five-year lease period, payable in advance. In addition to minimum rent, during the initial five-year lease term, percentage rent will 49 be payable in an amount equal to 2% of adjusted gross receipts over $100 million annually. The Company will have the option to extend the lease agreement for three successive five-year terms. In all extension periods, there will be no minimum rent, and percentage rent will be payable as follow: (i) 2% on the first $50 million of adjusted gross receipts; (ii) 3% on adjusted gross receipts between $50 million and $100 million; and (iii) 4% on adjusted gross receipts in excess of $100 million. If at any time during the initial lease term or any extension thereof, the Company is permitted to operate a permanent dockside gaming facility, the percentage rent will increase by one percentage point in each of the above listed categories. In May 1995, the Riverside site experienced flooding from the rising waters of the Missouri River. The Company implemented its emergency flood plan which included moving the temporary landing facilities to higher ground. The business at the Riverside Casino remained at near normal levels during this period. BELLE OF BATON ROUGE, BATON ROUGE, LOUISIANA The Belle of Baton Rouge began operations in Baton Rouge, Louisiana in September 1994 as the first riverboat gaming facility in the Baton Rouge market. The Belle of Baton Rouge is a three-level, ante-bellum themed riverboat casino that contains 28,900 square feet of gaming space with approximately 775 slot machines and 46 table games, for a total of 1,125 gaming positions. The riverboat casino is complemented by the Company's adjacent, land-based entertainment development known as Catfish Town. The first phase of Catfish Town opened during 1995 and features a 250-seat entertainment lounge and sports bar, a 50-seat premium steakhouse, a 250-seat buffet/coffee shop and conference facilities. The second phase of Catfish Town, an approximately 50,000-square foot entertainment facility, opened in April 1996 and features a climate-controlled, five-story glass atrium that will host a variety of entertainment functions, including banquets, parties, festivals, concerts and live entertainment events. The third phase of the Catfish Town project will feature the build-out of approximately 150,000 square feet of leasable retail space within the atrium complex which is expected to feature a variety of entertainment-related tenants, including specialty restaurants and specialty retail stores, entertainment venues, nightclubs and a microbrewery. The Company has improved customer accessability to the Belle of Baton Rouge by completing construction in October 1995 of a 733-space parking garage and by leasing in December 1995 a 271-space surface parking lot adjacent to Catfish Town. The Company has approximately $38.8 million invested in the construction of the Catfish Town project (excluding the riverboat casino and related landing facilities) through May 15, 1996 and estimates that approximately $45 million will be required (excluding the construction of a hotel) to complete all three phases of the Catfish Town project. On April 19, 1996, the Louisiana legislature approved legislation mandating local option elections to determine whether to prohibit or continue to permit specified individual types of gaming, including riverboat gaming, in Louisiana on a parish-by-parish basis. The referendum will be brought before the Louisiana voters at the time of the 1996 presidential election. There can be no assurance that the voters of the Belle of Baton Rouge's parish, East Baton Rouge Parish, will not vote to prohibit riverboat gaming at the time of the 1996 presidential election. If such a vote to prohibit riverboat gaming occurred, the Company would be required to discontinue gaming activity in East Baton Rouge Parish upon the expiration of its current gaming license in September 1999. The discontinuance of gaming operations in East Baton Rouge Parish would have a material adverse effect on the Company, both in terms of the loss of revenues and cash flow generated by the Belle of Baton Rouge and the impairment of the significant capital investment that the Company has in its riverboat casino and related facilities, including the Catfish Town development. In addition, the uncertainty resulting from the upcoming local option election on the continuance of riverboat gaming in East Baton Rouge Parish will have a negative impact on the ability of the Company to lease the retail space in Catfish Town. See "Risk Factors -- Louisiana Local Option Referendum to Restrict Gaming." On September 21, 1995, the Company entered into a letter of intent with DePalma Hotel Corporation and Southern Hospitality Corporation ("SHC") for the ownership, construction and operation of a 300-room convention hotel at Catfish Town. The agreement is subject to numerous conditions precedent including, but not limited to, SHC obtaining separate non-recourse project financing. In the event the Company does not commence construction of a 300-room hotel at Catfish Town prior to September 30, 1996, pursuant to the Company's agreement with the City of Baton Rouge, the Company's admission tax will 50 increase by $1.25 per passenger on that date. Due to the uncertainty created by the upcoming local option elections in Louisiana, the Company believes that it is unlikely that construction of the hotel will be commenced prior to September 30, 1996. See "Risk Factors -- Louisiana Local Option Referendum to Restrict Gaming." The Belle of Baton Rouge typically conducts eight 3-hour Mississippi River cruises seven days of the week. The Belle of Baton Rouge operates throughout the entire year. Louisiana gaming law provides that a gaming vessel need not cruise if there is inclement weather or if the river conditions endanger the passengers or crew. The local Baton Rouge States Attorney has been diligent in monitoring the cruising schedule of the Belle of Baton Rouge and the competing riverboat casino in the Baton Rouge market. During such times that the Belle of Baton Rouge is prevented from cruising it operates on an unlimited ingress and egress schedule. Catfish Town is located adjacent to Baton Rouge's convention complex, the Centroplex, which has a 12,000-seat arena and a 30,000-square foot exhibition hall. The Belle of Baton Rouge draws from a population of approximately 540,000 in the Baton Rouge metropolitan area. The Company believes that the Belle of Baton Rouge will benefit from the entertainment, retail and hotel amenities expected to be offered at the Catfish Town development, from the facility's proximity to the Baton Rouge convention center and from its convenient access from Baton Rouges' two major interstate highways. BELLE OF SIOUX CITY, SIOUX CITY, IOWA The Company became the manager of the Belle of Sioux City on October 4, 1994 and on December 1, 1994 began operating the Belle of Sioux City through a partnership in which the Company is a 70% general partner and Sioux City Riverboat Corp., Inc. is a 30% limited partner. The Company is the manager of the casino and receives a percentage management fee based upon the facility's adjusted gross gaming revenues (as defined in the management agreement). This fee was 4.5% through 1995 and increased to 6.5% in January 1996. The Company has leased to the partnership a 27,900-square foot, three-level historic themed riverboat casino with room for 1,400 passengers and crew. The Belle of Sioux City features approximately 11,800 square feet of gaming space with approximately 470 slot machines and 27 table games, for a total of approximately 670 gaming positions. The casino facility is complemented by an adjacent barge facility, which features buffet dining, a bar and a gift shop, and 274 surface parking spaces. On April 13, 1996 the Belle of Sioux City was removed from service for its requisite five-year hull inspection. The riverboat arrived at a U.S. Coast Guard approved dry docking facility on April 16, 1996, passed its inspection and returned to service on May 9, 1996. No interruption in gaming operations occurred in Sioux City as a result of the hull inspection process since, prior to removing the Belle of Sioux City from service, the Company moved the original Alton Belle to Sioux City and temporarily transferred gaming operations to it. The original Alton Belle boards approximately 490 passengers and has approximately 450 gaming positions. The Belle of Sioux City typically conducts one two-hour Missouri River cruise each day for 100 days per year. At other times the Belle of Sioux City remains dockside. At such time, the Belle of Sioux City operates on an unlimited ingress and egress schedule. The Belle of Sioux City draws from a population of approximately 80,000 in Sioux City and an additional 900,000 residents within a 100-mile radius of Sioux City. 51 OPERATIONS UNDER DEVELOPMENT LAWRENCEBURG CASINO, LAWRENCEBURG, INDIANA On June 30, 1995, Indiana Gaming L.P., received a certificate of suitability from the Indiana Gaming Commission to develop and operate a riverboat casino and entertainment complex in Lawrenceburg, Indiana, which is located approximately 15 miles west of Cincinnati, Ohio. The Company is the sole general partner of, and holds a 57.5% general partnership interest in, Indiana Gaming L.P. Conseco Entertainment L.L.C. ("Conseco"), an indirect subsidiary of Conseco, Inc., holds a 29% limited partnership interest and certain other investors, including H. Steven Norton, Chief Operating Officer of the Company, who brought the opportunity to the Company concurrent with his initial employment, hold the remaining 13.5% limited partnership interest in Indiana Gaming L.P. Indiana Gaming L.P. operates pursuant to a partnership agreement entered into among the partners as of April 11, 1994, as amended and restated as of February 21, 1996. Under the provisions of this agreement, the Company will manage the development, construction and operation of the Lawrenceburg Casino project and will receive a management fee of 7.5% of EBITDA (as defined in the partnership agreement) and Conseco will receive a financial advisory fee of 5% of EBITDA. For a more complete description of the partnership agreement see "Lawrenceburg Casino Partnership Agreement." The Company expects to face limited direct competition for gaming revenues in the Lawrenceburg, Indiana market upon the opening of the Company's Lawrenceburg Casino. Indiana gaming law currently limits the number of gaming licenses to be issued in the state to a total of 11, including a maximum of 5 licenses along the Ohio River and a limit of one license per county. In addition, casino gaming is not currently permitted under the laws of either Ohio or Kentucky. The next closest Indiana gaming facility to the Cincinnati market will be located approximately 15 miles south of Lawrenceburg and the principal traffic route between the greater Cincinnati metropolitan area and the other facility passes Lawrenceburg prior to reaching the other facility. In addition, Indiana gaming law does not restrict the size of a licensee's gaming facility or place limits on customer losses or betting levels. Indiana Gaming L.P. is building what it believes to be one of the largest riverboat casinos in the United States, featuring approximately 90,000 square feet of gaming space on three levels. The permanent riverboat casino is expected to initially have approximately 2,600 gaming positions and accommodate approximately 4,400 passengers and crew members. In addition to the new riverboat casino, it is anticipated that the permanent facility will include a 300-room hotel, a 1,750-space parking garage, 2,000 additional surface parking spaces and a 120,000-square foot land-based entertainment pavilion and support facility featuring specialty restaurants, meeting and banquet rooms and a sports bar and entertainment lounge. The Company estimates that the total cost to open a temporary facility and to construct the proposed permanent riverboat casino, land-based facilities and 300-room hotel will be approximately $210 million. As of June 30, 1996, approximately $ million had been expended on the project. Of the remaining $ million in Lawrenceburg construction costs, approximately $25 million is anticipated to be funded through equipment financing from third party lenders and approximately $ million will be funded by the Company and Conseco, 57.5% of which will be funded by the Company and 42.5% of which will be funded by Conseco. In the event project costs exceed the budgeted $210 million total project cost, the Company and Conseco will fund such costs on the same percentages up to a total project cost of $225 million. Any project costs in excess of $225 million must be funded solely by the Company. The Company will use $94.3 million of the net proceeds of the offering of the Old Notes to finance its share of remaining Lawrenceburg construction costs including the development and opening of both the temporary and permanent gaming facilities up to a total project cost of $225 million. See "Lawrenceburg Casino Partnership Agreement." The Company plans to open a temporary gaming facility in Lawrenceburg in the fourth quarter of 1996 and anticipates opening the permanent gaming facility not later than twelve months thereafter. The certificate of suitability issued to Indiana Gaming L.P. must be extended by the Indiana Gaming Commission in order to accommodate the expected opening of the temporary facility in the fourth quarter of 1996. Further, Indiana law permits the Indiana Gaming Commission to permit a riverboat to dock at a temporary site for a period not exceeding one year after award of the license at which point the permanent facility must be 52 opened. The certificate of suitability requires expenditures of at least $200 million and further requires Indiana Gaming L.P. to make additional payments to the City of Lawrenceburg as a percentage of annual gross gaming receipts ranging in amount from five percent (for up to $150 million in adjusted gross receipts) to 14 percent (for adjusted gross receipts over $300 million). Failure to comply with the foregoing conditions and/or failure to commence riverboat excursions (at either the temporary or permanent facilities) at such time as required by the Indiana Gaming Commission could result in the revocation of the certificate of suitability or the license. Further, the Indiana Gaming Commission may place restrictions, conditions, or requirements on the permanent riverboat owner's license. The temporary facility will feature a leased 1,200-passenger gaming vessel with approximately 870 slot machines and 52 table games and an entertainment barge featuring ticketing, restaurant and bar facilities. The temporary facility will not include on-site parking, but will include off-site parking, with shuttle bus service that will transport customers between the parking areas and the temporary facility. Before the Lawrenceburg Casino becomes operational additional definitive agreements must be negotiated and executed, gaming facilities must be constructed, and a number of further conditions must be satisfied (including the licensing of Indiana Gaming L.P. and their respective employees and the receipt of all requisite permits). There can be no assurance that the Lawrenceburg Casino will become operational. See "Risk Factors -- Project Development Risks." The Lawrenceburg Casino is expected to draw from a population of approximately 1.6 million residents in the Cincinnati metropolitan area and an additional 5.4 million people who reside within 100 miles of Lawrenceburg, including the major metropolitan markets of Dayton and Columbus, Ohio; Indianapolis, Indiana; and, to a lesser extent, Lexington, Kentucky. The City of Lawrenceburg has major interstate highway access from each of these metropolitan areas. MARKETING The Company's management has developed a corporate marketing plan initially based on the experience gained in developing, marketing and operating the Company's Alton facility and further refined since opening three additional casinos in 1994. The plan is designed to identify, target and attract initial and return visits from the following segments of the gaming market: (i) diverse local patrons (typically customers from within a 100-mile radius of the casino); (ii) premium wagerers (bettors who typically wager $25 or more per bet) within the local patrons market; and (iii) local groups and bus tours. To aggressively pursue its customer base, the Company has upgraded and expanded both its marketing department and sales force. In order to address each market segment, the Company has developed and implemented a balanced marketing strategy that emphasizes advertising, casino marketing, promotions and direct sales. The Company utilizes television, radio, print and billboard advertising, database marketing, players clubs and direct sales programs to market its operations to each segment. All programs are designed to effectively tailor each specific promotion to meet the Company's goals of increased awareness and repeat patronage. DIVERSE LOCAL PATRONS. The diverse local patrons market segment is comprised of middle market recreational gaming customers from within a 100-mile radius of its casinos in Alton, Illinois, Riverside, Missouri, Baton Rouge, Louisiana and Sioux City, Iowa. The Company believes that its casinos have high recognition level among patrons in the local market, in part due to each being the first riverboat casino to open in its market. The Company has developed a multi-level marketing approach and advertising program comprised of radio and television commercials, billboards, newspaper insertions and public relations efforts. In order to maintain its high level of customer awareness and fill its off-peak capacity, the Company has begun a promotional campaign which includes merchandising giveaways, double jackpot cruises, discount tickets and meal, trip and car prizes. Within the broader advertising campaign, management has designed a more focused radio promotion strategy. Specifically, the Company conducts promotions with certain radio stations in the local market, in which a disc jockey generally broadcasts live on-board. The Company believes that this promotion has enabled the Company to better target specific types of customers. The Company's state-of-the-art reservation system allows it to accommodate increased demand and in turn to handle calls promptly, professionally and proactively, treating each potential customer with courtesy while enthusiastically describing the Company's product and converting calls into confirmed advance bookings. To assist in its marketing efforts, the Company continues to develop a database of names and addresses 53 of customers based upon the Company's computerized player tracking system that is equipped on all of the Company's slot machines. In addition, database information is collected from telephone reservations, credit card sales and manual player tracking. The Company recently began to use this information to identify and direct-market to its customers through mailings (including two to three direct mailings per month) and on other promotions. The Company uses information obtained with this technology to refine its database and develop gaming profiles of its slot customers. The Company plans to continue to run special promotions rewarding its slot customers for using slot cards and has established a VIP Slot Club as a means of enhancing this effort. PREMIUM WAGERERS. The Company's casino marketing efforts are also focused on identifying and developing strong relationships with its premium wagerers to build customer loyalty. Relationships with these wagerers are initially established by the floor managers and pit bosses. These relationships are then extended to include the upper levels of the Company's management team. The Company has implemented a host system to cater to and better recognize premium wagerers, thereby providing them with more personalized service. In order to identify and develop special marketing programs for premium slot players, the Company utilizes a computerized player tracking system on its slot machines. The Company has also established several clubs for its most valued premium wagerers, which entitle the premium wagerer to participate in special promotions. Because many premium wagerers tend not to make advance reservations, a certain number of complimentary tickets are typically set aside for these customers up to 10 minutes before a cruise embarks. The Company has also established Platinum and Gold Clubs to recognize, reward and differentiate among its premium wagerers. The Gold and Platinum Clubs reward premium wagerers with complimentary gifts and special services. The Company believes these special programs stimulate greater customer loyalty and generate repeat business. LOCAL GROUP AND BUS TOURS. The Company's sales force markets to groups of patrons from the local market and bus tours which come from outside this area. The Company's marketing efforts to these groups is focused on attracting such groups to cruises during off-peak hours. The Company's marketing plan includes providing discount packages, banquet facilities and other services to attract local civic, corporate and social groups as well as bus tours. The Company's sales force markets to the local group and bus tour segments through its direct relationships with local and out-of-town tour operators, businesses, organizations and other groups. COMPETITION The casino gaming industry is characterized by intense competition from a large number of participants, including riverboat casinos, dockside casinos, land-based casinos, video lottery and poker machines in locations other than casinos, Native American gaming and other forms of legalized gaming in the United States. Gaming industry competition is particularly intense in each of the markets where the Company operates and is likely to increase as other operators open new or expanded facilities in the future. Historically, the Company has been an early entrant in each of its markets; however, as its competitors have opened properties in these markets, the Company's operating results in these markets have been negatively affected. The Company expects that many of its competitors will have more gaming industry experience, will be larger and will have significantly greater financial and other resources than the Company. In addition, certain of its direct competitors may have superior facilities and/or operating conditions in terms of (i) dockside versus cruising riverboat gaming, (ii) the amenities offered by the competing casino and its related support and entertainment facilities, (iii) convenient parking facilities, and (iv) ease of accessibility to the casino site. Given these factors, substantial increased competition could have a material adverse affect on the Company's existing and proposed operations. The Company's Alton riverboat casino currently faces competition from three other riverboat casinos currently operating in the St. Louis area and a fourth casino complex is under construction in the northwest suburb of Maryland Heights, Missouri, which will include two independently owned facilities, each of which are expected to operate two dockside vessels. Further, because Missouri gaming law does not limit the number of licenses that may be granted, there could be substantial increases in the number of gaming operations in the St. Louis area. The Company's Riverside riverboat casino currently faces competition from 54 two other casinos in the Kansas City area that offer dockside gaming and two additional casino operators have commenced construction of gaming facilities in Kansas City, both of which are expected to open in the second half of 1996, and the Missouri Gaming Commission is conducting reviews of their license applications. In addition, one existing Kansas City competitor has commenced construction of expanded facilities, including a second gaming vessel that recently opened. The Company's Baton Rouge riverboat casino currently faces competition from one riverboat casino in downtown Baton Rouge, a land-based Native American casino located approximately 70 miles away and multiple casinos throughout Louisiana. The Company's Sioux City riverboat casino currently faces competition from two nearby land-based Native American casinos and slot machines at nearby pari-mutuel race tracks and from two riverboat casinos in the Council Bluffs, Iowa/Omaha, Nebraska market, which opened in January 1996. See "Risk Factors -- Competition." EMPLOYEES As of December 31, 1995, the Company had approximately 2,822 full-time employees. Approximately 1,186 employees are represented by the Seafarers International Union of North America. The collective bargaining agreement with that union expires in June, 2001. Eleven employees are represented by the International Brotherhood of Electrical Workers. The Company has not experienced any work stoppages and believes its relations with its employees are generally satisfactory. LEGAL PROCEEDINGS The Company is from time to time a party to legal proceedings arising in the ordinary course of business. The Company does not believe that the results of such ordinary course of business legal proceedings, even if the outcome were unfavorable to the Company, would have a material adverse impact on either its financial condition or results of operations. Certain other legal proceedings are described below. MARION COUNTY, INDIANA GRAND JURY DOCUMENT SUBPOENA On or after March 15, 1996, the Company, its partners in the Lawrenceburg Casino project and certain other individuals and entities were served with document request subpoenas issued by the Office of the Prosecuting Attorney of Marion County, Indiana in connection with a grand jury investigation entitled: STATE OF INDIANA V. ORIGINAL INVESTIGATION-OFFICIAL MISCONDUCT. Indiana law requires that at the time a target of an investigation is determined, that entity or person must be so advised by the Office of the Prosecuting Attorney. On March 23, 1996 the Company was advised by the Marion County prosecutor that no target subpoenas had been issued by the grand jury in its investigation as of that date. However, there can be no assurance that targets will not be identified as further information and documents are obtained and considered by the grand jury. Due to the confidential nature of grand jury proceedings, the Company is not aware of the specific subject matter or matters of the investigation. The Company believes it has fully complied with its subpoena, and has been informed by its partners that they will do the same. The subpoenas request information regarding the current or prior ownership interest in the Company and the partners of Indiana Gaming L.P. by the individuals or entities described below. The subpoenas also request that the Company and its partners produce a broad category of documents including documents regarding employment and other agreements, gifts, payments and correspondence between the Company and any of its partners on the one hand and several business entities and individuals, including an Indiana state legislator, certain Indiana lobbyists, and certain Lawrenceburg, Indiana city officials and businessmen on the other hand. The Company has learned that this legislator has served as an employee of a subsidiary of Conseco, Inc., the parent company of the 29% limited partner in Indiana Gaming L.P., since September 1995. Additionally, the Company has learned that such state legislator has served since September 1993 as a consultant to a major Indiana engineering firm that is engaged in many state and local government funded construction projects. That engineering firm also serves as lead engineer for the Lawrenceburg Casino project. On May 24, 1996, the Indiana House Legislative Ethics Committee voted to reprimand, but take no further action against, this legislator for failing to properly report the foregoing employment and consulting arrangements on his 1993, 1994 and 1995 statements of economic interests. The Company believes that neither it nor any entity controlled by or person employed by the Company has engaged, and has been informed by representatives of its partners that they have not engaged, in any 55 unlawful conduct in the pursuit by or granting to Indiana Gaming L.P. of the Lawrenceburg gaming license. Because the grand jury proceedings are unlikely to be concluded quickly, on March 25, 1996, a former U.S. Attorney and his law firm were retained to conduct, as special independent counsel (the "special independent counsel"), an internal investigation into the activities and actions of the Company and the entities controlled by and persons employed by the Company with respect to (i) the hiring by Conseco, Inc. and the Indiana engineering firm of the state legislator, (ii) the endorsement of Indiana Gaming L.P. by the City of Lawrenceburg and the financial affairs of certain Lawrenceburg officials with respect to such endorsement and the awarding of the certificate of suitability by the Indiana Gaming Commission, and (iii) their lobbying efforts in furtherance of the Indiana legislature's enactment of legislation authorizing gaming and limiting gaming licenses to one per county. A special committee of independent directors of the Company has been appointed to supervise and coordinate the special independent counsel's investigation. The special independent counsel has not investigated Conseco, Inc. or the other limited partners of Indiana Gaming L.P. The Company has been advised that Conseco, Inc., with the assistance of outside counsel, has conducted its own internal investigation of matters that may be the subject of the grand jury proceedings and such investigation found no wrongdoing by Conseco, Inc. or any person or entity it controls, or is controlled by, and that Conseco, Inc. intends to review with the Company's special independent counsel the findings of its investigation. From March 25 to April 15, 1996, the special independent counsel conducted its investigation and issued an interim report in which it concluded that it found no evidence that the Company or any entity controlled by or person employed by the Company had any involvement in, or knowledge of, the relationship between the state legislator and Conseco, Inc. or the Indiana engineering firm, or attempted to improperly influence any City of Lawrenceburg official, state legislator or Indiana Gaming Commission member or staff member in connection with the endorsement of the partnership by the City of Lawrenceburg and the awarding of the certificate of suitability to Indiana Gaming L.P. With regard to lobbying, including the lobbying with respect to one gaming license per county legislation, the special independent counsel found no evidence that the Company or any entity controlled by or person employed by the Company attempted to unduly influence any legislator in any way. However, no investigation was made of any lobbyist's records, activities or expenditures, nor were any outside lobbyists interviewed. The special independent counsel also audited the Company's compliance with the lobbying disclosure statute in Indiana and found only technical errors in the Company's lobbying disclosure statements. No evidence was found that these technical errors were intentional or designed to hide any lobbying activity. In conducting its investigation, the special independent counsel, among other things, reviewed numerous boxes of documents produced by the executive and Lawrenceburg offices of the Company and extensively interviewed the nine Company officers and employees most closely related to the Lawrenceburg Casino project, as well as the principal of R.J. Investments, Inc., a 4% limited partner of Indiana Gaming L.P. No assurance can be given, however, that the nature and scope of the investigation conducted by the special independent counsel, which among other things was conducted under severe time pressure and was limited to the Company and the entities controlled by and persons employed by the Company, was sufficient to uncover conduct that might be considered unlawful. In the event that the Company, any entity controlled by the Company, any person employed by the Company, Indiana Gaming L.P. or any of its partners is found by the Marion County prosecutor to have engaged in unlawful conduct, there is no assurance what effect such action would have on Indiana Gaming L.P.'s certificate of suitability or, after issuance, the Indiana gaming license. In the event Conseco or one of the Company's other partners in the Lawrenceburg Casino project is determined by the Indiana Gaming Commission to be unsuitable for the ownership of a gaming license or to have engaged in unlawful conduct, the terms of Indiana Gaming L.P.'s partnership agreement provide that Indiana Gaming L.P. shall redeem 100% of such unsuitable partner's interest in the partnership for an amount equal to such partner's capital account. In the event that a partner is determined by the Indiana Gaming Commission to be unsuitable for ownership after the issuance of the gaming license, the terms of Indiana Gaming L.P.'s partnership agreement provide that Indiana Gaming L.P. shall redeem 100% of such unsuitable partner's interest for an amount equal to 90% of the "appraised value" of that partner's interest, determined in accordance with the terms of the partnership agreement. The purchase price is payable in five annual installments, only from available cash flow or sale or financing proceeds of the 56 partnership, and bears interest at "prime." If such event were to occur with respect to Conseco prior to the completion of the Lawrenceburg Casino project, the Company would have to fund any remaining construction costs of the Lawrenceburg Casino project which were to have been funded by Conseco. No assurance can be given that the Company would be able to obtain funds sufficient for this purpose. Also, there can be no assurance that the Indiana Gaming Commission will not take other actions such as suspending, revoking or failing to renew Indiana Gaming L.P.'s certificate of suitability, delaying the issuance of or failing to issue Indiana Gaming L.P. a gaming license or, after issuance, revoking or suspending such gaming license. Therefore, there can be no assurance that the grand jury investigation will not lead to events having a material adverse effect on the Company. H. STEVEN NORTON V. JOHN T. CONNORS, ET AL. In September, 1993, H. Steven Norton, who was then and is now the President of the Company, filed a cause of action against John T. Connors, a significant shareholder of the Company and a former officer, director and shareholder of J. Connors Group Inc., a predecessor entity of the Company ("JCG"), seeking $50 million in damages. Mr. Norton alleged that Mr. Connors failed to fulfill his promise made in the summer of 1991 to establish a partnership with Mr. Norton in which each would have an equal 50% interest in JCG, which had a 25% partnership interest in the Company's predecessor entity that owned the Alton Belle Casino. As a result of the reorganization effected immediately prior to its initial public offering, the Company succeeded to all the rights, properties and assets, and assumed all the liabilities, of all of its predecessor entities, including JCG. Subsequent to the filing of the lawsuit, Mr. Connors advised the Company that his dealings with Mr. Norton, which are the subject of the litigation, were in his capacity as an officer of JCG, and that the Company should assume the defense and reimburse Mr. Connors for the approximately $130,000 spent to date on legal fees, and that any liability resulting from the litigation was assumed by the Company as a result of Company's reorganization. The Company responded to Mr. Connors that it believed that his actions and dealings with Mr. Norton were solely in his individual capacity as a shareholder of JCG, and the Company declined to assume the defense or reimburse him for previously incurred legal fees, and the Company denied that it has any liability with respect to such matter. If, however, JCG were to have been found liable to Mr. Norton as a result of the actions of Mr. Connors, then the Company could under certain circumstances be liable to Mr. Norton for any damages awarded against JCG. In April 1995, Mssrs. Norton and Connors agreed to voluntarily dismiss the lawsuit without prejudice. However, on May 22, 1996, Mr. Norton refiled the suit against Mr. Connors and is again seeking $50 million in damages. The Company believes that Mr. Connors will again seek to cause the Company to indemnify and reimburse him from liability thereunder. Therefore, there can be no assurance that the lawsuit will not lead to events having a material adverse effect on the Company. GAMING INDUSTRY CLASS ACTIONS The Company has been named, along with two gaming equipment suppliers, 41 of the country's largest gaming operators and four gaming distributors (the "Gaming Industry Defendants") in three class action lawsuits pending in Las Vegas, Nevada. The suits allege that the Gaming Industry Defendants violated the Racketeer Influenced and Corrupt Organizations Act ("RICO") by engaging in a course of fraudulent and misleading conduct intended to induce people to play their gaming machines based upon a false belief concerning how those gaming machines actually operate, as well as the extent to which there is actually an opportunity to win on any given play. The suit sought unspecified compensatory and punitive damages. On April 17, 1996 the court granted the defendants motion to dismiss one of the complaints; however, the court has allowed the plaintiffs until May 31, 1996 to amend their complaint to cure certain pleading defects in the prior complaint. Failure to so amend will result in the dismissal of the complaint. On August 23, 1995, a class action suit was filed in the United States District Court for the District of New Jersey against the Company and approximately 80 other major casinos located throughout the United States. The suit alleges that the defendants violated federal antitrust and consumer credit reporting laws by engaging in a conspiracy to refuse to deal to skilled blackjack players who are capable of winning money at 57 the casinos' blackjack tables. The suit seeks unspecified compensatory and punitive damages. The Company is unable at this time to determine what effect, if any, the suit would have on its business or results of operations. CAPITAL HOUSE PRESERVATION COMPANY, L.L.C. V. JAZZ ENTERPRISES, INC., ET AL. In July 1995, Capital House Preservation Company, L.L.C. ("Capital House") filed a cause of action in the U.S. District Court of the Middle District of Louisiana against Jazz, the former shareholders of Jazz ("Former Jazz Shareholders"), Catfish Queen Partnership (the "Partnership"), Argosy of Louisiana, Inc. ("Argosy Louisiana") and the Company alleging that Jazz and Argosy obtained the gaming license for Baton Rouge based upon false and fraudulent pretenses and declarations and financial misrepresentations. The complaint alleges tortious conduct as well as violations of RICO and seeks damages of $130,900,000 plus court costs and attorneys' fees. The plaintiff was an applicant for a gaming license in Baton Rouge whose application was denied by the Louisiana Enforcement Division. The Company believes the allegations of the plaintiff are without merit and intends to vigorously defend such cause of action. On June 7, 1995, the Company consummated its purchase of all of the outstanding capital stock of Jazz from the Former Jazz Shareholders. The Company intends to seek indemnification from the Former Jazz Shareholders for any liability the Company, Argosy Louisiana or Jazz suffers as a result of such cause of action. As part of the consideration payable by the Company to the Former Jazz Shareholders for the acquisition of Jazz, the Company agreed at the time of such acquisition to annual deferred purchase price payments of $1,350,000 for each of the first ten years after closing and $500,000 for each of the next ten years. Payments are to be made quarterly by the Company. The definitive acquisition documents provide the Company with off-set rights against such deferred purchase price payments for indemnification claims of the Company against the Former Jazz Shareholders and for liabilities that the Former Jazz Shareholders contractually agreed to retain. There can be no assurance that the Former Jazz Shareholders will have assets sufficient to satisfy any claim in excess of the Company's off-set rights. DISPUTE WITH FORMER SHAREHOLDERS OF JAZZ ENTERPRISES, INC. On March 15, 1996, a judgment for approximately $2.2 million plus continuing interest, attorney's fees and court costs was rendered against Jazz in the cause of action entitled MARTHA MYATT BOWLUS ET. AL. V. JAZZ ENTERPRISES, INC. filed in the Ninteenth Judicial District Court, Parish of East Baton Rouge, State of Louisiana ("Bowlus Lawsuit"). The plaintiffs sued Jazz to recover amounts due under a promissory note issued by Jazz and secured by a mortgage on certain property owned by Jazz located several miles south of Catfish Town. The delay for filing for a new trial in the Bowlus Lawsuit has elapsed and under Louisiana law a suspensive appeal from a judgment must be filed within 30 days thereafter and any such appeal requires the posting of an appeal bond in an amount at least equal to the amount of the judgment. The judgment rendered in the Bowlus Lawsuit has been recorded in the mortgage records of East Baton Rouge Parish, and therefore the judgment now constitutes a judicial mortgage on Jazz's Catfish Town property. Pursuant to the definitive acquisition documents any and all amounts due by Jazz under the Bowlus Lawsuit are the obligations of the Former Jazz Shareholders. Prior to March 31, 1996, the Company requested, in writing, that the Former Jazz Shareholders satisfy the obligations and satisfy the judgment. Thereafter, Jazz was advised that the Former Jazz Shareholders hoped to settle the Bowlus Lawsuit prior to the expiration of the suspensive appeal delay and if not so settled, they intended to suspensively appeal the judgment. As a result of the Former Jazz Shareholders' obligations, one of the Former Jazz Shareholders, Mr. Steve Urie, has posted an unsecured personal appeal bond in the amount of $2,246,187.31, and a suspensive appeal has been filed. Under Louisiana law, if it is determined that the suspensive appeal is proper and that the suspensive appeal bond is valid, sufficient and proper, then after a contradictory hearing the court may order the judgement cancelled from the mortgage records during the pendency of the suspensive appeal. The Bowlus plaintiffs have filed pleadings to contest the validity, sufficiency, and propriety of the suspensive appeal bond, and Jazz is not able to predict what ruling the court may make on that issue. Accordingly, since the Former Jazz Shareholders have allowed the judgment to be entered against Jazz, and have allowed said judgment to remain in the mortgage records, such that the judgment creates a judicial mortgage on Jazz's immovable property, the Company withheld a scheduled payment of $337,500 to 58 the Former Jazz Shareholders representing the March 31, 1996 quarterly installment of the deferred purchase price. The Company believes that withholding such payment, as well as withholding future payments, until the Former Jazz Shareholders satisfy the Bowlus Lawsuit is within the Company's rights as provided for in the definitive acquisition documents. In response to the Company's withholding the March 31, 1996 payment, Mr. Steve Urie has filed an action in the District Court of East Baton Rouge seeking payment of the withheld amount and has also threatened, among other things, to file a class action on behalf of the shareholders of the Company against the Company and its directors and officers for mismanagement. The Company believes such threatened claims are without merit and would vigorously pursue the defense of any lawsuit filed by the Former Jazz Shareholders. POTENTIAL CHALLENGE TO CERTIFICATE OF SUITIBILITY FOR LAWRENCEBURG CASINO BY UNSUCCESSFUL APPLICANT On March 6, 1996 Indiana Gaming Company received a letter from counsel to Schilling Casino Corporation, d/b/a Empire Casino & Resort ("Empire") advising the Company that Empire intends to take legal action to seek a revocation or cancellation of the certificate of suitability issued by the Indiana Gaming Commission to Indiana Gaming L.P. on June 30, 1995 to develop and operate the Lawrenceburg Casino. Empire was one of the 10 unsuccessful applicants competing for the Lawrenceburg gaming license. Empire has advised Indiana Gaming L.P. that it intends to file an application with the Indiana Gaming Commission seeking revocation of the certificate of suitability and that if such application is unsuccessful, Empire has stated that it intends to file a civil action challenging the Indiana Gaming Commission's authority to issue the certificate of suitability and finally, if any such civil action is unsuccessful, to file an appeal from the denial of Empire's application, which denial Empire deems to occur upon the issuance of the gaming license to Indiana Gaming L.P. Among the grounds stated by Empire for its actions are: (i) the application process followed by the Indiana Gaming Commission did not afford Empire due process; (ii) Indiana Gaming L.P. will not be able to commence gaming operations prior to June 28, 1996 due to the failure to obtain the necessary permits and an inability to obtain the necessary financing for the project; (iii) Indiana Gaming L.P. made misrepresentations to the Indiana Gaming Commission during the licensing hearings; and (iv) the endorsement of Indiana Gaming L.P. by the City of Lawrenceburg was without legal authority. The Company believes that the grounds alleged by Empire are without merit and intends with Indiana Gaming L.P. to vigorously challenge any of the aforementioned actions taken by Empire. Additionally, the Company and Indiana Gaming L.P. intend to pursue their respective legal remedies against Empire and its representatives for any damages either may suffer as a result of any wrongful action of Empire. There can be no assurances, however, that any actions of Empire will not result in a delay in the opening of the temporary gaming facility in Lawrenceburg presently scheduled for the fourth quarter of 1996 or the opening of the permanent gaming facility scheduled twelve months later. Any such delay could have a material adverse effect on the Company. Additionally, the Company cannot predict the response of the Indiana Gaming Commission or City of Lawrenceburg to any such actions of Empire. LOUISIANA GAMING MATTERS In April 1995, the Company received a notice of violation from the Louisiana Enforcement Division alleging certain violations of the Louisiana gaming law principally related to compliance with reporting and internal control procedures and initially assessing fines and penalties of approximately $440,000. In April 1996, this amount was reduced to $88,400. The Company has taken the necessary actions to correct the matters alleged in the notice of violation. 59 LAWRENCEBURG CASINO PARTNERSHIP AGREEMENT GENERAL On June 30, 1995, Indiana Gaming L.P., received a certificate of suitability from the Indiana Gaming Commission to develop and operate the Lawrenceburg Casino project. The Company is the sole general partner of, and holds a 57.5% general partnership interest in, Indiana Gaming L.P. Conseco holds a 29% limited partnership interest and certain other investors, including H. Steven Norton, Chief Operating Officer of the Company, who brought the opportunity to the Company concurrent with his initial employment, hold the remaining 13.5% limited partnership interests in Indiana Gaming L.P. Indiana Gaming L.P. operates pursuant to a partnership agreement entered into among the partners as of April 11, 1994, as amended and restated as of February 21, 1996. The Indiana Gaming Company manages the partnership pursuant to a management agreement and as general partner, subject only to certain actions or major decisions requiring the consent of a majority in interest of the limited partners. Under the provisions of the partnership agreement and the management agreement, the Company will manage the development, construction and operation of the Lawrenceburg Casino project and will receive a management fee of 7.5% of EBITDA (as defined in the partnership agreement) and Conseco will receive a financial advisory fee of 5% of EBITDA. The Company estimates the total cost to open the temporary gaming facility and to construct the proposed permanent riverboat casino, land-based facilities and 300-room hotel will be approximately $210 million. PROJECT FUNDING It is currently anticipated that the budgeted $210 million total project cost will be funded as follows: $52.5 million by capital contributions by the partners of which $16.75 million will constitute common equity and $35.75 million will constitute preferred equity. The Company has contributed 57.5% of the common equity, in the amount of approximately $9.6 million, and has contributed or will contribute 57.5% of the preferred equity, in the amount of approximately $20.6 million. The remainder of the common equity has been and the remainder of the preferred equity will be contributed by Conseco. The remainder of the cost of the Lawrenceburg Casino is expected to be funded by third party financing and capital loans from the Company and Conseco. Any capital loans are to be funded 57.5% by the Company and 42.5% by Conseco, pursuant to agreements under which Conseco will fund both its and such other limited partners' share of such capital loans. Conseco is obligated to fund 42.5% of any capital loans until project costs exceed the budgeted $210 million total project cost. If project costs exceed $210 million, the Company and Conseco will make capital loans up to $15 million in the aggregate, 57.5% of which will be funded by the Company and 42.5% by of which will be funded Conseco; provided that Conseco will receive an interest rate 700 basis points higher than the Company on the last $10 million contributed. Any project costs over $225 million will be funded solely by the Company without a return or compensation. PARTNER DISTRIBUTIONS The Lawrenceburg Casino partnership agreement sets forth the manner in which cash flow of Indiana Gaming L.P. will be distributed. Pursuant to the agreement, capital loans will be repaid on an eight-year amortizing schedule and cash flow (after repayment of principal of, and interest on, capital loans) will be distributed by the general partner not less frequently than quarterly: (i) first, to the partners pro rata for tax payments in an amount equal to the product of an assumed tax rate times their estimated taxable income for such period; (ii) second, to the partners as a prepayment of principal on capital loans to be applied in the inverse order of maturity, up to 75% of the remaining cash flow; (iii) third, in payment of a preferred return of 14% on any preferred equity contributed by the partners; (iv) fourth, as a return of the preferred equity contributed by the partners; (v) fifth, as a return of common equity contributed by the partners; and (vi) sixth, to the partners in accordance with their respective percentage interests. The partnership agreement provides that the net cash proceeds from a sale or refinancing are distributed by the general partner in the same order as cash flow except that the proceeds will be used to repay 100% of outstanding capital loans by the partners. 60 GENERAL PARTNER REMOVAL The Lawrenceburg Casino partnership agreement provides that the Company's wholly-owned subsidiary, The Indiana Gaming Company, can be removed as general partner of the partnership by the limited partners under certain limited circumstances, including: (i) a material breach (after notice and expiration of applicable cure periods) of certain material provisions of the partnership agreement dealing with such things as distributions to partners or the failure to obtain the required consent of the limited partners for certain major decisions; (ii) conviction of embezzlement or fraud; (iii) certain bankruptcy events; (iv) if The Indiana Gaming Company's partnership interest is less than 40% due to sales or dilution for failure to pay required capital; (v) a final unappealable judgment against The Indiana Gaming Company in excess of $25 million which is uninsured and remains unsatisfied, unreleased or unstayed for 180 days; (vi) certain acts constituting "gross mismanagement"; (vii) if The Indiana Gaming Company fails to fund project costs in excess of $215 million (after expiration of applicable notice and cure periods); and (viii) if the Trustee under the Notes forecloses on The Indiana Gaming Company's pledge of its partnership interest in Indiana Gaming L.P. Upon removal as general partner, the general partnership interest of The Indiana Gaming Company becomes a "special limited partner" interest with rights to partner distributions but only limited voting rights on partnership matters. Also, if the reason for the removal is an event described in clause (i), (ii), (iii), (v), (vi) or (viii) above the limited partners may acquire all, but not less than all, of The Indiana Gaming Company's interest for the fair market value thereof determined by an appraisal process. LIMITED PARTNERS' SALE RIGHTS The Lawrenceburg Casino partnership agreement provides that: (i) after the third anniversary date of commencement of operations at the Lawrenceburg Casino, each limited partner has the right to sell its interest to the other partners (pro rata in accordance with their respective percentage interests) or (ii) after a deadlock by the parties with respect to significant items in any annual operating budget of the partnership for budget year 1999 and thereafter, any partner has a right to sell its interest to the other partners (the limited partner pursuant to clause (i) and the partner desiring to sell pursuant to clause (ii) is hereinafter referred to as a "Selling Partner" and the non-selling partners are hereinafter referred to as the "Non-Selling Partners"). The partnership agreement provides that after the Selling Partner gives notice of its intent to sell the Selling Partner and Non-Selling Partners shall have 60 days to attempt in good faith to agree to a purchase price. If within such period of time no such agreement is reached, then the Selling Partner's interest shall be appraised pursuant to an appraisal process to determine the fair market value thereof. After the fair market value of the Selling Partner's interest is determined by the appraisal process, the Non-Selling Partners have 60 days to reject such sale at that price, and if the Non-Selling Partners decline to purchase the interest of the Selling Partner at the appraisal price then the general partner is to solicit bids and sell all of the assets of the partnership within twelve months to the highest bidder and the partnership will be dissolved within a 12-month period. No assurances can be given that The Indiana Gaming Company, if it is a Non-Selling Partner, will have or will be able to obtain sufficient funds to acquire any Selling Partner's interest in the circumstances provided for above and therefore the assets of the partnership would have to be sold to the highest bidder as provided above. In addition, the partnership agreement provides all partners with a right of first refusal on transfers of partnership interests. A foreclosure by the Trustee on the Company's pledge of its partnership interest shall be deemed a transfer giving rise to the right of first refusal. 61 REGULATORY MATTERS GAMING REGULATORY SUMMARY The following table presents a comparative summary of certain key regulatory issues as in effect as of the date of this Offering Memorandum in the jurisdictions where the Company operates or proposes to operate casinos:
ILLINOIS IOWA MISSOURI LOUISIANA INDIANA --------------- ------------ --------------- --------------- --------------- MANDATORY CRUISING Yes Limited (1) Yes (2) Yes Yes CRUISE LENGTH (ACTUAL OR SIMULATED) Eight 2 hour 2 hours (1) Ten 2 hour Eight 3 hour Twelve 2 hour cruises (30 cruises (45 cruises (45 cruises min. board time min. board time min. board time anticipated (30 before and before and before and min. board time after cruise) after cruise) after cruise) before and after cruise) MAXIMUM NUMBER OF GAMING POSITIONS 1,200 Unlimited Unlimited Unlimited Unlimited MAXIMUM NUMBER OF LICENSES 10 Unlimited Unlimited 15 11 LICENSES OR CERTIFICATES OF 10 12 (3) 7 14 9 SUITABILITY ISSUED STATE LICENSED CASINOS IN OPERATION 10 12 (3) 7 12 4 STATE GAMING TAX AS A PERCENTAGE OF 20% Graduated to 20% 18.5% 20% GAMING REVENUES 20% STATE ADMISSION TAX PER PASSENGER $2.00 (4) $2.00 $2.50 $3.00 LOSS LIMIT PER CRUISE None None $500 None None
- --------------- (1) Iowa law requires one cruise per day for 100 days per year. While an Iowa riverboat is not cruising, customers are permitted unlimited ingress and egress to the casino. (2) The Missouri Gaming Commission is empowered to determine on a site by site basis whether dockside gaming is in the best interest of Missouri and the safety of the public and shall be permitted. (3) Nine of the state-licensed casinos are riverboat casino operations. The remaining three state-licensed casinos are land-based operations that are only permitted to offer gaming in the form of slot machines. (4) Admission fees are set annually on a per boat basis. ILLINOIS In February 1990, the State of Illinois pursuant to the Riverboat Gambling Act (the "Riverboat Act") legalized riverboat gaming. The Riverboat Act authorizes riverboat gaming upon any navigable stream within or forming a boundary of the State of Illinois other than Lake Michigan. The Riverboat Act does not, however, authorize riverboat gaming or the docking of a riverboat conducting gaming within a county having a population in excess of 3,000,000. The Riverboat Act grants the Illinois Gaming Board specific powers and duties, and all other powers which are necessary and proper to effectuate the Riverboat Act. The Illinois Gaming Board's jurisdiction extends to every person, association, corporation, partnership and trust involved in riverboat gaming operations in the State of Illinois. The Riverboat Act authorized a five member Illinois Gaming Board to issue up to ten owner's licenses statewide. Each owner's license permits the operation of up to two boats as a part of a single riverboat gaming operation with a combined maximum of 1,200 gaming positions (as defined by the Illinois Gaming Board). No person, firm or corporation may be licensed as the owner of more than one riverboat gaming operation in Illinois, although a licensed owner may hold up to 10% of a second riverboat gaming operation in Illinois. In addition to the ten owner's licenses which may be authorized under the Riverboat Act, the Illinois Gaming Board may issue special event licenses allowing persons who are not otherwise licensed to conduct riverboat gaming and to conduct such gaming on a specified date or series of dates. Riverboat gaming under such a license may take place on a riverboat not normally used for riverboat gaming. 62 An owner's license is issued for an initial period of three years (with a fee of $25,000 for the first year and $5,000 for each of the following two years) and must be renewed annually thereafter (with a fee of $5,000 for each year). The Company's Illinois gaming license is subject to renewal on October 24, 1996. An owner's license is eligible for renewal upon payment of the applicable fee and a determination by the Illinois Gaming Board that the licensee continues to meet all of the requirements of the Riverboat Act. The Illinois Gaming Board also requires that officers, directors and employees of a gaming operation be licensed. Licenses issued by the Illinois Gaming Board may not be transferred to another person or entity. All licensees must maintain their suitability for licensure and have a continuing duty to disclose any material changes in information provided to the Illinois Gaming Board. Pursuant to its rulemaking authority under the Illinois Riverboat Act, the Illinois Gaming Board has adopted certain regulations that provide that any beneficial owner of the legal or beneficial interests of a gaming company may be required, and in the case of a beneficial owner of 5% or more of the legal or beneficial interests (a "5% Holder") is required, to furnish a detailed personal disclosure form to the Illinois Gaming Board. The Illinois Gaming Board uses the personal disclosure form as the basis for its investigation to determine such holder's suitability as a stockholder of the company. In the case of a 5% Holder, the Illinois Gaming Board conducts such an investigation. The Illinois Gaming Board's decisions as to suitability are based on the same criteria used for a finding of preliminary suitability for licensure including character, reputation, experience and financial integrity of such holder. If the Illinois Gaming Board determines that a holder is not suitable, the holder is entitled to request a hearing; however, if no hearing is requested after such determination or such finding is upheld after a hearing, the holder is required to divest his shares of common stock of the company. After a holder is required to divest and until divestiture, the licensee is unable to distribute profits to such stockholder. The Illinois Gaming Board has adopted a regulation that provides that a licensee can only make distributions to shareholders to the extent such distributions would not impair the financial viability of the licensee. Factors which would be considered by the Illinois Gaming Board include working capital requirements, debt service requirements, requirements for repairs and maintenance and capital expenditure requirements. Illinois Gaming Board approval is required for certain changes, including, among other things, to the type of entity, debt and equity offerings by a company, issuances of debt, riverboat capacity or significant design changes, changes in the number of gaming positions and pro forma budgets and financial statements. Minimum and maximum wagers on games are set by the licensee. Wagering may not be conducted with money or negotiable currency. No person under the age of 21 is permitted to wager in Illinois, and wagers may only be taken from a person present on a licensed riverboat. With respect to electronic gaming devices, the payout percentage may not be less than 80% nor more than 100%. Under the Riverboat Act, vessels must have the capacity to hold a minimum of 500 persons if operating on the Mississippi River or the Illinois River south of Marshall County, and a minimum of 400 persons on any other waterway. In addition, all riverboats must be accessible to disabled persons, must be either a replica of a 19th century Illinois riverboat or be a casino cruise ship design and must comply with applicable federal and state laws, including but not limited to U.S. Coast Guard regulations. Gaming may only be conducted on a gaming excursion, which is limited to a maximum period of four hours. A gaming excursion is deemed to have started upon the commencement of gaming. For the purpose of orderly ingress of passengers to a riverboat, gaming is deemed to commence when the first passenger boards a riverboat for an excursion and may continue while other passengers are boarding for a period not to exceed thirty minutes, at which time the gangplank or its equivalent must be pulled up and further boarding is not permitted. For the purpose of orderly egress of passengers from a riverboat at the end of an excursion, gaming may continue for a period not to exceed thirty minutes after the gangplank or its equivalent is lowered. During this thirty minute period of egress, new passengers may not board a riverboat. These periods of time do not extend the four-hour maximum. Special event extended cruises may be authorized by the Illinois Gaming Board. Although the Riverboat Act provides that no gambling may be conducted while a riverboat is docked, an Illinois Gaming Board rule currently permits dockside gaming during the 30-minute time periods prior to 63 and following a cruise. Furthermore, if the captain of the riverboat reasonably determines that for reasons of safety, although seaworthy, the riverboat should not leave the dock or should return immediately thereto due to inclement weather, mechanical or structural problems, or river icing, then a gaming excursion may commence or continue while the gang plank or its equipment is raised and remains raised, and ingress is prohibited until completion of the excursion, in which case the riverboat is not considered docked. If such a situation occurs, the holder of the owner's license must promptly file a report with the administrator of the Illinois Gaming Board detailing the basis for its decision not to cruise. Recent pronouncements by the Illinois Gaming Board indicate that the explanations for failure to cruise pursuant to the rule will be scrutinized and that any abuse of the rule will result in disciplinary actions, which may include, among other things, any of the following: cancellation of future cruises, penalties, fines, suspension and/or revocation of a license. The Riverboat Act imposes a 20% wagering tax on adjusted gross receipts from gambling games. The tax imposed is to be paid by the licensed owner to the Illinois Gaming Board on the day after the day when the wagers were made. A number of bills have been recently introduced in the Illinois legislature proposing a graduated gaming tax that would impose a maximum tax on Illinois casinos far in excess of the current 20% wagering tax on adjusted gaming receipts. The Governor of Illinois has publicly supported such a graduated gaming tax and has proposed a state budget which is in part predicated on additional revenues being generated from an increase in gaming taxes. The proposed bills are still pending and no assurance can be given that one or a combination of these bills will not become law or that similar legislation will not be introduced in the future. The Riverboat Act also requires that licensees pay a $2.00 admission tax for each person admitted to a gaming cruise. In addition, all use, occupancy and excise taxes that apply to food and beverages and all taxes imposed on the sale or use of tangible property apply to sales aboard riverboats. The Company also pays $.20 admission tax to the City of Alton for each person admitted to the Alton Belle Casino. The Illinois Gaming Board is authorized to conduct investigations into the conduct of gaming as it may deem necessary and proper and into alleged violations of the Riverboat Act. Employees and agents of the Illinois Gaming Board have access to and may inspect any facilities relating to riverboat gaming operations at all times. A holder of any license is subject to the imposition of fines, suspension or revocation of such license, or other action for any act or failure to act by himself or his agents or employees, that is injurious to the public health, safety, morals, good order and general welfare of the people of the State of Illinois, or that would discredit or tend to discredit the Illinois gaming industry or the State of Illinois. Any riverboat operation not conducted in compliance with the Riverboat Act may constitute an illegal gaming place and consequently may be subject to criminal penalties, which penalties include possible seizure, confiscation and destruction of illegal gaming devices and seizure and sale of riverboats and dock facilities to pay any unsatisfied judgment that may be recovered and any unsatisfied fine that may be levied. The Illinois Gaming Board may revoke or suspend licenses, as the Board may see fit and in compliance with applicable laws of Illinois regarding administrative procedures and may suspend an owner's license, without notice or hearing, upon a determination that the safety or health of patrons or employees is jeopardized by continuing a riverboat's operation. The suspension may remain in effect until the Illinois Gaming Board determines that the cause for suspension has been abated and it may revoke the owner's license upon a determination that the owner has not made satisfactory progress toward abating the hazard. The Illinois Gaming Board may waive any licensing requirement or procedure provided by rule if it determines that such waiver is in the best interests of the public and the gaming industry. INDIANA In June 1993, the Indiana legislature adopted legislation permitting riverboat gambling in counties contiguous to Lake Michigan, the Ohio River and Patoka Lake. The legislation granted authority to supervise gaming activities to the seven-member Indiana Gaming Commission (the "Indiana Gaming Commission"). The Indiana Gaming Commission is empowered to administer, regulate and enforce the system of riverboat gaming established under Indiana's Riverboat Gambling Act (the "Riverboat Gambling 64 Act") and has jurisdiction and supervision over all riverboat gaming operations in Indiana, as well as all persons on riverboats where gaming operations are conducted. The Indiana Gaming Commission has broad powers to regulate riverboat gaming operations and to approve the form of ownership and financial structure of not only riverboat owner licensees, but also their entity qualifiers, and intermediary and holding companies. Indiana is a new gaming jurisdiction and the emerging regulatory framework is not yet complete. The Indiana Gaming Commission has adopted certain final rules and has published others in proposed or draft form which are proceeding through the review and final adoption process. The Indiana Gaming Commission also has indicated its intent to publish additional proposed rules in the future. The Indiana Gaming Commission has broad rulemaking power and it is impossible to predict what effect, if any, the rules might have on the operations of the Lawrenceburg Casino. The following description reflects both adopted and proposed rules. Further, the Indiana General Assembly has the power to promulgate new laws and implement amendments to the Riverboat Gambling Act, which can materially affect the operation or economic viability of the gaming industry in Indiana. No one may operate a riverboat gaming operation in Indiana without holding a riverboat owner's license. The Indiana Gaming Commission has implemented strict regulations with respect to the suitability of riverboat license owners, their key personnel, and employees. The Indiana Gaming Commission utilizes a "class based" licensing structure that subjects all individuals associated with a riverboat licensee or a riverboat license applicant to varying degrees of background investigations. Under current Indiana law a maximum of 11 owner's licenses may be in effect at any time with an aggregate of five licenses to be issued to owners whose home port is a county which is contiguous to Lake Michigan, an aggregate of five licenses to be issued to owners whose home port is a county which is contiguous to the Ohio River and one license to be issued to an owner whose home port is a county contiguous to Lake Patoka. For counties contiguous to the Ohio River, the Indiana Gaming Commission may not issue a license unless an ordinance has been passed permitting the docking of a riverboat by the specified local entity and the voters of the county have approved riverboat gambling in the county. A license holder is required to pay an initial license fee of $25,000, a renewal of $5,000 per year thereafter and post a bond to guaranty performance of the licensee's obligations under the legislation. Gaming will be permitted only on riverboats which (i) have a valid certificate of inspection from the U.S. Coast Guard for the carrying of at least 500 passengers, (ii) are at least 150 feet in length, and (iii) for riverboats operating on the Ohio River, replicate historic Indiana steamboat passenger vessels of the 19th century. No person or entity may simultaneously own an interest in more than two riverboat owner's licenses. A person or entity may simultaneously own up to 100% in one riverboat owner's license and no more than 10% in a second riverboat owner's license. A riverboat owner's licensee must possess a level of skill, experience, or knowledge necessary to conduct a riverboat gaming operation that will have a positive economic impact on the host site, as well as the entire State of Indiana. Additional representative, but not exclusive, qualification criteria with respect to the holder of a riverboat owner's license include character, reputation, financial integrity, the facilities or proposed facilities for the conduct of riverboat gaming including related non-gaming projects such as hotel development, and the good faith affirmative action plan to recruit, train and upgrade minorities and women in all employment classifications. The Indiana Gaming Commission shall require persons holding owner's licenses to adopt policies concerning the preferential hiring of residents of the city in which the riverboat docks for riverboat jobs. The Indiana Gaming Commission has broad discretion in regard to the issuance, renewal, revocation and suspension of licenses and approvals, and the Indiana Gaming Commission is empowered to regulate a wide variety of gaming and non-gaming related activities, including the licensing of suppliers to, and employees at, riverboat gaming operations, and effectively to approve the form of ownership and financial structure of not only riverboat owner and supplier licensees, but also their subsidiaries and affiliates. A riverboat owner's licensee or any other person may not lease, hypothecate, borrow money against or loan money against a riverboat owner's license. An ownership interest in a riverboat owner's license may only be transferred in accordance with the regulations promulgated under the Riverboat Gambling Act. An applicant for the approval of the transfer of a riverboat owner's license must comply with application procedures prescribed by the Indiana Gaming Commission and present evidence that it meets or possesses the standards, qualifications, and other criteria 65 under Indiana gaming laws, and pay an investigative fee in the amount of $50,000 with the application. If the Indiana Gaming Commission denies the application to transfer an ownership interest, it shall issue notice of denial to the applicant. Unless specifically stated to the contrary, a notice of denial of an application for transfer shall not constitute a finding that the applicant is not suitable for licensure. A person who is served with notice of denial under this rule may request an administrative hearing. "Certificates of Suitability" are issued following selection by the Indiana Gaming Commission. The "Certificate of Suitability" is valid for 180 days unless extended by the Indiana Gaming Commission. During this period the prospective riverboat licensee must among other things: obtain a permit to develop the riverboat gaming operation from the United States Army Corps of Engineers; obtain a valid certificate of inspection from the United States Coast Guard for the vessel on which the riverboat gaming operation will be conducted; apply for and receive the appropriate permits or certificates from the Indiana Alcoholic Beverage Commission, fire marshall, and other appropriate local, state and federal agencies which issue permits including, but not limited to, health permits, building permits and zoning permits; closing the financing necessary to complete the development of the gaming operation; post a bond in compliance with the applicable law; obtain the insurance deemed necessary by the Indiana Gaming Commission; receive licensure for electronic gaming devices and other gaming equipment under applicable law; submit an emergency response plan in compliance with applicable laws; and take any other action that the Indiana Gaming Commission deems necessary for compliance under Indiana gaming laws. Further, the Indiana Gaming Commission may place restrictions, conditions or requirements on the permanent riverboat owner's license. An owner's initial license expires five years after the effective date of the license, and unless the owner's license is terminated, expires or is revoked, the owner's license may be renewed annually by the Indiana Gaming Commission upon satisfaction of certain conditions contained in the Riverboat Gambling Act. Pursuant to rules promulgated by the Indiana Gaming Commission, any person (other than an institutional investor) who individually, or in association with others, acquires directly or indirectly the beneficial ownership of 5% or more of any class of voting securities of a publicly-traded corporation that is a riverboat licensee or 5% or more of the beneficial interest in a riverboat licensee, directly or indirectly, through any class of the voting securities of any holding or intermediary company of a riverboat licensee shall apply to the Indiana Gaming Commission for finding of suitability within 45 days after acquiring the securities. Each institutional investor who, individually or in association with others, acquires, directly or indirectly, beneficial ownership of 5% or more of any class of voting securities of a publicly-traded corporation that is a riverboat licensee or 5% or more of the beneficial interest in a riverboat licensee through any class of the voting securities of any holding or intermediary company of a riverboat licensee shall notify the Indiana Gaming Commission within 10 days after the institutional investor acquires the securities and shall provide additional information and may be subject to a finding of suitability as required by the Indiana Gaming Commission. An institutional investor who would otherwise be subject to a suitability finding shall, within 45 days, after acquiring the interests submit information to the Indiana Gaming Commission including the following: a description of the institutional investor's business and a statement as to why the institutional investor satisfies the definitional requirements of an institutional investor under Indiana gaming rule requirements; a certification made under oath that the voting securities were acquired and are held for investment purposes only and were acquired and are held in the ordinary course of business as an institutional investor; the name, address, telephone number, social security number or federal tax identification number of each person who has the power to direct or control the institutional investor's exercise of its voting rights as a holder of voting securities of the riverboat licensee; the name of each person who beneficially owns 5% or more of the institutional investor's voting securities or equivalent; a list of the institutional investor's affiliates; a list of all securities of the riverboat licensee that are or were beneficially owned by the institutional investor or its affiliates within the preceding one year; a disclosure of all criminal and regulatory sanctions imposed during the preceding ten years; a copy of any filing made under 16 U.S.C. 18(a); and any other additional information the Indiana Gaming Commission may request to insure compliance with Indiana gaming laws. 66 Each institutional investor who, individually or in association with others, acquires, directly or indirectly, the beneficial ownership of 15% or more of any class of voting securities of a publicly-traded corporation that owns a riverboat owner's license or 15% or more of the beneficial interest in a riverboat licensee directly or indirectly through any class of voting securities of any holding company or intermediary company of a riverboat licensee shall apply to the Indiana Gaming Commission for a finding of suitability within 45 days after acquiring the securities. An institutional investor means any of the following: a retirement fund administered by a public agency for the exclusive benefit of federal, state or local public employees; an investment company registered under the Investment Company Act of 1940; a collective investment trust organized by banks under Part 9 of the Rules of the Comptroller of the Currency; a closed end investment trust; a chartered or licensed life insurance company or property and casualty insurance company; a banking, chartered or licensed lending institution; an investment adviser registered under the Investment Advisers Act of 1940; and any other entity the Indiana Gaming Commission determines constitutes an institutional investor. The Indiana Gaming Commission may in the future promulgate regulations with respect to the qualification of other financial backers, mortgagees, bond holders, holders of indentures or other financial contributors. The Riverboat Gambling Act imposes a tax on admissions to gaming excursions at a rate of $3.00 for each person admitted to the gaming excursion. This admission tax is imposed upon the license owner conducting the gaming excursion on a per-person basis without regard to the actual fee paid by the person using the ticket, with the exception that no tax shall be paid by admittees who are actual and necessary officials, employees of the licensee or other persons actually working on the riverboat. A tax is imposed on the adjusted gross receipts received from gaming games under the Riverboat Gambling Act at a rate of twenty percent (20%) of the amount of the adjusted gross receipts. Adjusted gross receipts is defined as the total of all cash and property (including checks received by a licensee), whether collected or not, received by a licensee from gaming operations less the total of all cash paid out as winnings to patrons including a provision for uncollectible gaming receivables as is further set forth in the Riverboat Gambling Act. The Indiana Gaming Commission may, from time to time, impose other fees and assessments on riverboat owner licensees. In addition, all use, excise and retail taxes apply to sales aboard riverboats. In general, riverboat excursions are limited to a duration of four hours, and no gaming may be conducted while the riverboat is docked, with the exception of (i) the 30 minutes during passenger embarkation and disembarkation and (ii) when weather, water or traffic prevent the riverboat from cruising. Minimum and maximum wagers on games are set by the licensee, and wagering may not be conducted with money or other negotiable currency. No person under the age of 21 is permitted to wager, and wagers may only be taken from a person present on a licensed riverboat. No riverboat licensee or riverboat license applicant may enter into or perform any contract or transaction in which it transfers or receives consideration which is not commercially reasonable or which does not reflect the fair market value of the goods or services rendered or received as determined at the time the contract is executed. Any contract entered into by a riverboat licensee or riverboat license applicant that exceeds the total dollar amount of $50,000 shall be a written contract. A riverboat license applicant means an applicant for a riverboat owner's license that has been issued a certificate of suitability. Pursuant to proposed Indiana Gaming Commission rules, riverboat licensees and riverboat license applicants must submit an internal control procedure regarding purchasing transactions which must contain provisions regarding ethical standards, compliance with state and federal laws, and prohibitions on the acceptance of gifts and gratuities by purchasing and contracting personnel from suppliers of goods or services. The proposed rules also require any riverboat licensee or applicant to submit any contract, transaction or series of transactions greater than $500,000 in any 12-month period to the Indiana Gaming Commission within 10 days of execution, and to submit a summary of all contracts or transactions greater than $50,000 in any 12-month period on a quarterly basis. The proposed rules provide that contracts submitted to the Indiana Gaming Commission are not submitted for approval, but grant the Indiana Gaming Commission authority to cancel or terminate any contract not in compliance with Indiana law and Indiana Gaming Commission rules. 67 Indiana gaming laws provide that the opportunity for full minority and women's business enterprise participation in the riverboat industry in Indiana is essential to social and economic parity for minority and women business persons. The Indiana Gaming Commission has the power to review compliance with the goals of participation by minority and women business persons and impose appropriate conditions on licensees to insure that goals for such business enterprises are met. Under proposed Indiana Gaming Commission rules, a riverboat licensee or a riverboat license applicant shall designate certain minimum percentages of the value of its contracts for goods and services to be expended with minority business enterprises and womens' business enterprises such that 10% of the dollar value of the riverboat licensee's or the riverboat license applicant's contracts be expended with minority enterprises and 5% of the dollar value of the riverboat licensee's or the riverboat license applicant's contracts be expended with women's business enterprises. Expenditures with minority and women business enterprises are not mutually exclusive. All licensees subject to the jurisdiction of the Indiana Gaming Commission have a continuing duty to maintain suitability for licensure. The Indiana Gaming Commission may initiate an investigation or disciplinary action or both against a licensee about whom the commission has reason to believe is not maintaining suitability for licensure, is not complying with licensure conditions, and/or is not complying with Indiana gaming laws or regulations. The Indiana Gaming Commission may suspend, revoke, restrict or place conditions on the license of a licensee; require the removal of a licensee or an employee of a licensee; impose a civil penalty or take any other action deemed necessary by the Indiana Gaming Commission to insure compliance with Indiana gaming laws. IOWA In 1989, the State of Iowa legalized riverboat gaming on the Mississippi and Missouri Rivers and certain other waterways located in Iowa. The Excursion Gambling Act grants the Iowa Racing and Gaming Commission (the "Iowa Commission") jurisdiction over all gambling operations. The legislation authorized the granting of licenses to conduct riverboat gaming to not-for-profit corporations which, in turn, are permitted to enter into operating agreements with persons who are licensed by the Iowa Commission to operate riverboat casinos. The number of licenses which may be granted is not limited by statute or regulation. Gaming is permitted only on riverboats which recreate, as nearly as practicable, Iowa's riverboat history and have a capacity for at least 250 persons with tickets. In addition the licensee must utilize Iowa resources, goods and services in the operation of the riverboat. An excursion gambling boat must operate at least one excursion each day for 100 days during the excursion season which will be from April 1 through October 31. Excursions consist of a minimum two hours. While an excursion gambling boat is docked, passengers may embark or disembark at any time during its business hours. If during the excursion season it is determined that it would be unsafe to complete any portion of an excursion, or if mechanical problems prevent the completion of any portion of an excursion, the boat may be allowed to remain dockside. A gaming license will be issued for not more than three years and is subject to annual renewals thereafter. The Iowa Commission has broad discretion with regard to such renewals. The annual license fee to operate an excursion gambling boat shall be based on the passenger carrying capacity, including crew, for which the excursion gambling boat is registered. The annual fee shall be five dollars per person capacity. Licenses issued by the Iowa Commission may not be transferred to another person or entity. The Company must submit detailed financial and operating reports to the Iowa Commission. Minimum and maximum wagers on games are set by the licensee. Wagering may only be conducted with chips, wagering debit cards or coins. Wagers may only be made by persons 21 years of age and older. A licensee shall not accept a credit card to purchase coins, tokens or other forms of credit to be wagered on gambling games. The legislation imposes a graduated tax based on adjusted gross receipts at a rate of 5% on the first $1 million, 10% on the next $2 million and 20% on any amount over $3 million. The tax is to be paid by the 68 licensee within 10 days after the close of business of the day when the wagers were made. The legislation also permits the Iowa Commission to impose an admission fee for each person embarking on an excursion vessel, and the city or county in which gaming is conducted is permitted to impose an admission fee of not greater than 50 CENTS. Pursuant to its rulemaking authority, the Iowa Commission requires officers, directors and certain key employees of the Company to be licensed by the Iowa Commission. In addition, anyone having a material relationship or involvement with the Company may be required to be found suitable or to be licensed, in which case those persons would be required to pay the costs and fees of the Iowa Commission. The Iowa Commission has jurisdiction to disapprove a change in position by such officers or key employees and the power to require the Company to suspend or dismiss officers, directors or other key employees or sever relationships with other persons who refuse to file appropriate applications or whom the Iowa Commission finds suitable to act in such capacities. Any contract in excess of $50,000 must be submitted to and approved by the Iowa Commission. The Iowa Commission may also require any individual who has a material relationship with the Company to be investigated and licensed or found suitable. Any person who acquires 5% or more of the Company's equity securities must be approved by the Iowa Commission prior to such acquisition. The applicant stockholder is required to pay all costs of such investigation. LOUISIANA In July 1991, the Louisiana legislature adopted legislation permitting certain types of gaming activity on certain rivers and waterways in Louisiana. The legislation granted authority to supervise riverboat gaming activities to the Louisiana Riverboat Gaming Commission and the Riverboat Gaming Enforcement Division of the Louisiana State Police (the "Louisiana Enforcement Division"). The Louisiana Riverboat Gaming Commission was authorized to hear and determine all appeals relative to the granting, suspension, revocation, condition or renewal of all licenses, permits and applications. In addition, the Louisiana Riverboat Gaming Commission was to establish rules providing for and determining, among other things, authorized routes, duration of excursions and the stops a riverboat may make, minimum levels of insurance, construction of riverboats, periodic inspections and procedures for negotiable instrument transactions involving patrons. The Louisiana Enforcement Division was authorized, among other things, to investigate applicants and issue licenses, investigate violations of the statute, conduct continuing reviews of gaming activities and exercise other broad oversight powers. In an April 1996 special session of the Louisiana legislature, Louisiana lawmakers passed a measure which established the Louisiana Gaming Control Board and provides that such board shall be the successor to all prior authorities, and the sole and exclusive authority, with regard to the regulation and supervision of gaming operations and activities in Louisiana except for the regulation of horse racing and offtrack betting and the conducting of charitable gaming operations. Effective May 1, 1996, the powers, duties, functions, and responsibilities of the Louisiana Riverboat Gaming Commission and the Louisiana Enforcement Division, including those with respect to riverboat gaming, are transferred to the Louisiana Gaming Control Board. The statute authorized issuance of up to 15 licenses to conduct gaming activities on a riverboat of new construction in accordance with applicable law. However, no more than six licenses may be granted to riverboats operating from any one parish. An initial license to conduct riverboat gaming operations is valid for a term of five years. The Louisiana gaming law provides that a renewal application for the period succeeding the initial five year term of the operator's license must be made to the Louisiana Gaming Control Board. The application for renewal shall be accompanied with payment of a fee and shall include a statement under oath of any and all changes in information, including financial information, provided in the previous application. The Louisiana gaming law specifies certain restrictions relating to the operation of riverboat gaming, including the following: (i) gaming is not permitted while a riverboat is docked, other than the forty-five minutes between excursions, and during times when dangerous weather or water conditions exist; (ii) each 69 round-trip riverboat cruise may not be less than three nor more than eight hours in duration, subject to specific exceptions; (iii) agents of the Louisiana Gaming Control Board are permitted on board at any time during gaming operations; (iv) gaming devices, equipment and supplies may only be purchased or leased from permitted suppliers; (v) gaming may only take place in the designated gaming area while the riverboat is conducting an authorized excursion upon a designated river or waterway; (vi) gaming equipment may not be possessed, maintained or exhibited by any person on a riverboat except in the specifically designated gaming area, or a secure area used for inspection, repair or storage of such equipment; (vii) wagers may be received only from a person present on a licensed riverboat; (viii) persons under 21 are not permitted in designated gaming areas; (ix) except for slot machine play, wagers may be made only with tokens, chips or electronic cards purchased from the licensee; (x) the riverboat may only board and discharge passengers at the riverboat's licensed berth; (xi) licensees must have adequate protection and indemnity insurance; (xii) licensees must have all necessary Federal and state licenses, certificates and other regulatory approvals prior to operating a riverboat; and (xiii) gaming may only be conducted in accordance with the terms of the license and the rules and regulations adopted by the Louisiana Gaming Control Board. Certain persons affiliated with a riverboat gaming licensee, including directors and officers of the licensee, directors and officers of any holding company of the licensee involved in gaming operations, persons holding five percent or greater interests in the licensee, and persons exercising influence over a licensee ("Affiliated Gaming Persons"), are subject to the application and suitability requirements of the Louisiana gaming law. The transfer of a license or permit or an interest in a license or permit is prohibited. The sale, purchase, assignment, transfer, pledge or other hypothecation, lease, disposition or acquisition (a "Transfer") by any person of securities which represents 5% or more of the total outstanding shares issued by a corporation that holds a license is subject to Louisiana Gaming Control Board disapproval. A security issued by a corporation that holds a license must disclose these restrictions. Prior Louisiana Gaming Control Board approval is required for the Transfer of any ownership interest of 5% or more in any licensee or for the Transfer of any "economic interest" of 5% or more in any licensee or Affiliated Gaming Person. No such prior approval is required for the transfer of any ownership interest of 5% or more in any corporate licensee. An "economic interest" is defined for purposes of a Transfer as any interest whereby a person receives or is entitled to receive, by agreement or otherwise, a profit, gain, thing of value, loss, credit, security interest, ownership interest or other benefit. A licensee must notify the Louisiana Gaming Control Board in writing within five (5) days of the completion of the following transactions: 1. Withdrawal of capital in excess of five percent (5%) of the licensee's net gaming proceeds for the preceding twelve month period; 2. The granting of a loan or any other extension of credit in excess of five percent (5%) of the licensee's net gaming proceeds for the preceding twelve month period; 3. Any advance or other distribtuion of any type of asset in excess of five percent (5%) of the licensee's net gaming proceeds for the preceding twelve month period; No prior approval of any such withdrawal, loan, advance or distribution is required, but such transaction is ineffective if subsequently disapproved by the Louisiana Gaming Control Board. In addition, the Louisiana Gaming Control Board may issue an emergency order for not more than 10 days prohibiting payment of profits, income or accruals by, or investments in, a licensee. Riverboat gaming licensees and their Affiliated Gaming Persons are required to notify the Louisiana Gaming Control Board within 30 days after any such person applies for, receives or accepts a loan, or makes use of any cash, property, credit, loan or line of credit, or guarantees, or grants other form of security for a loan (a "Loan") unless such transaction involves publicly registered debt and securities (in which event such person shall file the registration statement and other materials with the Louisiana Gaming Control Board), unless more stringent conditions are imposed by the Louisiana Gaming Control Board, or the amount of the Loan is below certain specified thresholds. The Louisiana Gaming Control Board is required to investigate 70 the reported Loan, and to either approve or disapprove the transaction. If disapproved, the Loan must be rescinded by the Licensee or Affiliated Gaming Person. The Company has obtained the approval of the Louisiana Enforcement Division in connection with the Offering. The Louisiana Enforcement Division, however, has reserved the right to review all Louisiana security documents. Fees for conducting gaming activities on a riverboat include (i) $50,000 per riverboat for the first year of operation and $100,000 per year per riverboat thereafter; (ii) a state franchise fee of 15% of net gaming proceeds; (iii) a state license fee of 3.5% of net gaming proceeds; and (iv) a local fee of up to $2.50 per passenger. On April 19, 1996, the Louisiana legislature approved legislation mandating local option elections to determine whether to prohibit or continue to permit three individual types of gaming in Louisiana on a parish-by-parish basis. The referendum will be brought before the Louisiana voters at the time of the 1996 presidential election and will determine whether each of the following types of gaming will be prohibited or permitted in the following described Louisiana parishes: (i) the operation of video draw poker devices in each parish; (ii) the conduct of riverboat gaming in each parish that is contiguous to a statutorily designated river or waterway or (iii) the conduct of land-based casino gaming operations in Orleans Parish. If a majority of the voters in a parish elect to prohibit one or more of the above-described gaming activities in such parish, then no license or permit shall be issued to conduct such prohibited gaming activity in such parish and no such gaming activity may be permitted in that parish. If, however, riverboat gaming was previously permitted in such parish, the legislation permits the current gaming operator to continue riverboat gaming in that parish until the expiration of its gaming license. However, the current legislation does not provide for any moratorium that must expire before future local elections on gaming could be mandated or allowed. Further, in parishes where riverboat gaming is currently authorized and voters elect to prohibit riverboat gaming, the legislation provides that the gaming license shall not be reissued or transferred to any parish other than a parish in which a riverboat upon which gaming is conducted is berthed. In addition, the Louisiana legislature approved a joint resolution to submit to Louisiana voters at the time of the 1996 presidential election for their approval a proposed constitutional amendment which, among other things, would require the voters in a parish where riverboat gaming exists to approve additional riverboat gaming in that parish. MISSOURI Gaming was originally authorized in the State of Missouri on November 3, 1992, although no governmental action was taken to enforce or implement the original law. On April 29, 1993, Missouri enacted the Missouri Gaming Law which replaced the original law and established the Missouri Gaming Commission, which is responsible for the licensing and regulation of riverboat gaming in Missouri. The number of licenses which may be granted is not limited by statute or regulation. The Missouri Gaming Law grants specific powers and duties to the Missouri Gaming Commission to supervise riverboat gaming and implement the Missouri Gaming Law and take any other action as may be reasonable or appropriate to enforce the Missouri Gaming Law. The Missouri Gaming Commission has discretion to approve permanently moored ("dockside") riverboat casinos if it finds that the best interest of Missouri and the safety of the public indicate the need for continuous docking of an excursion gambling boat. Under the Missouri Gaming Law, the ownership and operation of riverboat gaming facilities in Missouri are subject to extensive state and local regulation. If a company is granted a gaming license in Missouri, such company, any subsidiaries it may form and its officers, directors, significant shareholders and employees will be subject to regulations. The initial license and first subsequent license renewal of an excursion gambling boat operator shall be for a period of one year. Thereafter, license renewal periods shall be two years. However, the Missouri Gaming Commission may reopen license hearings at any time. In addition to the owners license and operators license for the riverboat, every individual participating in gaming operations in any capacity is required to have an occupational license from the Missouri Gaming Commission. Applicants and licensees are responsible to keep the application and any requested materials current at all times, and this responsibility shall continue throughout any period of licensure granted by the Missouri Gaming Commission. In addition, Missouri has extensive licensing disclosure requirements. 71 The Missouri Gaming Commission may revoke or suspend gaming licenses and impose other penalties for violation of the Missouri Gaming Law and the rules and regulations which may be promulgated thereunder. Penalties include, but are not limited to, forfeiture of all gaming equipment used in the conduct of unauthorized gambling games and fines of up to three times a licensee's highest daily gross receipts derived from wagering on the gambling games, whether authorized or unauthorized, conducted during the preceding twelve months. In addition, the Missouri Gaming Commission requires 60 days notice of, and may disapprove or require delay pending further investigation of, transactions in excess of the greater of $500,000 or 30% of licensee's net worth, up to $1,000,000, which transactions involve or relate to the gaming licensee. The Missouri Gaming Law imposes operational requirements on riverboat operators, including a charge of two dollars per gaming customer per excursion that licensees must pay to the Missouri Gaming Commission, a minimum payout requirement of 80% for slot machines, a 20% tax on adjusted gross receipts, prohibitions against providing credit to gaming customers (except for the use of credit cards and cashing checks) and a requirement that each licensee reimburse the Missouri Gaming Commission for all costs of any Missouri Gaming Commission staff necessary to protect the public on the licensee's riverboat. Licensees must also submit to the Commission on a quarterly basis an audit of compliance and of the financial transactions and condition of the licensee's total operations for the calendar quarter and pay the associated auditing fees. The Missouri Gaming Law provides for a loss limit of $500 per person per excursion. Although the Missouri Gaming Law provides no limit on the amount of riverboat space that may be used for gaming, the Missouri Gaming Commission is empowered to impose such space limitations through the adoption of rules and regulations. Additionally, United States Coast Guard safety regulations could affect the amount of riverboat space that may be devoted to gaming. The Missouri Gaming Law also includes requirements as to the form of riverboats, which must resemble Missouri's riverboat history to the extent practicable and include certain non-gaming amenities. The licensee may receive wagers only from a person present on a licensed excursion gambling boat. Wagering shall not be conducted with money or other negotiable currency. A person under 21 years of age shall not make a wager on an excursion gambling boat and shall not be allowed in the area of the excursion boat where gambling is being conducted. With respect to the availability of dockside gaming, which may be more profitable than cruise gaming, the Missouri Gaming Commission is empowered to determine on a site by site basis where such gaming is in the best interest of Missouri and the safety of the public and shall be permitted. Pursuant to its rulemaking authority, the Missouri Gaming Commission has adopted certain regulations which provide, among other things, that: (i) riverboat excursions are limited to a duration of four hours, and gaming may be conducted at any time during the excursion; (ii) no gaming licensee or occupational licensee may pledge, hypothecate or transfer in any way any license, or any interest in a license, issued by the Missouri Gaming Commission; (iii) without first notifying the Missouri Gaming Commission at least 60 days prior to such consummation of any of the following transactions (and during such period the Missouri Gaming Commission may disapprove the transaction or require the transaction to be delayed pending further investigation) (a) a gaming licensee or a holding company affiliated with a gaming licensee may not make a public issuance of debt, (b) a publicly held gaming licensee or a publicly held holding company may not make any issuance of an ownership interest equaling 5% or greater of the gaming licensee or holding company or (c) a person or entity may not pledge or hypothecate an ownership interest in a gaming licensee that is not a publicly held company or a holding company that is not a publicly held company provided that no such ownership interest may be transferred voluntarily or involuntarily pursuant to any pledge without separate notice to the Missouri Gaming Commission as required by the regulations; (iv) not later than 7 days after the consummation of any transfer of ownership interest in a publicly held gaming licensee, if such transfer would result in an entity or group of entities acting in concert owning, directly or indirectly, a total amount of ownership interest equaling 5% or greater of the ownership interest in the gaming licensee, the transferee must report such consummation to the Missouri Gaming Commission; (v) no withdrawals of capital, loans, advances or distribution of any type of assets in excess of 5% of accumulated earnings of a licensee to anyone 72 with an ownership interest in the licensee may occur without prior Missouri Gaming Commission approval; and (vi) the Missouri Gaming Commission may take action against a licensee or other person who has been disciplined in another jurisdiction for gaming related activity. The Missouri Gaming Commission is authorized to enter the premises of excursion gambling boats, facilities, or other places of business of a licensee in Missouri to determine compliance with the Missouri Gaming Law and to investigate alleged violations of the Missouri Gaming Law or Missouri Gaming Commission rules, orders or final decisions. A holder of any license shall be subject to imposition of penalties, suspension or revocation of such license, or other action for any act or failure to act by himself or his agents or employees that is injurious to the public health, safety, morals, good order and general welfare of the people of the state of Missouri, or that would discredit the Missouri gaming industry or the state of Missouri. The Missouri Gaming Commission may waive any licensing requirement or procedure for any type of license if it determines that the waiver is in the best interests of the public. In addition, a supplier's license is required of persons who sell or lease gambling equipment, gambling supplies or both to any licensee. A licensee licensed to conduct gambling games shall acquire all gambling games or implements of gambling from a licensed supplier. LEGISLATIVE AND REGULATORY CONSIDERATIONS IN CERTAIN ADJACENT JURISDICTIONS KANSAS. Casino gaming is currently illegal in Kansas as a constitutionally prohibited form of lottery. In order to amend the Kansas constitution, two-thirds of the members of each house of the Kansas legislature and a majority of Kansas voters would have to approve a proposed amendment. Resolutions seeking to amend the Kansas constitution to authorize limited forms of gaming have been proposed. Kansas Governor Graves has stated that he is in favor of the legalization of slot machines at racing locations. He has expressed his desire to put a proposed amendment before the voters by November 1996. The Kansas senate recently voted to allow specified racetracks, including the Woodlands Racetrack in Kansas City, to install instant bingo dispensers that resemble slot machines. The legislation must still be approved by the Kansas house of representatives and signed by the governor. The State of Kansas has approved Class III Indian compacts with four separate tribes authorizing the tribes to conduct table and keno games, but not slot machines, on their respective reservation lands. The reservations on which these tribes propose to offer gaming in Kansas are located from approximately 120 to 150 miles from downtown Kansas City. KENTUCKY. Casino gaming is illegal in Kentucky as a constitutionally prohibited form of lottery. In order to amend the Kentucky constitution, three-fifths of the members of each house of the Kentucky legislature and a majority of Kentucky voters would have to approve a proposed amendment. Several Kentucky racetracks have publicly lobbied for the right to conduct casino games. OHIO. Casino gaming is illegal in Ohio as a constitutionally prohibited form of lottery. In order to amend the Ohio constitution, three-fifths of the members of each house of the Ohio legislature and a majority of Ohio voters would have to approve the proposed amendment. There have been efforts to amend the Ohio constitution to allow for casino gaming, but these efforts have been rejected. As recently as 1994, a proposed amendment was introduced to amend the constitution to allow as many as four casino vessels but it remained in committee until the end of the legislative session. In 1990, Ohio voters defeated a proposed constitutional amendment to allow a pilot casino gaming project. The Ohio legislature operates on two-year sessions. The current legislative session runs through December 1996. Because the Ohio legislature is currently in session, a proposed amendment could be introduced and put before the voters. There have been reports of voter petition drives to place a casino gaming referendum on the November 1996 ballot. Ohio Governor Voinovich has publicly opposed the legalization of casino gaming in Ohio. FEDERAL AND NON-GAMING REGULATIONS The Company and its subsidiaries are subject to certain federal, state and local safety and health laws, regulations and ordinances that apply to businesses generally, such as the Clean Air Act, Clean Water Act, 73 Occupational Safety and Health Act, Resource Conservation Recovery Act and Comprehensive Environmental Response, Compensation and Liability Act. The Company has not made, and does not anticipate making, material expenditures with respect to such environmental laws and regulations. However, the coverage and attendant compliance costs associated with such laws, regulations and ordinances may result in additional costs to the Company. For example, in 1990 the U.S. Congress enacted the Oil Pollution Act to consolidate and reconcile mechanisms under various oil spill response laws. The Department of Transportation has proposed regulations requiring owners and operators of certain vessels to establish through the U.S. Coast Guard evidence of financial responsibility in the amount of $5.5 million for clean-up of oil pollution. This requirement would be satisfied by either proof of adequate insurance (including self-insurance) or the posting of a surety bond or guaranty. All vessels operated by the Company must comply with U.S. Coast Guard requirements as to safety and must hold a Certificate of Seaworthiness. These requirements set limits on the operation of the vessels and require individual licensing of all personnel involved with the operation of the vessel. Loss of the Certificate of Seaworthiness of a vessel would preclude its use as a riverboat. Every five years, vessels must be drydocked for an inspection of the outside of the hull resulting in a loss of service for a period of time. The Belle of Sioux City riverboat was removed from service on April 13, 1996 for such a hull inspection. The riverboat arrived at an approved dry docking facility on April 16, 1996, passed its inspection and returned to service on May 9, 1996. No interruption in gaming operations occurred in Sioux City as a result of the hull inspection process, as the Company temporarily transferred gaming operations to the original Alton Belle prior to removing the Belle of Sioux City from service. All shipboard employees of the Company employed on U.S. Coast Guard regulated vessels, including those who have nothing to do with the actual operation of the vessel, such as dealers, waiters and security personnel, may be subject to the Jones Act which, among other things, exempts these employees from state limits on workers' compensation awards. The Company is subject to the provisions of the Americans With Disabilities Act but does not anticipate incurring significant expenses to bring its facilities or procedures into compliance with such Act. The Bank Secrecy Act (the "BSA"), enacted by Congress in 1985, requires banks, other financial institutions and casinos to monitor receipts and disbursements of currency in excess of $10,000 and report them to the United States Department of the Treasury (the "Treasury"). In management's opinion, the BSA may have resulted in a reduction in the volume of play by high level wagerers. The Treasury has proposed tentative amendments to the BSA which would apply solely to casinos and their reporting of currency transactions. The most significant proposed change in the BSA is a reduction in the threshold at which customer identification data must be obtained and documented by the casino, from $10,000 to $3,000 (which may include the aggregation of smaller denomination transactions). Additionally, the amendments would substantially increase the record-keeping requirements imposed upon casinos relating to customer data, currency and non-currency transactions. Management believes the proposed amendments, if enacted in their current form, could result in a further reduction in the volume of play by upper- and middle-level wagerers while adding operating costs associated with the more extensive record-keeping requirements. However, the effect of the Company's operations is not expected to be material. The proposed riverboat casino sites in Lawrenceburg, Indiana and Riverside, Missouri are located in potential wetlands or other protected areas. Although the Company does not believe that the existence of wetlands or other protected areas will prohibit or have a significant adverse impact on the Company's ability to develop any of its current sites, there can be no assurance that such a claim or other claims relating to such matters may not arise in the future, which may have a material adverse effect on the costs of opening a casino at such sites or result in a material delay in opening a gaming facility at such sites. 74 MANAGEMENT DIRECTORS AND EXECUTIVE OFFICERS The following table sets forth the names and ages of the Company's directors and executive officers and the positions they hold with the Company.
NAME AGE POSITION - -------------------------- --- --------------------------------------------------------- J. Thomas Long (a) 45 Chief Executive Officer, General Counsel and Vice Chairman of the Board of Directors H. Steven Norton 62 President and Chief Operating Officer Joseph G. Uram 38 Executive Vice President, Treasurer and Chief Financial Officer William F. Cellini (a) 61 Chairman of the Board of Directors George L. Bristol (c) 55 Director Jimmy F. Gallagher (c) 67 Director William McEnery (a) 53 Director F. Lance Callis (b) 60 Director John B. Pratt, Sr. (b) 73 Director Edward F. Brennan (b) 55 Director Walter I. Rogers 63 Vice President -- Casino Development Patsy S. Hubbard 51 Secretary
- ------------ (a) Messrs. Long, Cellini and McEnery comprise a class of directors whose term expires in 1999. (b) Messrs. Callis, Pratt and Brennan comprise a class of directors whose term expires in 1998. (c) Messrs. Bristol and Gallagher comprise a class of directors whose term expires in 1997. J. THOMAS LONG has been employed by the Company since March 1991 and is currently Chief Executive Officer, General Counsel and Vice Chairman of the Board of Directors of the Company. Prior to the hiring of Mr. Uram in January 1993, Mr. Long also served as Chief Financial Officer of the Company. Mr. Long was an active partner in the law firm of Farrell & Long, P.C., Godfrey, Illinois from 1985 to 1991. Mr. Long remains of counsel to The Farrell Law Firm, the successor firm of Farrell & Long. From 1980 to 1984, Mr. Long served as Assistant States Attorney in Madison County, Illinois. H. STEVEN NORTON has been President and Chief Operating Officer of the Company since January 1993. From April 1991 to December 1992, Mr. Norton was President and Chief Executive Officer of Gold River Gambling Hall and Resort in Laughlin, Nevada. From August 1990 to April 1991, Mr. Norton was President and Chief Operating Officer of the Sands Hotel and Casino, Las Vegas, Nevada and from August 1967 to August 1990, Mr. Norton was employed by Resorts International, Inc., a hotel and casino concern based in Atlantic City, New Jersey in numerous positions including Executive Vice President. JOSEPH G. URAM has been Executive Vice President, Treasurer and Chief Financial Officer of the Company since January 1993. From September 1989 to January 1993, Mr. Uram was Vice President and Chief Financial Officer of Creative Data Services, Inc., a national manufacturing concern headquartered in St. Louis, Missouri. Mr. Uram is a certified public accountant and, from 1979 to August 1989, he was employed by Arthur Andersen & Co. in St. Louis where he served as an audit manager. GEORGE L. BRISTOL has been President of GLB, Inc., a consulting firm, since 1977. He has been a member of the Board of Directors of the Company since January 1995 and is a member of its Audit Committee. 75 WILLIAM F. CELLINI has been Chairman of the Company's Board of Directors since February 1993. Mr. Cellini has served as Chief Executive Officer of New Frontier Group, a real estate development, management and construction concern with offices in Chicago and Springfield, Illinois, since 1977. Mr. Cellini is a member of the Nominating Committee of the Board of Directors. JIMMY F. GALLAGHER has been a director of the Company since February 1993 and is currently a member of its Compensation Committee and Audit Committee. Mr. Gallagher retired from the gaming industry in March 1991. From March 1990 to March 1991, he was Supervisor of Casino Games for the Park Hotel and Casino in Las Vegas, Nevada. WILLIAM MCENERY has served as the president of Gas City, Ltd., an operator of gasoline stations and convenience stores in Illinois and Florida headquartered in Frankfort, Illinois, since 1965. Since 1982, Mr. McEnery has served as the president of A.D. Connor, Inc., a petroleum products hauling concern located in Frankfort, Illinois. Since 1975, Mr. McEnery has served as president of Bell Valley Farms, Inc., an owner and operator of harness racing training facilities located in Lockport, Illinois. Since 1992, Mr. McEnery has been a Director and investor in the Empress Riverboat Casino Corporation, the owner and operator of riverboat casino operations in Joliet, Illinois and the holder of a certificate of suitability for a riverboat casino operation in Hammond, Indiana. Mr. McEnery has been a member of the Company's Board of Directors since February 1993 and is a member of its Audit Committee and Nominating Committee. F. LANCE CALLIS has been a partner with the law firm of Callis, Papa, Hale, Jensen, Jackstadt, Bailey & Halloran P.C. (formerly Pratt & Callis, P.C.), with offices in St Louis, Missouri and Granite City, Illinois, since 1986. Mr. Callis has been a member of the Board of Directors of the Company since February 1993 and is a member of its Compensation and Nominating Committees. JOHN B. PRATT, SR. has practiced law in White Hall, Illinois as a sole practitioner since 1986. He has been a member of the Board of Directors of the Company since February 1993 and is a member of its Compensation and Audit Committees. EDWARD F. BRENNAN has been a principal in the law firm of Brennan, Cates & Constance in Belleville, Illinois since 1987. He has been a member of the Board of Directors of the Company since January 1995. WALTER I. ROGERS has been Vice President of Casino Development for the Company since March 1993. From 1973 to 1977, Mr. Rogers was Vice President of Casino Operations of Resorts International for its facilities in the Bahamas. From 1977 to 1988, Mr. Rogers served as Resorts International's Corporate Vice President of Casino Operations and Development and later represented Resorts International in Europe, North and Central Africa, and Central and South America. Mr. Rogers was retired between 1988 and 1993. PATSY S. HUBBARD has been employed by the Company since September 1991 and currently serves as Secretary of the Company. From 1978 through 1991, Ms. Hubbard was an Enrolled Agent/Paralegal at the law firm of Farrell & Long, P.C., Godfrey, Illinois. Prior to the initial public offering, Ms. Hubbard also served as Assistant Corporate Secretary to one of the corporate partners of the predecessor entity of the Company. Each director of the Company is currently required to be licensed to serve as a director of the Company by the applicable gaming regulatory authorities in Illinois, Missouri, Louisiana, Iowa and Indiana and may be subject to similar requirements in other jurisdictions in which the Company may conduct business. The nominees have met these requirements in the required jurisdictions. However, should any director be found no longer suitable by any regulatory authority having jurisdiction over the Company, that individual shall become ineligible to serve on the Board of Directors and a majority of the remaining directors may appoint a qualified replacement to serve as director for the remaining term of the disqualified director. William McEnery, a director and shareholder of the Company, owns Gas City, Ltd. which since June 1, 1995 has been the exclusive operator of the service stations on the Indiana East-West Toll Road. Since December 1995, Gas City, Ltd. has responded to certain document subpoenas for, and produced certain employees to testify before, a grand jury convened in the United States District Court, Northern District of 76 Indiana. The document subpoenas have related to Gas City, Ltd.'s relationship with the Indiana Toll Road Authority. None of Gas City, Ltd., Mr. McEnery or any employees of Gas City, Ltd. have been advised that they are targets of the grand jury investigation. The Company believes that the grand jury investigation is unrelated to the gaming industry and is focused on actions by, and dealings with, the Indiana Toll Road Authority. The Company has been advised by Gas City, Ltd. that it understands that other suppliers to the Indiana East-West Toll Road have also received document subpoenas. The Company has been advised that on May 14, 1996, a document subpoena was issued by the Assistant U.S. Attorney for the United States District Court, Northern District of Indiana to the Company in connection with the abovementioned grand jury. The document subpoena issued to the Company seeks certain documents relating to (i) contributions, gifts or donations to political persons or entities, (ii) requests to the Company for contributions, gifts or donations by political persons or entities and (iii) communications with employees of the Indiana Toll Road Authority. Mr. McEnery and other companies in which Mr. McEnery has investments also received similar document subpoenas. The Company has never made any contribution, gift or donation to any political person or entity on behalf of Mr. McEnery, Gas City, Ltd. or any entity controlled by him, nor has the Company had any dealings or communications with any employees of the Indiana Toll Road Authority. 77 DESCRIPTION OF EXCHANGE NOTES Set forth below is a summary of certain provisions of the Exchange Notes and the Old Notes (collectively referred to as, the "Notes"). The Exchange Notes will be, and the Old Notes were, issued pursuant to an indenture (the "Indenture") dated as of June 5, 1996, by and among Argosy Gaming Company (the "Company"), Alton Gaming Company, The Missouri Gaming Company, The St. Louis Gaming Company, Iowa Gaming Company, Jazz Enterprises, Inc., Argosy of Louisiana, Inc., Catfish Queen Partnership in Commendam and The Indiana Gaming Company (the "Guarantors") and First National Bank of Commerce, as trustee (the "Trustee"). The following summary does not purport to be complete and is subject to, and is qualified in its entirety by, reference to all of the provisions of the Notes, the Indenture and the Collateral Documents (as defined below). The terms of the Exchange Notes are the same in all respects (including principal amount, interest rate, maturity, security and ranking) as the terms of the Old Notes for which they may be exchanged pursuant to the Exchange Offer, except that the Exchange Notes (i) are freely transferable by holders thereof (except as provided below) and (ii) are not entitled to certain registration rights and certain liquidated damages which are applicable to the Old Notes under the Registration Rights Agreement. The Exchange Notes will be issued under the Indenture governing the Old Notes. The terms of the Indenture are also governed by certain provisions contained in the Trust Indenture Act of 1939, as amended. Capitalized terms used herein and not otherwise defined shall have the meanings assigned to them in the Indenture. Wherever particular provisions of the Indenture are referred to in this summary, such provisions are incorporated by reference as a part of the statements made and such statements are qualified in their entirety by such reference. GENERAL The Notes are senior secured obligations of the Company, limited in aggregate principal amount to $235 million. The Notes rank pari passu in right of payment with all present and future Indebtedness of the Company and senior to all future subordinated indebtedness of the Company and the existing Convertible Notes. The Notes are secured by certain property and assets as described below (sometimes referred to herein as the "Collateral"). References herein to the "Collateral Documents" include all documents to be entered into to create or perfect the security interests in the Collateral. The Exchange Notes will be issued only in fully registered form, without coupons, in denominations of $1,000 and integral multiples thereof. The Exchange Notes will mature on June 1, 2004. The Exchange Notes will bear interest from June 5, 1996. Holders of Old Notes whose Old Notes are accepted for exchange will be deemed to have waived the right to receive any payment in respect of interest on the Old Notes accrued from June 5, 1996 to the date of the issuance of the Exchange Notes. The Exchange Notes will bear interest at the rate of 13 1/4% per annum, payable semi-annually on June 1 and December 1 of each year, commencing December 1, 1996, to the persons in whose names such Exchange Notes are registered at the close of business on the May 15 or November 15 immediately preceding such Interest Payment Date. Interest will be calculated on the basis of a 360-day year consisting of twelve 30-day months. Principal of, premium, if any, and interest on the Exchange Notes will be payable, and the Exchange Notes may be presented for registration of transfer or exchange, at the office or agency of the Company maintained for such purpose, which office or agency shall be maintained in the Borough of Manhattan, The City of New York. At the option of the Company, payment of interest may be made by check mailed to the Noteholders at the addresses set forth upon the registry books of the Company; PROVIDED, that all payments with respect to Global Notes, and Certificated Securities the holders of which have given wire transfer instructions to the Company, will be required to be made by wire transfer of immediately available funds to the accounts specified by the holders thereof. No service charge will be made for any registration of transfer or exchange of the Exchange Notes, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. Until otherwise designated by the Company, the Company's office or agency will be the correspondent office of the Trustee presently located at Chemical Banking Corp., 4 New York Plaza, New York, New York. 78 SECURITY FOR THE NOTES Except as provided below under the caption "Limitation on Liens Securing Indebtedness" and to the extent permitted by applicable law, the Notes are secured by a Lien, evidenced by pledge agreements, real estate mortgages, ship mortgages and security agreements executed by the Company and each of the Guarantors, as applicable, in favor of the Trustee for the benefit of the Noteholders creating, subject to certain prior liens and other limitations and exceptions, a first priority security interest in substantially all of the present assets of the Company and each of the current Guarantors (collectively, the "Collateral"). The Collateral includes (i) substantially all the assets owned by the Company and the Guarantors and used in the Company's Alton, Riverside, Baton Rouge and Sioux City properties, excluding their gaming licenses, (ii) a pledge of all the capital stock of and partnership interests in the Company's operating subsidiaries (including Indiana Gaming L.P.) owned by the Company and the Guarantors, except for the Company's partnership interest in the Belle of Sioux City, L.P., which operates the Sioux City property, (iii) a pledge of intercompany notes, if any, payable to the Company or the Guarantors from their subsidiaries, and (iv) an assignment of the proceeds payable pursuant to the management agreement between The Indiana Gaming Company and Indiana Gaming L.P. with respect to the Lawrenceburg Casino. The Collateral does not include assets of the Lawrenceburg Casino and assets owned by the Belle of Sioux City, L.P; however, the Collateral includes the riverboat owned by the Company and leased to Belle of Sioux City, L.P. The Collateral does not include the assets of any future projects of the Company and any Subsidiaries formed or acquired after the date hereof and their related assets, unless acquired with the proceeds of the sale of Collateral or out of any distributions made by Indiana Gaming L.P. to the Company or any of its Subsidiaries (excluding managements fees, interest income and preferred dividends) up to the amount of the Lawrenceburg Investment to the extent not used to purchase Notes pursuant to the covenant "Repurchase of Notes in Connection With Sale of Lawrenceburg Interest or Repayment of Indebtedness." The Collateral does not include two parcels of property at the Riverside and Baton Rouge properties, which will be released from the Collateral and contributed to Unrestricted Subsidiaries of the Company subsequent to the execution of the Indenture. Such parcels may only be used to construct hotels, parking garages, restaurants or other businesses directly related to the hotel business at such properties. The Company and the Guarantors will be required to deliver to the Trustee, at their expense, one or more insurance policies from insurance companies of favorable national reputation having capital and surplus greater than $100,000,000, providing for title insurance for certain fee or leasehold interests naming the Trustee as insured on behalf of the Noteholders. No assurance can be provided by the Company or the Guarantors as to the priority of any security interest created by the Collateral Documents, and there may exist significant limitations on the ability of the Noteholders to exercise certain remedies with respect to certain of the Collateral, including the right to foreclose on, or take possession of, certain Collateral. See "Risk Factors -- Foreclosure Restrictions" and "-- Certain Bankruptcy Considerations." RELEASE OF COLLATERAL Collateral may be released in certain circumstances, including: (a) in the event the Company or a Guarantor incurs FF&E Indebtedness or working capital Indebtedness with respect to any Material Casino in accordance with the provisions of clauses (v) or (vi), respectively, of the covenant "Limitation on Incurrence of Additional Indebtedness and Disqualified Capital Stock," then such fixtures and equipment, or accounts receivable and inventory, respectively, securing such Indebtedness no longer need constitute Collateral, (b) in accordance with release and substitution provisions set forth in the Indenture and the release of obsolete property, in accordance with the terms of the Indenture, (c) in connection with the sale of assets and subsidiary stock in accordance with the provisions of the covenant "Limitation on Sale of Assets and Subsidiary Stock," provided the proceeds thereof are used to purchase Notes in accordance with an Asset Sale Offer or to purchase substitute Collateral in accordance with such covenant, and (d) in connection with the contribution of the Specified Parcels to joint ventures formed to develop and operate hotels at the Company's Riverside and Baton Rouge properties. As described below in "Limitations on Liens Securing Indebtedness," the Company and its Subsidiaries may have or permit Liens ranking junior to or pari passu with the Liens created by the Collateral Documents, provided that the Indebtedness secured is Indebtedness permitted by clause (ii) of the covenant 79 described below under "Limitation on Incurrence of Additional Indebtedness and Disqualified Capital Stock." The Company and its Subsidiaries may have or permit Liens on property that is not Collateral, provided that the Indebtedness secured is permitted by clause (iii) of such covenant. GUARANTEES The Notes are guaranteed irrevocably and unconditionally as to principal, premium, if any, and interest jointly and severally by the Guarantors and any future Subsidiaries of the Company. The term "Subsidiaries" is defined to exclude Unrestricted Subsidiaries. Accordingly, Indiana Gaming L.P., the subsidiary of the Company that will operate the Lawrenceburg Casino, will not be a Guarantor of the Notes. The Indenture contains provisions the intent of which is to provide that the obligations of each Guarantor will be limited to the maximum amount that will, after giving effect to all other contingent and fixed liabilities of such Guarantor and after giving effect to any collections from, rights to receive contribution from, or payments made by or on behalf of any other Guarantor in respect of the obligations of such other Guarantor under its Guarantee or pursuant to its contribution obligations under the Indenture, result in the obligations of such Guarantor under its Guarantee not constituting a fraudulent conveyance or fraudulent transfer under any applicable federal, state or foreign law. Each Guarantor that makes a payment or distribution under a Guarantee shall be entitled to contribution from each other Guarantor so long as the exercise of such right does not impair the rights of the Noteholders under the Guarantees or any of the Collateral Documents. See "Risk Factors -- Fraudulent Transfer Considerations." The Indenture provides that in the event of (i) a sale or other disposition of all or substantially all of the assets of any Guarantor or the sale of a Guarantor, by way of merger, consolidation or otherwise, (ii) a Subsidiary becoming an Unrestricted Subsidiary pursuant to terms of the Indenture or (iii) or a sale or other disposition of all of the Capital Stock of any Guarantor, then such Guarantor or the corporation acquiring the property, as applicable, shall be released and relieved of any obligations under its guarantee, provided that the Company complies with the provisions of the covenant "Limitation on Sales of Assets and Subsidiary Stock." The Indenture provides that the Company shall cause each Subsidiary hereafter formed or acquired or any Unrestricted Subsidiary designated a Subsidiary to (i) execute and deliver to the Trustee a supplemental indenture in form reasonably satisfactory to the Trustee pursuant to which such Subsidiary shall unconditionally guarantee all of the Company's obligations under the Notes on the terms set forth in the Indenture and (ii) deliver to the Trustee an opinion of counsel that, subject to customary assumptions and exclusions, such supplemental indenture and Collateral Documents, if any, have been duly executed and delivered by such Subsidiary. OPTIONAL REDEMPTION Except as set forth below, the Company does not have the right to redeem any Notes prior to June 1, 2000. The Notes will be redeemable at the option of the Company, in whole or in part, at any time on or after June 1, 2000, upon not less than 30 days nor more than 60 days notice to each Noteholder, at the following redemption prices (expressed as percentages of the principal amount) if redeemed during the 12-month period commencing June 1 of the years indicated below, in each case (subject to the right of Noteholders of record on a Record Date to receive interest due on an Interest Payment Date that is on or prior to such Redemption Date) together with accrued and unpaid interest and Liquidated Damages, if any, thereon to the Redemption Date:
YEAR PERCENTAGE - ------------------------------------------------------------- ----------- 2000......................................................... 106.625% 2001......................................................... 104.417% 2002......................................................... 102.208% 2003 and thereafter.......................................... 100.000%
If a Noteholder or a beneficial owner of a Note is required by any regulatory body responsible for a gaming license (a "Gaming Authority") to be found suitable, the Noteholder shall apply for a finding of suitability within 30 days after a Gaming Authority request or sooner if so required by such Gaming 80 Authority. The applicant for a finding of suitability must pay all costs of the investigation for such finding of suitability. If a Noteholder or beneficial owner is required to be found suitable and is not found suitable by a Gaming Authority, the Noteholder shall, to the extent required by applicable law, dispose of his Notes within 30 days or within that time prescribed by a Gaming Authority, whichever is earlier. If the Noteholder fails to dispose of its Notes within such time period, the Company may, at its option, redeem the Noteholder's Notes at, depending on applicable law, (i) the principal amount thereof, together with accrued and unpaid interest [and Liquidated Damages, if any,] to the date of the finding of unsuitability by a Gaming Authority, (ii) the amount that such Noteholder paid for the Notes, (iii) the fair market value of the Notes, (iv) the lowest of clauses (i), (ii) and (iii), or (v) such other amount as may be determined by the appropriate Gaming Authority. The Notes will not have the benefit of any sinking fund. Except as required by a Gaming Authority with respect to a redemption described in the second preceding paragraph, notice of any redemption will be sent, by first class mail, at least 30 days and not more than 60 days prior to the date fixed for redemption to each Noteholder to be redeemed to such Noteholder's last address as then shown upon the registry books of the Registrar. Any notice which relates to a Note to be redeemed in part only must state the portion of the principal amount equal to the unredeemed portion thereof and must state that on and after the date of redemption, upon surrender of such Note, a new Note or Notes in a principal amount equal to the unredeemed portion thereof will be issued. On and after the date of redemption, interest and Liquidated Damages, if any, will cease to accrue on the Notes or portions thereof called for redemption. In the case of a partial redemption, the Trustee shall select the Notes or portions thereof for redemption on a PRO RATA basis, by lot or in such other manner it deems appropriate and fair. The Notes may be redeemed in part in multiples of $1,000 only. CERTAIN COVENANTS RELATING TO THE LAWRENCEBURG CASINO LIMITATION ON ACTIVITIES OF THE INDIANA GAMING COMPANY The Indenture prohibits The Indiana Gaming Company from conducting any business whatsoever other than (i) investing in and serving as general partner of Indiana Gaming L.P., including executing agreements on behalf of Indiana Gaming L.P., (ii) if removed as general partner of Indiana Gaming L.P. pursuant to the terms of such partnership's partnership agreement, serving as a limited partner thereof and (iii) complying with its obligations under the Indenture and the Notes and acting as a Guarantor of the Notes. The Indenture also prohibits the transfer of any of The Indiana Gaming Company's interest in Indiana Gaming L.P. to the Company or any of its Subsidiaries, unless such Subsidiary is a direct wholly owned Subsidiary of the Company and is bound by this provision and all other provisions of the Indenture and the Notes specifically relating to The Indiana Gaming Company. LIMITATION ON CERTAIN ACTIVITIES OF INDIANA GAMING L.P. The Indenture provides that as long as The Indiana Gaming Company is the general partner of Indiana Gaming L.P., the Company will not permit Indiana Gaming L.P. to incur any Indebtedness other than Indebtedness under the terms of which (a) no recourse shall be had against any other person (other than The Indiana Gaming Company solely in its capacity as general partner of Indiana Gaming L.P.) for the payment of the principal of or interest or premium on such Indebtedness or for any claim based on such Indebtedness, and (b) no restrictions of the type prohibited by "Limitation on Dividends and Other Payment Restrictions Affecting Subsidiaries" shall be permitted. The Indenture provides that as long as The Indiana Gaming Company is the general partner of Indiana Gaming L.P., the Company will not permit Indiana Gaming L.P. to amend the provision of its partnership agreement dealing with distributions in a manner which is adverse to the Noteholders or the provision with respect to partnership purpose, which is limited to the operation of the Lawrenceburg Casino. 81 REPURCHASE OF NOTES ON CERTAIN PROJECT DELAYS The Indenture provides that in the event of a Project Delay each Noteholder will have the right, at such Noteholder's option, pursuant to an irrevocable and unconditional offer by the Company (the "Project Delay Offer"), to require the Company to repurchase all or any part of such Noteholder's Notes (PROVIDED, that the principal amount of such Notes must be $1,000 or an integral multiple thereof) on a date (the "Project Delay Purchase Date") that is no later than 40 Business Days after the date on which a Project Delay occurs, at a cash price equal to 101% of the principal amount thereof, together with accrued interest and Liquidated Damages, if any, to the Project Delay Purchase Date, PROVIDED, HOWEVER, that in no event shall the Company be required to purchase more than an aggregate principal amount of Notes equal to the amount remaining in the disbursement account on the date of the Project Delay (the "Project Delay Offer Amount") in connection with such Project Delay Offer. The Project Delay Offer shall remain open for at least 20 Business Days following its commencement (the "Project Delay Offer Period"). Upon expiration of the Project Delay Offer Period, the Company shall purchase all Notes properly tendered in response to the Project Delay Offer (on a PRO RATA basis if the Project Delay Offer Amount is insufficient to purchase all Notes so tendered). In no event shall the Company be required to make more than one offer to purchase pursuant to this provision, assuming all Notes tendered into such offer are purchased by the Company in accordance with the terms thereof. To the extent applicable and if required by law, the Company will comply with Section 14 of the Exchange Act and the provisions of Regulation 14E and any other tender offer rules under the Exchange Act and any other securities laws, rules and regulations which may then be applicable to any offer by the Company to purchase the Notes at the option of the Noteholders upon such failure to open. REPURCHASE OF NOTES IN CONNECTION WITH SALE OF LAWRENCEBURG INTEREST OR REPAYMENT OF LAWRENCEBURG INVESTMENT The Indenture provides that the Company and its Subsidiaries will not, and will not permit any of their Subsidiaries to, in one or a series of related transactions, sell or otherwise transfer any of the Company's interest in Indiana Gaming L.P., whether directly by a sale of such interest or indirectly by the sale, issuance or transfer of Capital Stock of any Subsidiary of the Company directly or indirectly owning such interest (a "Lawrenceburg Sale"), unless (1) within 40 Business Days of the date of such Lawrenceburg Sale, the Net Cash Proceeds therefrom, less the pro rata portion of such amount distributed to any lender holding Indebtedness secured by the Collateral on a PARI PASSU basis, are applied to the repurchase of the Notes pursuant to an irrevocable, unconditional cash offer to repurchase Notes at a purchase price of 101% of the principal amount, plus accrued interest and Liquidated Damages, if any, to the date of payment, made within 15 Business Days following any such Lawrenceburg Sale, (2) at least 85% of the consideration received for such Lawrenceburg Sale or series of related Lawrenceburg Sales consists of cash, (3) no Default or Event of Default shall have occurred and be continuing at the time of, or would occur after giving effect on a PRO FORMA basis to, such Lawrenceburg Sale, (4) the Board of Directors of the Company determines in good faith that the Company or such Subsidiary receives fair market value for such Lawrenceburg Sale and (5) the Board of Directors of the Company receives a favorable written opinion as to the fairness of the transaction to the Company from a financial point of view issued by an investment banking firm of nationally recognized standing. The Indenture provides that the offer remain open for at least 20 Business Days after its commencement. Upon expiration of the offer, the Company shall apply the Net Cash Proceeds plus an amount equal to accrued interest and Liquidated Damages, if any, to the purchase of all Notes properly tendered (on a PRO RATA basis if the Net Cash Proceeds are insufficient to purchase all the Notes so tendered). Pending application of Net Cash Proceeds, such proceeds shall be maintained by the Trustee in the collateral account in Permitted Investments. After the purchase of all Notes properly tendered, all remaining Net Cash Proceeds shall be available for general corporate purposes, provided, that as reinvested, the assets acquired shall become Collateral. The Company shall cause distributions from Indiana Gaming L.P. to The Indiana Gaming Company to be promptly distributed to the Company. At least once in every twelve-month period commencing on the anniversary of the date of original issuance of the Notes (and not later than 40 Business Days after any Property Sale, as described below), the Company shall apply 50% of any distributions from Indiana Gaming 82 L.P. (excluding management fees, interest income, preferred dividends or provision for taxes) up to the total amount of the Lawrenceburg Investment, less the pro rata portion of such amount distributed to any lender holding Indebtedness secured by the Collateral on a PARI PASSU basis, to the optional redemption of Notes in accordance with the terms of the Indenture or to the repurchase of the Notes pursuant to an irrevocable, unconditional cash offer to purchase Notes at a purchase price of 101% of the principal amount, plus accrued interest and Liquidated Damages, if any, to the date of payment. In no event shall the Company be required to make offers in an aggregate amount in excess of the Lawrenceburg Investment. In the event of a Property Sale, as defined below, 100% of the Company's pro rata share of the Net Cash Proceeds shall be applied in the next such offer. The Indenture provides that, except in the case of a Property Sale, such offer may be deferred until a following twelve month period in which such accumulated distributions exceed $10 million and that each offer shall remain open for at least 20 Business Days following its commencement. Upon expiration of the offer, the Company shall apply such distributions to the purchase of all Notes properly tendered (on a PRO RATA basis if the distributions are insufficient to purchase all the Notes so tendered). After the purchase of all Notes properly tendered, all remaining amounts of such distributions shall be available for general corporate purposes, provided, that as reinvested, the assets acquired shall become Collateral. As long as The Indiana Gaming Company serves as general partner of Indiana Gaming L.P., Indiana Gaming L.P. will not engage in a sale of all or substantially all its assets, by way of merger, consolidation or otherwise (a "Property Sale") unless (i) at least 85% of the consideration received consists of cash, (ii) the Board of Directors of the Company determines in good faith that Indiana Gaming L.P. receives fair market value therefor, (iii) the Board of Directors of the Company receives a favorable written opinion as to the fairness of the transaction to Indiana Gaming L.P. from a financial point of view issued by an investment bank of nationally recognized standing, and (iv) the Company's pro rata share of the Net Cash Proceeds, less the pro rata portion of such amount distributed to any lender holding Indebtedness secured by Collateral on a PARI PASSU basis, are distributed to the Company and held by the Trustee in the collateral account in Permitted Investments pending application in accordance with the preceding paragraph. To the extent applicable and if required by law, the Company will comply with Section 14 of the Exchange Act and the provisions of Regulation 14E and any other tender offer rules under the Exchange Act and any other securities laws, rules and regulations which may then be applicable to any offer to purchase Notes at the option of the Noteholders. CERTAIN COVENANTS REPURCHASE OF NOTES AT THE OPTION OF THE NOTEHOLDER UPON A CHANGE OF CONTROL The Indenture provides that in the event that a Change of Control has occurred, each Noteholder will have the right, at such Noteholder's option, pursuant to an irrevocable and unconditional offer by the Company (the "Change of Control Offer"), to require the Company to repurchase all or any part of such Noteholder's Notes (PROVIDED, that the principal amount of such Notes must be $1,000 or an integral multiple thereof) on a date (the "Change of Control Purchase Date") that is no later than 45 Business Days after the occurrence of such Change of Control, at a cash price (the "Change of Control Purchase Price") equal to 101% of the principal amount thereof, together with accrued interest and Liquidated Damages, if any, to the Change of Control Purchase Date. The Change of Control Offer shall be made within 20 Business Days following a Change of Control and shall remain open for at least 20 Business Days following its commencement (the "Change of Control Offer Period"). Upon expiration of the Change of Control Offer Period, the Company shall purchase all Notes properly tendered in response to the Change of Control Offer. As used herein, a "Change of Control" means (i) any merger or consolidation of the Company with or into any person or any sale, transfer or other conveyance, whether direct or indirect, of all or substantially all of the assets of the Company, on a consolidated basis, in one transaction or a series of related transactions, if, immediately after giving effect to such transaction, any "person" or "group" (as such terms are used for purposes of Sections 13(d) and 14(d) of the Exchange Act, whether or not applicable), other than Excluded Persons, is or becomes the "beneficial owner," directly or indirectly, of more than 50% of the total voting power in the aggregate normally entitled to vote in the election of directors, managers, or trustees, as 83 applicable, of the transferee or surviving entity, (ii) any "person" or "group" (as such terms are used for purposes of Sections 13(d) and 14(d) of the Exchange Act, whether or not applicable), other than Excluded Persons, is or becomes the "beneficial owner," directly or indirectly, of more than 50% of the total voting power in the aggregate of all classes of Capital Stock of the Company then outstanding normally entitled to vote in elections of directors, or (iii) during any period of 12 consecutive months after the Issue Date, individuals who at the beginning of any such 12-month period constituted the Board of Directors of the Company (together with any new directors whose election by such Board or whose nomination for election by the shareholders of the Company was approved by a vote of a majority of the directors then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the Board of Directors of the Company then in office. On or before the Change of Control Purchase Date, the Company will (i) accept for payment Notes or portions thereof properly tendered pursuant to the Change of Control Offer, (ii) deposit with the Paying Agent cash sufficient to pay the Change of Control Purchase Price (together with accrued and unpaid interest and Liquidated Damages, if any) of all Notes so tendered and (iii) deliver to the Trustee Notes so accepted together with an Officers' Certificate listing the Notes or portions thereof being purchased by the Company. The Paying Agent will promptly mail to the Noteholders so accepted payment in an amount equal to the Change of Control Purchase Price (together with accrued and unpaid interest and Liquidated Damages, if any), and the Trustee will promptly authenticate and mail or deliver to such Noteholders a new Note equal in principal amount to any unpurchased portion of the Note surrendered. Any Notes not so accepted will be promptly mailed or delivered by the Company to the Noteholder thereof. The Company will publicly announce the results of the Change of Control Offer on or as soon as practicable after the Change of Control Purchase Date. The phrase "all or substantially all of the assets" of the Company will likely be interpreted under applicable state law and will be dependent upon particular facts and circumstances. As a result, there may be a degree of uncertainty in ascertaining whether a sale or transfer of "all or substantially all" of the assets of the Company has occurred. In addition, no assurances can be given that the Company will be able to acquire Notes tendered upon the occurrence of a Change of Control. For purposes of this definition, (i) the terms "person" and "group" shall have the meaning used for purposes of Rules 13d-3 and 13d-5 of the Exchange Act as in effect on the Issue Date, whether or not applicable; and (ii) the term "beneficial owner" shall have the meaning used in Rules 13d-3 and 13d-5 under the Exchange Act as in effect on the Issue Date, whether or not applicable, except that a "person" shall be deemed to have "beneficial ownership" of all shares that any such person has the right to acquire, whether such right is exercisable immediately or only after the passage of time or upon the occurrence of certain events. The Change of Control purchase feature of the Notes may make more difficult or discourage a takeover of the Company, and, thus, the removal of incumbent management. To the extent applicable and if required by law, the Company will comply with Section 14 of the Exchange Act and the provisions of Regulation 14E and any other tender offer rules under the Exchange Act and any other securities laws, rules and regulations which may then be applicable to any offer by the Company to purchase the Notes at the option of the Noteholders upon a Change of Control. LIMITATION ON USE OF PROCEEDS The proceeds (net of the Initial Purchasers' discounts and commissions and other transaction expenses) received by the Company from the sale of the Old Notes were used as follows: (i) $91.4 million to pay in full all outstanding indebtedness under the Former Bank Credit Facility, (ii) $94.3 million to make capital contributions and capital loans to Indiana Gaming L.P. for the development of the Lawrenceburg Casino and (iii) all remaining amounts for general corporate purposes. The portion of the proceeds to be used for funding the construction costs of the Lawrenceburg Casino project are being held in a disbursement account. Pursuant to the terms of the disbursement agreement governing the disbursement account, there are certain 84 conditions and limitations affecting the ability of the Company to draw upon such funds. See "Description of Exchange Notes -- Cash Collateral and Disbursement Agreement." Any funds remaining in the disbursement account will be released to the Company upon final completion of the Lawrenceburg Casino project for general corporate purposes, PROVIDED that, as reinvested, the assets acquired shall become Collateral. A portion of the funds may also be released from the disbursement account if third-party financing for the hotel development is obtained and funded, PROVIDED that, as reinvested, the assets acquired with such released funds become Collateral. LIMITATION ON INCURRENCE OF ADDITIONAL INDEBTEDNESS AND DISQUALIFIED CAPITAL STOCK The Indenture provides that, except as set forth below in this covenant, the Company and its Subsidiaries will not, and will not permit any of their Subsidiaries to, directly or indirectly, issue, assume, guaranty, incur, become directly or indirectly liable with respect to (including as a result of an Acquisition), or otherwise become responsible for, contingently or otherwise (individually and collectively, to "incur" or, as appropriate, an "incurrence"), any Indebtedness or any Disqualified Capital Stock (including Acquired Indebtedness). Notwithstanding the foregoing: (i) if (a) no Default or Event of Default shall have occurred and be continuing at the time of, or would occur after giving effect on a PRO FORMA basis to, such incurrence of Indebtedness or Disqualified Capital Stock and (b) on the date of such incurrence (the "Incurrence Date"), the Consolidated Coverage Ratio of the Company for the Reference Period immediately preceding the Incurrence Date, after giving effect on a PRO FORMA basis to such incurrence of such Indebtedness or Disqualified Capital Stock and, to the extent set forth in the definition of Consolidated Coverage Ratio, the use of proceeds thereof, would be at least 2.0 to 1.0, then the Company or any Guarantor may incur unsecured Subordinated Indebtedness; (ii) if (a) no Default or Event of Default shall have occurred and be continuing at the time of, or would occur after giving effect on a pro forma basis to, such incurrence of Indebtedness and (b) on the Incurrence Date, the Consolidated Coverage Ratio of the Company for the Reference Period immediately preceding the Incurrence Date, after giving effect on a pro forma basis to such incurrence of such Indebtedness and, to the extent set forth in the definition of Consolidated Coverage Ratio, the use of proceeds thereof, would be at least 2.5 to 1.0 (or, in the event the sole use of proceeds of such Indebtedness is to purchase any or all of the partnership interests in Indiana Gaming L.P. not owned by the Company and its Subsidiaries, 2.25 to 1.0), then the Company or any Guarantor may incur Indebtedness secured by the Collateral, PROVIDED that such Indebtedness (x) is PARI PASSU in right of payment with the Notes or the guarantee of the Notes, as applicable, (y) has an Average Life to Stated Maturity greater than or equal to the Average Life to Stated Maturity of the Notes and (z) has a final scheduled maturity later than or equal to the Stated Maturity, and provided further that (t) such Indebtedness is incurred to develop or acquire a Material Casino or make a Casino Improvement, (u) not more than 80% of the cost of such acquisition, development or improvement is funded by such Indebtedness, (v) such Material Casino or Casino Improvements and all its assets become Collateral for the Notes, and (w) such Indebtedness is subject to an intercreditor agreement with the Trustee in the form attached to the Indenture; (iii) if (a) no Default or Event of Default shall have occurred and be continuing at the time of, or would occur after giving effect on a pro forma basis to, such incurrence of Indebtedness and (b) on the Incurrence Date, the Consolidated Coverage Ratio of the Company for the Reference Period immediately preceding the Incurrence Date, after giving effect on a pro forma basis to such incurrence of such Indebtedness and, to the extent set forth in the definition of Consolidated Coverage Ratio, the use of proceeds thereof, would be at least 2.5 to 1.0, then the Company or any Guarantor may incur Indebtedness secured by property that is not Collateral, PROVIDED that such Indebtedness (y) has an Average Life to Stated Maturity greater than the Average Life to Stated Maturity of the Notes and (z) has a final scheduled maturity later than the Stated Maturity; 85 (iv) the Company may incur Indebtedness evidenced by the Notes and represented by the Indenture up to the amounts specified therein as of the date thereof; (v) the Company and the Guarantors may incur FF&E Indebtedness, PROVIDED that the amount of such Indebtedness in the aggregate outstanding at any time pursuant to this paragraph (v) (including any Indebtedness, whether or not Refinancing Indebtedness, issued to refinance, replace or refund such Indebtedness) shall not exceed $5 million multiplied by the number of Material Casinos then operated by the Company or Guarantors; (vi) the Company and the Guarantors may incur Indebtedness for working capital purposes, PROVIDED that the amount of such Indebtedness in the aggregate outstanding at any time pursuant to this paragraph (vi) (including any Indebtedness, whether or not Refinancing Indebtedness, issued to refinance, replace or refund such Indebtedness) may not exceed $4 million multiplied by the number of Material Casinos then operated by the Company or Guarantors; (vii) the Company and the Guarantors, as applicable, may incur Refinancing Indebtedness with respect to any Indebtedness or Disqualified Capital Stock, as applicable, described in clauses (i), (ii), (iii), (v) and (vi) of this covenant or Indebtedness which is outstanding on the Issue Date so long as, in the case of secured Indebtedness used to refinance, refund, or replace secured Indebtedness, such Refinancing Indebtedness is secured only by the assets that secured the Indebtedness so refinanced; and (viii) the Company and the Guarantors may incur Permitted Indebtedness. LIMITATION ON RESTRICTED PAYMENTS The Indenture provides that the Company and the Subsidiaries will not, and will not permit any of their Subsidiaries to, directly or indirectly, make any Restricted Payment if, after giving effect to such Restricted Payment on a PRO FORMA basis, (l) a Default or an Event of Default shall have occurred and be continuing, (2) the Company is not permitted to incur at least $1.00 of additional Indebtedness pursuant to the Indebtedness incurrence ratio in paragraph (i) of the covenant "Limitation on Incurrence of Additional Indebtedness and Disqualified Capital Stock," or (3) the aggregate amount of all Restricted Payments made by the Company and its Subsidiaries, including after giving effect to such proposed Restricted Payment, from and after the Issue Date, would exceed the sum, without duplication, of (a) 50% of the aggregate Consolidated Net Income of the Company and its Consolidated Subsidiaries for the period (taken as one accounting period), commencing on the first day of the first full fiscal quarter commencing after the Issue Date, to and including the last day of the fiscal quarter ended immediately prior to the date of each such calculation (or, in the event Consolidated Net Income for such period is a deficit, then minus 100% of such deficit), plus (b) 50% of all cash distributions (excluding management fees, interest income, preferred dividends or provision for taxes received from Indiana Gaming L.P.) made by The Indiana Gaming Company to the Company or another Guarantor after the Lawrenceburg Investment Return and after opening of the permanent Lawrenceburg Casino, plus (c) the aggregate Net Cash Proceeds received by the Company from the sale of its Qualified Capital Stock (other than (i) to a Subsidiary of the Company and (ii) to the extent applied in connection with a Qualified Exchange) after the Issue Date. The immediately preceding paragraph, however, will not prohibit (s) Investments not to exceed $10 million in the aggregate made on or after the Issue Date, (t) Investments in Qualified Gaming Ventures, PROVIDED that, after giving PRO FORMA effect to such Investment, the aggregate amount of all such Investments made on or after the Issue Date (after giving effect to 50% of any cash, including management fees, returned without restriction from such Investments to the Company or the wholly owned Subsidiary that made such prior Investment on or prior to the date of any such calculation) at any time does not exceed $15 million, (u) Investments in Indiana Gaming L.P. to fund construction and preopening costs until the permanent Lawrenceburg Casino is completed, PROVIDED that, after giving PRO FORMA effect to such Investment, the aggregate amount of all such Investments made on or after the Issue Date does not exceed $135 million, (v) a Qualified Exchange, (w) Investments received by the Company or its Subsidiaries as consideration for Asset Sales to the extent not otherwise prohibited by the Indenture, (x) Investments by the Company or any of its Subsidiaries in Interest Swap and Hedging Obligations provided that such Interest Swap and Hedging 86 Obligations are related to payment obligations on Indebtedness otherwise permitted under the Indenture, (y) the contribution of a Specified Parcel to an Unrestricted Subsidiary or any other person for the development and operation of a hotel on such Specified Parcel, or (z) the payment of any dividend on Qualified Capital Stock within 60 days after the date of its declaration if such dividend could have been made on the date of such declaration in compliance with the foregoing provisions. The full amount of any Restricted Payments made pursuant to the foregoing clause (z) of the immediately preceding sentence, however, will be deducted in the calculation of the aggregate amount of Restricted Payments available to be made referred to in clause (3) of the immediately preceding paragraph. LIMITATION ON DIVIDENDS AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES The Indenture provides that the Company and the Subsidiaries will not, and will not permit any of their Subsidiaries or Indiana Gaming L.P. or its subsidiaries (as long as The Indiana Gaming Company is the general partner of Indiana Gaming L.P.) to, directly or indirectly, create, assume or suffer to exist any consensual restriction on the ability of any Subsidiary of the Company to pay dividends or make other distributions to or on behalf of, or to pay any obligation to or on behalf of, or otherwise to transfer assets or property to or on behalf of, or make or pay loans or advances to or on behalf of, the Company or any Subsidiary of the Company, except (a) restrictions imposed by the Notes or the Indenture, (b) restrictions imposed by applicable law, (c) existing restrictions under specified Indebtedness outstanding on the Issue Date, (d) restrictions under any Acquired Indebtedness not incurred in violation of the Indenture or any agreement relating to any property, asset, or business acquired by the Company or any of its Subsidiaries, which restrictions in each case existed at the time of acquisition, were not put in place in connection with or in anticipation of such acquisition and are not applicable to any person, other than the person acquired, or to any property, asset or business, other than the property, assets and business so acquired and such acquisition was not made, in whole or in part, with any Collateral or from the proceeds of the sale of any Collateral or out of distributions made by Indiana Gaming L.P. not in the nature of management fees, interest income or preferred dividends up to the amount of the Lawrenceburg Investment, (e) restrictions with respect solely to a Subsidiary of the Company imposed pursuant to a binding agreement which has been entered into for the sale or disposition of all or substantially all of the Capital Stock or assets of such Subsidiary, provided such restrictions apply solely to the Capital Stock or assets of such Subsidiary which are being sold, (f) restrictions on transfer contained in FF&E Indebtedness incurred pursuant to paragraph (v) of the covenant "Limitation on Incurrence of Additional Indebtedness and Disqualified Capital Stock," provided such restrictions relate only to the transfer of the property acquired with the proceeds of such FF&E Indebtedness, and (g) in connection with and pursuant to any Permitted Refinancing, replacements of restrictions imposed pursuant to clauses (c) and (d) of this paragraph that are not more restrictive than those being replaced and do not apply to any other person or assets than those that would have been covered by the restrictions in the Indebtedness so refinanced. Notwithstanding the foregoing, neither (a) customary provisions restricting subletting or assignment of any lease entered into in the ordinary course of business, consistent with industry practice, (b) Liens permitted under the terms of the Indenture on assets securing FF&E Indebtedness incurred in accordance with the covenant "Limitation on Incurrence of Additional Indebtedness and Disqualified Capital Stock," nor (c) provisions ordering distributions of cash flow from Indiana Gaming L.P. shall in and of themselves be considered a restriction on the ability of the applicable Subsidiary to transfer such agreement or assets, as the case may be. LIMITATION ON LIENS SECURING INDEBTEDNESS The Company and its Subsidiaries will not, and will not permit any of their Subsidiaries to, create, incur, assume or suffer to exist any Lien of any kind upon any of their respective assets now owned or acquired on or after the date of the Indenture or upon any income or profits therefrom other than (a) Permitted Liens; (b) Liens incurred under the Indenture to secure the Notes; (c) Liens incurred in support of any FF&E Indebtedness permitted by clause (v) of the covenant "Limitation on Incurrence of Additional Indebtedness and Disqualified Capital Stock," which Liens may be exclusive; (d) Liens incurred in connection with Indebtedness for working capital purposes permitted by clause (vi) of the covenant "Limitation on Incurrence of Additional Indebtedness and Disqualified Capital Stock" on accounts receivable and inventory of the property to which such Indebtedness relates, which Liens may be exclusive; (e) Liens incurred in 87 connection with Indebtedness permitted by clause (ii) of the covenant "Limitation on Incurrence of Additional Indebtedness and Disqualified Capital Stock," which Liens may be junior or PARI PASSU to the Lien securing the Notes; and (f) Liens incurred in connection with Indebtedness permitted by clause (iii) of the covenant "Limitation on Incurrence of Additional Indebtedness and Disqualified Capital Stock," which Liens may be exclusive. LIMITATION ON SALE OF ASSETS AND SUBSIDIARY STOCK The Indenture provides that the Company and the Subsidiaries will not, and will not permit any of their Subsidiaries to, in one or a series of related transactions, convey, sell, transfer, assign or otherwise dispose of, directly or indirectly, any of its property, business or assets, including by merger or consolidation (in the case of a Subsidiary of the Company), and including any sale or other transfer or issuance of any Capital Stock of any Subsidiary of the Company (except any Subsidiary directly or indirectly owning an interest in Indiana Gaming L.P., which transaction is governed by the covenant "Repurchase of Notes in Connection with Sale of Lawrenceburg Interest or Repayment of Lawrenceburg Investment") whether by the Company or a Subsidiary or through the issuance, sale or transfer of Capital Stock by a Subsidiary of the Company (an "Asset Sale"), unless (l)(a) within 210 days after the date of such Asset Sale, the Net Cash Proceeds therefrom, less the pro rata portion of such amount distributed to any lender holding indebtedness secured by the Collateral on a PARI PASSU basis (the "Asset Sale Offer Amount") are applied to the repurchase of the Notes pursuant to an irrevocable, unconditional cash offer (the "Asset Sale Offer") to repurchase Notes at a purchase price (the "Asset Sale Offer Price") of 100% of principal amount, plus accrued interest and Liquidated Damages, if any, to the date of payment, made within 180 days of such Asset Sale or (b) within 180 days following such Asset Sale, the Asset Sale Offer Amount is invested in assets and property (other than notes, bonds, obligation and securities, except with respect to an Acquisition of an entity whose business consists solely of Related Businesses) which in the good faith reasonable judgment of the Board will immediately constitute or be a part of a Related Business of the Company or such Subsidiary immediately following such transaction and which shall become Collateral if acquired with Collateral or the proceeds of Collateral, (2) at least 85% of the consideration received (as defined below) for such Asset Sale or series of related Asset Sales consists of cash or cash equivalents, PROVIDED that (x) the amount of any liabilities (as shown on the Company's or such Subsidiary's most recent balance sheet or in the notes thereto) of the Company or any Subsidiary (other than liabilities that are by their terms subordinated to the Notes or any Guarantee thereof) that are assumed by the transferee of any such assets and (y) the amount of any notes or other obligations received by the Company or any such Subsidiary from such transferee that are immediately converted by the Company or such Subsidiary into cash or as to which the Company or such Subsidiary has received at or prior to the consummation of the Asset Sale a commitment from a nationally recognized investment, merchant or commercial bank to convert into cash within 90 days of the consummation of such Asset Sale unless not actually converted into cash within such 90-day period (to the extent of the cash received or receivable pursuant to any such commitment) will be deemed cash or cash equivalents for purposes of this provision, (3) no Default or Event of Default shall have occurred and be continuing at the time of, or would occur after giving effect on a PRO FORMA basis to, such Asset Sale, and (4) the Board of Directors of the Company determines in good faith that the Company or such Subsidiary, as applicable, receives fair market value for such Asset Sale. Pending the application of Net Cash Proceeds resulting from an Asset Sale, such proceeds shall be maintained by the Trustee in a collateral account and invested in Permitted Investments. The Indenture provides that an Asset Sale Offer may be deferred until the accumulated Net Cash Proceeds from Asset Sales not applied to the uses set forth in (l)(b) above exceeds $5 million and that each Asset Sale Offer shall remain open for at least 20 Business Days following its commencement. Upon expiration of the offer, the Company shall apply the Asset Sale Offer Amount plus an amount equal to accrued interest and Liquidated Damages, if any, to the purchase of all Notes properly tendered (on a PRO RATA basis if the Asset Sale Offer Amount is less than the principal amount of all Notes so tendered) at the Asset Sale Offer Price (together with accrued interest and Liquidated Damages, if any). After the purchase of all Notes properly tendered, any remaining Net Cash Proceeds shall be available for general corporate purposes, PROVIDED that, as reinvested, the assets acquired with Collateral or the proceeds of Collateral shall become Collateral. 88 Notwithstanding the foregoing provisions of the prior paragraph: (i) the Company and its Subsidiaries may, in the ordinary course of business, convey, sell, transfer, assign or otherwise dispose of inventory acquired and held for resale in the ordinary course of business; (ii) the Company and its Subsidiaries may convey, sell, transfer, assign or otherwise dispose of assets pursuant to and in accordance with the limitation on mergers, sales or consolidations provisions in the Indenture; (iii) the Company and its Subsidiaries may sell or dispose of damaged, worn out or other obsolete property in the ordinary course of business so long as such property is no longer necessary for the proper conduct of the business of the Company or such Subsidiary, as applicable; (iv) the Company and its Subsidiaries may convey, sell, transfer, assign or otherwise dispose of assets to the Company or any of its wholly owned Subsidiaries; (v) the Company and its Subsidiaries may convey, sell, transfer, assign or otherwise dispose of assets with an aggregate fair market value of $5 million in any fiscal year; and (vi) the Company may make a like kind exchange for the Company's Alton barge, provided that the Board of Directors of the Company determines in good faith that the Company receives fair market value for such exchange and the Company receives an appraisal valuing the property received as having a value at least as great as the value of the Alton barge. To the extent applicable and if required by law, the Company will comply with Section 14 of the Exchange Act and the provisions of Regulation 14E and any other tender offer rules under the Exchange Act and any other securities laws, rules and regulations which may then be applicable to any offer by the Company to purchase the Notes at the option of the Noteholders upon an Asset Sale Offer. All Net Cash Proceeds from an Event of Loss shall be invested or used to repurchase Notes, all within the period and as otherwise provided above in clause (1) of the first paragraph of this covenant. Notwithstanding the foregoing, the Company will not, and will not permit any Subsidiary to, directly or indirectly make any Asset Sale of any of the Capital Stock of a Subsidiary except (i) pursuant to an Asset Sale of all the Capital Stock of such Subsidiary or (ii) pursuant to an Asset Sale of shares of common stock with no preferences or special rights or privileges and with no redemption or prepayment provisions, provided that after such sale the Company or its Subsidiaries own at least 50.1% of the voting and economic interests of the Capital Stock of such Subsidiary. The Indenture provides that promptly on the sale of any real or personal property owned by Iowa Development Corp., the net proceeds will be promptly distributed to the Company and, as reinvested, the assets acquired shall become Collateral. Iowa Development Corp. shall not conduct any business other than the sale of its assets. 89 REPURCHASE ON LOSS OF MATERIAL CASINO The Indenture provides that, in the event of the loss of the legal right to operate a Material Casino, which Material Casino represented more than 10% of the Consolidated EBITDA of the Company for and as of the end of the Reference Period immediately preceding such loss, and such loss continues for more than 90 days (a "License Loss"), the Company shall, within 40 Business Days of such ninetieth day, apply an amount equal to four times the contribution of such Material Casino to such Consolidated EBITDA during the Reference Period to the repurchase of a like principal amount of the Notes in accordance with an irrevocable, unconditional cash offer to purchase Notes at a purchase price of 101% of the principal amount, plus accrued interest and Liquidated Damages, if any, to the date of payment. The Indenture provides that each offer shall remain open for at least 20 Business Days following its commencement. The Company need not make such offer if, giving effect to the License Loss on a PRO FORMA basis, the Company's Consolidated Coverage Ratio would be at least 2.25 to 1. Upon expiration of the offer, the Company shall apply such amount to the purchase of all Notes properly tendered (on a PRO RATA basis if the amount is less than the principal amount the Notes so tendered). To the extent applicable and if required by law, the Company will comply with Section 14 of the Exchange Act and the provisions of Regulation 14E and any other tender offer rules under the Exchange Act and any other securities laws, rules and regulations which may then be applicable to any offer to purchase Notes at the option of the Noteholders. LIMITATION ON TRANSACTIONS WITH AFFILIATES The Indenture provides that the Company and its Subsidiaries will not, and will not permit any of their Subsidiaries to, enter into any contract, agreement, arrangement, understanding or transaction with an Affiliate (an "Affiliate Transaction"), or series of related Affiliate Transactions, involving consideration to either party in excess of $1 million, except for transactions approved by a majority of the disinterested (as to such transaction) directors of the Company and evidenced by an Officers' Certificate addressed and delivered to the Trustee stating that such Affiliate Transaction has been so approved and is made in good faith and that the terms of such Affiliate Transaction are no less favorable than could have been obtained in an arm's length transaction with a non-Affiliate and are otherwise fair and reasonable to the Company; PROVIDED that with respect to any Affiliate Transaction (including any series of related transactions) involving consideration to either party in excess of $10 million (except as otherwise permitted by "Limitation on Restricted Payments") the Company also must, prior to the consummation thereof, obtain a written favorable opinion as to the fairness of such transaction to the Company from a financial point of view from an independent investment banking firm of national reputation. Transactions solely between or amongst the Company and any wholly owned Subsidiary of the Company and Belle of Sioux City L.P. or between or amongst wholly owned Subsidiaries of the Company and Belle of Sioux City L.P. shall not be deemed to be Affiliate Transactions. LIMITATION ON MERGER, SALE OR CONSOLIDATION The Indenture provides that neither the Company nor any Guarantor (to the extent not permitted by the sale provisions under the heading "Guarantees" above) will directly or indirectly consolidate with or merge with or into another person or sell, lease, convey or transfer all or substantially all of its assets (computed on a consolidated basis), whether in a single transaction or a series of related transactions, to another Person or group of affiliated Persons, unless (i) either (a) in the case of a merger or consolidation, the Company or such Guarantor, as the case may be, is the continuing entity or (b) the resulting, surviving or transferee entity is a corporation organized under the laws of the United States, any state thereof or the District of Columbia and expressly assumes by supplemental indenture all of the obligations of the Company or such Guarantor, as applicable, in connection with the Notes and the Indenture; (ii) no Default or Event of Default shall exist or shall occur immediately after giving effect on a PRO FORMA basis to such transaction; (iii) immediately after giving effect to such transaction on a PRO FORMA basis, the Consolidated Net Worth of the consolidated surviving or transferee entity is at least equal to the Consolidated Net Worth of the Company or such Guarantor, as applicable, immediately prior to such transaction; (iv) other than in the case of a transaction solely between the Company and a wholly owned Guarantor or solely between wholly owned Guarantors, immediately after giving effect to such transaction on a PRO FORMA basis, the consolidated 90 resulting, surviving or transferee entity would immediately thereafter be permitted to incur at least $1.00 of additional Indebtedness pursuant to the ratio set forth in paragraph (i) of the covenant "Limitation on Incurrence of Additional Indebtedness and Disqualified Capital Stock;" and (v) such transaction will not result in the loss of a material gaming license. Upon any consolidation or merger or any transfer of all or substantially all of the assets of the Company or a Guarantor in accordance with the foregoing, the successor corporation formed by such consolidation or into which the Company or such Guarantor, as the case may be, is merged or to which such transfer is made, shall succeed to, and be substituted for, and may exercise every right and power of, the Company or such Guarantor, as the case may be, under the Indenture with the same effect as if such successor corporation had been named therein as the Company or such Guarantor, as the case may be, and, except in the case of a lease, the Company or such Guarantor, as the case may be, shall be released from the obligations under the Notes and the Indenture except with respect to any obligations that arise from, or are related to, such transaction. LIMITATION ON LINES OF BUSINESS The Indenture provides that neither the Company nor any of its Subsidiaries or Unrestricted Subsidiaries shall directly or indirectly engage to any substantial extent in any line or lines of business activity other than that which, in the reasonable good faith judgment of the Board of Directors of the Company, is a Related Business, including, in the case of an Acquisition, immediately upon such Acquisition. LIMITATION ON STATUS AS INVESTMENT COMPANY The Indenture prohibits the Company and its Subsidiaries from being required to register as an "investment company" (as that term is defined in the Investment Company Act of 1940, as amended) or from otherwise becoming subject to regulation under the Investment Company Act. REPORTS The Indenture provides that whether or not the Company is subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, the Company shall deliver to the Trustee and, to each Noteholder within 15 days after it is or would have been required to file such with the Commission, annual and quarterly financial statements substantially equivalent to financial statements that would have been included in reports filed with the Commission, if the Company were subject to the requirements of Section 13 or 15(d) of the Exchange Act, including, with respect to annual information only, a report thereon by the Company's certified independent public accountants as such would be required in such reports to the Commission, and, in each case, together with a management's discussion and analysis of financial condition and results of operations which would be so required. The Company shall simultaneously with such delivery deliver to the Trustee annual and quarterly condensed financial statements for Indiana Gaming L.P. EVENTS OF DEFAULT AND REMEDIES The Indenture defines an Event of Default as (i) the failure by the Company to pay any installment of interest or Liquidated Damages on the Notes as and when the same becomes due and payable and the continuance of any such failure for 30 days, (ii) the failure by the Company to pay all or any part of the principal, or premium, if any, on the Notes when and as the same becomes due and payable at maturity, redemption, by acceleration or otherwise, including, without limitation, redemptions or purchase offers in connection with a Property Sale, Asset Sale, Change of Control, Lawrenceburg Sale, License Loss, failure to open the Lawrenceburg Casino or Annual Obligation or otherwise, (iii) the failure by the Company or any Subsidiary to observe or perform any other covenant or agreement contained in the Notes or the Indenture and, subject to certain exceptions, the continuance of such failure for a period of 30 days after written notice is given to the Company by the Trustee or to the Company and the Trustee by the holders of at least 25% in aggregate principal amount of the Notes outstanding, (iv) certain events of bankruptcy, insolvency or reorganization in respect of the Company or any of its Significant Subsidiaries, (v) a default in the payment of principal, premium or interest when due which extends beyond any stated period of grace applicable thereto or any acceleration for any other reason of the maturity of any Indebtedness of the Company or any of its Subsidiaries with an aggregate principal amount in excess of $5 million, (vi) final unsatisfied judgments 91 not covered by insurance aggregating in excess of $5 million, at any one time rendered against the Company or any of its Subsidiaries and not stayed, bonded or discharged within 45 days, (vii) an event of default specified in any of the Collateral Documents not cured within the applicable grace period or (viii) a default in the payment of principal, premium or interest on the Convertible Notes at the final maturity on June 1, 2001, regardless of any consent or waiver to such nonpayment given by any holder thereof. The Indenture provides that if a Default occurs and is continuing, the Trustee must, within 90 days after the occurrence of such default, give to the Noteholders notice of such default. If an Event of Default occurs and is continuing (other than an Event of Default specified in clause (iv), above, relating to the Company or any Subsidiary,) then in every such case, unless the principal of all of the Notes shall have already become due and payable, either the Trustee or the holders of 25% in aggregate principal amount of the Notes then outstanding, by notice in writing to the Company (and to the Trustee if given by Noteholders) (an "Acceleration Notice"), may declare all principal, determined as set forth below, and accrued interest thereon to be due and payable immediately. If an Event of Default specified in clause (iv) above relating to the Company or any Subsidiary occurs, all principal and accrued interest thereon will be immediately due and payable on all outstanding Notes without any declaration or other act on the part of Trustee or the Noteholders. The holders of a majority in aggregate principal amount of Notes generally are authorized to rescind such acceleration if all existing Events of Default, other than the non-payment of the principal of, premium, if any, and interest on the Notes which have become due solely by such acceleration, have been cured or waived, except a default with respect to any provision requiring a supermajority to amend, which default may only be waived by such supermajority. Prior to the declaration of acceleration of the maturity of the Notes, the holders of a majority in aggregate principal amount of the Notes at the time outstanding may waive on behalf of all the Noteholders any default, except a default in the payment of principal of or interest on any Note not yet cured or a default with respect to any covenant or provision which cannot be modified or amended without the consent of the each Noteholder affected, and except a default with respect to any provision requiring a supermajority to amend, which default may only be waived by such supermajority. Subject to the provisions of the Indenture relating to the duties of the Trustee, the Trustee will be under no obligation to exercise any of its rights or powers under the Indenture at the request, order or direction of any of the Noteholders, unless such Noteholders have offered to the Trustee reasonable security or indemnity. Subject to all provisions of the Indenture and applicable law, the holders of a majority in aggregate principal amount of the Notes at the time outstanding will have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred on the Trustee. LEGAL DEFEASANCE AND COVENANT DEFEASANCE The Indenture provides that the Company may, at its option and at any time, elect to have its obligations discharged with respect to the outstanding Notes ("Legal Defeasance"). Such Legal Defeasance means that the Company shall be deemed to have paid and discharged the entire indebtedness represented, and the Indenture shall cease to be of further effect as to all outstanding Notes and guarantees, except as to (i) rights of Noteholders to receive payments in respect of the principal of, premium, if any, and interest on such Notes when such payments are due from the trust funds; (ii) the Company's obligations with respect to such Notes concerning issuing temporary Notes, registration of Notes, mutilated, destroyed, lost or stolen Notes, and the maintenance of an office or agency for payment and money for security payments held in trust; (iii) the rights, powers, trust, duties, and immunities of the Trustee, and the Company's obligations in connection therewith; and (iv) the Legal Defeasance provisions of the Indenture. In addition, the Company may, at its option and at any time, elect to have its obligations released with respect to certain covenants that are described in the Indenture ("Covenant Defeasance") and thereafter any omission to comply with such obligations shall not constitute a Default or Event of Default with respect to the Notes. In the event Covenant Defeasance occurs, certain events (not including non-payment, bankruptcy, receivership, rehabilitation and insolvency events) described under "Events of Default" will no longer constitute an Event of Default with respect to the Notes. 92 In order to exercise either Legal Defeasance or Covenant Defeasance, (i) the Company must irrevocably deposit with the Trustee, in trust, for the benefit of the Noteholders, U.S. legal tender, non-callable government securities or a combination thereof, in such amounts as will be sufficient, in the opinion of a nationally recognized firm of independent public accountants, to pay the principal of, premium, if any, and interest on such Notes on the stated date for payment thereof or on the redemption date of such principal or installment of principal of, premium, if any, or interest on such Notes, and the Noteholders must have a valid, perfected, exclusive security interest in such trust; (ii) in the case of the Legal Defeasance, the Company shall have delivered to the Trustee an opinion of counsel in the United States reasonably acceptable to Trustee confirming that (A) the Company has received from, or there has been published by the Internal Revenue Service, a ruling or (B) since the date of the Indenture, there has been a change in the applicable federal income tax law, in either case to the effect that, and based thereon such opinion of counsel shall confirm that, the Noteholders will not recognize income, gain or loss for federal income tax purposes as a result of such Legal Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance had not occurred; (iii) in the case of Covenant Defeasance, the Company shall have delivered to the Trustee an opinion of counsel in the United States reasonably acceptable to such Trustee confirming that the Noteholders will not recognize income, gain or loss for federal income tax purposes as a result of such Covenant Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred; (iv) no Default or Event of Default shall have occurred and be continuing on the date of such deposit or insofar as Events of Default from bankruptcy or insolvency events are concerned, at any time in the period ending on the 91st day after the date of deposit; (v) such Legal Defeasance or Covenant Defeasance shall not result in a breach or violation of, or constitute a default under the Indenture or any other material agreement or instrument to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries is bound; (vi) the Company shall have delivered to the Trustee an Officers' Certificate stating that the deposit was not made by the Company with the intent of preferring the Noteholders over any other creditors of the Company or with the intent of defeating, hindering, delaying or defrauding any other creditors of the Company or others; and (vii) the Company shall have delivered to the Trustee an Officers' Certificate and an opinion of counsel, each stating that the conditions precedent provided for in, in the case of the officers' certificate, (i) through (vi) and, in the case of the opinion of counsel, clauses (i), (with respect to the validity and perfection of the security interest) (ii), (iii) and (v) of this paragraph have been complied with. Upon the occurrence of legal or covenant defeasance, the Lien of the Collateral Documents will be released only if the Company delivers to the Trustee an opinion of counsel as to certain matters, including the legal status of the trust. In addition, the Lien of the Collateral Documents will remain in place for 91 days, unless the Company delivers to the Trustee an appraisal of the Collateral and an opinion of counsel as to certain bankruptcy matters both as further described in the Indenture. AMENDMENTS AND SUPPLEMENTS The Indenture contains provisions permitting the Company and the Trustee to enter into a supplemental indenture for certain limited purposes without the consent of the Noteholders. With the consent of the holders of not less than a majority in aggregate principal amount of the Notes at the time outstanding, the Company and the Trustee are permitted to amend or supplement the Indenture or any supplemental indenture or modify the rights of the Noteholders; provided, that no such modification may, without the consent of at least 66 2/3% of the aggregate principal amount of Notes outstanding, alter the provisions of the covenants "Repurchase of Notes of the Option of the Holder upon a Change of Control," "Repurchase of Notes in Connection with Sale of Lawrenceburg Interest or Repayment of Lawrenceburg Investment," "Repurchase on Loss of Material Casino," "Limitation on Sale of Assets and Subsidiary Stock," "Use of Proceeds" or "Repurchase of Notes on Certain Project Delays" in a manner adverse to the Noteholders or modify the Guarantees; and that no such modification may, without the consent of the Holders of at least 85% of the aggregate principal amount of outstanding Securities, release or grant additional liens on the Collateral, except as otherwise specifically provided in the Indenture; and that no such modification may without the consent of each Noteholder affected thereby: (i) change the Stated Maturity on any Note, or reduce the principal amount thereof or the rate (or extend the time for payment) of interest thereon or any 93 premium payable upon the redemption thereof, or change the place of payment where, or the coin or currency in which, any Note or any premium or the interest thereon is payable, or impair the right to institute suit for the enforcement of any such payment on or after the Stated Maturity thereof (or, in the case of redemption, on or after the Redemption Date), or reduce the price paid in any purchase offer or alter the redemption provisions in a manner adverse to the Noteholders, or (ii) reduce the percentage in principal amount of the outstanding Notes, the consent of whose Noteholders is required for any such amendment, supplemental indenture or waiver provided for in the Indenture, or (iii) modify any of the waiver provisions, except to increase any required percentage or to provide that certain other provisions of the Indenture cannot be modified or waived without the consent of the Noteholder of each outstanding Note affected thereby, or (iv) cause the Notes or any guarantee to rank junior in right of payment to any other Indebtedness of the Company or any guarantee, as applicable. NO PERSONAL LIABILITY OF PARTNERS, STOCKHOLDERS, OFFICERS, DIRECTORS The Indenture provides that no direct or indirect stockholder, employee, officer or director, as such, past, present or future of the Company or any successor entity shall have any personal liability in respect of the obligations of the Company under the Indenture or the Notes by reason of his or its status as such stockholder, employee, officer or director. CERTAIN DEFINITIONS "ACQUIRED INDEBTEDNESS" means, with respect to any person, (i) Indebtedness or Disqualified Capital Stock of any person existing at the time such person becomes a Subsidiary of the Company or is merged or consolidated into or with the Company or one of its Subsidiaries or (ii) Indebtedness encumbering any asset acquired by such person. Acquired Indebtedness shall be deemed to have been incurred at the time such person becomes a Subsidiary of the Company (including upon the designation of a subsidiary or any other person as a Subsidiary) or is merged or consolidated into or with the Company or one of its Subsidiaries or the time of the Acquisition of such assets. "ACQUISITION" means the purchase or other acquisition of any person or substantially all the assets of any person by any other person, whether by purchase, merger, consolidation, or other transfer, and whether or not for consideration. "AFFILIATE" means (i) any person directly or indirectly controlling or controlled by or under direct or indirect common control with the Company, (ii) any spouse, immediate family member or other relative who has the same principal residence of any person described in clause (i) above, and (iii) any trust in which any person described in clause (i) or (ii) above has a beneficial interest. For purposes of this definition, the term "control" means (a) the power to direct the management and policies of a person, directly or through one or more intermediaries, whether through the ownership of voting securities, by contract, or otherwise, or (b) the beneficial ownership of 10% or more of the voting power of a person (on a fully diluted basis) or of warrants or other rights to acquire shares of such class of Capital Stock (whether or not presently exercisable). "AVERAGE LIFE TO STATED MATURITY" means, as of the date of determination, with respect to any indebtedness, the quotient obtained by dividing (i) the sum of the products of (a) the number of years from the date of determination to the date or dates of each successive scheduled principal payment of such Indebtedness multiplied by (b) the amount of each such principal payment by (ii) the sum of all such principal payments. "BUSINESS DAY" means each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which banking institutions in New York, New York are authorized or obligated by law or executive order to close. "CAPITAL STOCK" means, with respect to any person, any and all shares, interests, rights to purchase (other than convertible or exchangeable Indebtedness), warrants, options, participations or other equivalents of or interests (however designated) in stock or equity issued by that person. "CASINO IMPROVEMENTS" means the acquisition of, or development and construction of, any addition to or expansion of the Company's Riverside, Alton, Sioux City or Baton Rouge properties in connection with 94 any expansion of casino floor space, and any addition to or expansion of any gaming, hotel, parking, dining, entertainment, retail, promotional, storage, patron services, transportation or similar facilities related thereto, in each case, after the date of the Indenture. "CONSOLIDATED COVERAGE RATIO" of any person on any date of determination (the "Transaction Date") means the ratio, on a PRO FORMA basis, of (a) the aggregate amount of Consolidated EBITDA of such person attributable to continuing operations and businesses exclusive of amounts attributable to operations and businesses permanently discontinued or disposed of during the Reference Period, to (b) the aggregate Consolidated Fixed Charges of such person (exclusive of amounts attributable to operations and businesses permanently discontinued or disposed of, but only to the extent that the obligations giving rise to such Consolidated Fixed Charges would no longer be obligations contributing to such person's Consolidated Fixed Charges subsequent to the Transaction Date) during the Reference Period; PROVIDED,that for purposes of such calculation, (i) Acquisitions which occurred during the Reference Period or subsequent to the Reference Period and on or prior to the Transaction Date shall be assumed to have occurred on the first day of the Reference Period, (ii) transactions giving rise to the need to calculate the Consolidated Coverage Ratio shall be assumed to have occurred on the first day of the Reference Period, (iii) the incurrence of any Indebtedness or issuance of any Disqualified Capital Stock during the Reference Period or subsequent to the Reference Period and on or prior to the Transaction Date (and the application of the proceeds therefrom to the extent used to refinance or retire other Indebtedness) shall be assumed to have occurred on the first day of such Reference Period, and (iv) the Consolidated Fixed Charges of such person attributable to interest on any Indebtedness or dividends on any Disqualified Capital Stock bearing a floating interest (or dividend) rate shall be computed on a PRO FORMA basis as if the average rate in effect from the beginning of the Reference Period to the Transaction Date had been the applicable rate for the entire period, unless such Person or any of its Subsidiaries is a party to an Interest Swap or Hedging Obligation (which shall remain in effect for the 12-month period immediately following the Transaction Date) that has the effect of fixing the interest rate on the date of computation, in which case such rate (whether higher or lower) shall be used. "CONSOLIDATED EBITDA" means, with respect to any person, for any period, the Consolidated Net Income of such person for such period adjusted to add thereto (to the extent deducted from net revenues in determining Consolidated Net Income), without duplication, the sum of (i) consolidated income tax expense, (ii) consolidated depreciation and amortization expense, provided that consolidated depreciation and amortization of a Subsidiary that is a less than wholly owned Subsidiary shall only be added to the extent of the equity interest of the Company in such Subsidiary, (iii) Consolidated Fixed Charges, and (iv) with respect to the Company, all cash distributions made by The Indiana Gaming Company to the Company or another Guarantor, except for payments in the nature of management fees, interest income or preferred dividends from Indiana Gaming L.P. "CONSOLIDATED FIXED CHARGES" of any person means, for any period, the aggregate amount (without duplication and determined in each case in accordance with GAAP) of (a) interest expensed or capitalized, paid, accrued, or scheduled to be paid or accrued (including, in accordance with the following sentence, interest attributable to Capitalized Lease Obligations) of such person and its Consolidated Subsidiaries during such period, including (i) original issue discount and non-cash interest payments or accruals on any Indebtedness, (ii) the interest portion of all deferred payment obligations, and (iii) all commissions, discounts and other fees and charges owed with respect to bankers' acceptances and letters of credit financings and currency and Interest Swap and Hedging Obligations, in each case to the extent attributable to such period, and (b) the amount of dividends accrued or payable by such person or any of its Consolidated Subsidiaries in respect of Preferred Stock (other than by Subsidiaries of such person to such person or such person's wholly owned Subsidiaries). For purposes of this definition, (x) interest on a Capitalized Lease Obligation shall be deemed to accrue at an interest rate reasonably determined by the Company to be the rate of interest implicit in such Capitalized Lease Obligation in accordance with GAAP and (y) interest expense attributable to any Indebtedness represented by the guaranty by such person or a Subsidiary of such person of an obligation of another person shall be deemed to be the interest expense attributable to the Indebtedness guaranteed. 95 "CONSOLIDATED NET INCOME" means, with respect to any person for any period, the net income (or loss) of such person and its Consolidated Subsidiaries (determined on a consolidated basis in accordance with GAAP) for such period, adjusted to exclude (only to the extent included in computing such net income (or loss) and without duplication): (a) all gains (but not losses) which are either extraordinary (as determined in accordance with GAAP) or are either unusual or nonrecurring (including any gain from the sale or other disposition of assets outside the ordinary course of business or from the issuance or sale of any capital stock), (b) any gains (but not losses) from currency exchange transactions, (c) the net income, if positive, of any person, other than a wholly owned Consolidated Subsidiary, in which such person or any of its Consolidated Subsidiaries has an interest, except to the extent of the amount of any dividends or distributions actually paid in cash to such person or a wholly owned Consolidated Subsidiary of such person during such period, but in any case not in excess of such person's PRO RATA share of such person's net income for such period, (d) the net income or loss of any person acquired in a pooling of interests transaction for any period prior to the date of such acquisition, (e) cash distributions from Indiana Gaming L.P. and the net income of The Indiana Gaming Company, except for net income in the nature of management fees, interest income or preferred dividends actually paid to the Company or a Guarantor other than The Indiana Gaming Company, so long as Indiana Gaming L.P. is an Unrestricted Subsidiary, (f) the net income, if positive, of any of such person's Consolidated Subsidiaries to the extent that the declaration or payment of dividends or similar distributions is not at the time permitted by operation of the terms of its charter or bylaws or any other agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to such Consolidated Subsidiary PROVIDED, HOWEVER, that statutory or regulatory requirements of gaming authority approval prior to distribution shall not be considered such a limitation and (g) any noncash extraordinary charge relating to the repayment of the Existing Bank Credit Facility in connection with this Offering. "CONSOLIDATED NET WORTH" of any person at any date means the aggregate consolidated stockholders' equity of such person (plus amounts of equity attributable to preferred stock) and its Consolidated Subsidiaries, as would be shown on the consolidated balance sheet of such person prepared in accordance with GAAP, adjusted to exclude (to the extent included in calculating such equity), (a) the amount of any such stockholders' equity attributable to Disqualified Capital Stock or treasury stock of such person and its Consolidated Subsidiaries, (b) all upward revaluations and other write-ups in the book value of any asset of such person or a Consolidated Subsidiary of such person subsequent to the Issue Date, and (c) all investments in Subsidiaries that are not Consolidated Subsidiaries and in persons that are not Subsidiaries. "CONSOLIDATED SUBSIDIARY" means, for any person, each Subsidiary of such person (whether now existing or hereafter created or acquired) the financial statements of which are consolidated for financial statement reporting purposes with the financial statements of such person in accordance with GAAP. So long as Indiana Gaming L.P. is an Unrestricted Subsidiary, the results of operation of Indiana Gaming L.P. shall not be included in the calculation of Consolidated Net Income of the Company, other than management fees, interest income and preferred dividends paid to the Company or a Guarantor other than The Indiana Gaming Company. "DISQUALIFIED CAPITAL STOCK" means (a) except as set forth in (b), with respect to any person, Capital Stock of such person that, by its terms or by the terms of any security into which it is convertible, exercisable or exchangeable, is, or upon the happening of an event or the passage of time would be, required to be redeemed or repurchased (including at the option of the holder thereof) by such person or any of its Subsidiaries, in whole or in part, on or prior to the Stated Maturity of the Notes and (b) with respect to any Subsidiary of such person (including with respect to any Subsidiary of the Company), any Capital Stock other than any common stock with no preference, privileges, or redemption or repayment provisions. "EVENT OF LOSS" means, with respect to any property or asset, any (i) loss, destruction or damage of such property or asset or (ii) any condemnation, seizure or taking, by exercise of the power of eminent domain or otherwise, of such property or asset, or confiscation or requisition of the use of such property or asset. "EXCHANGE NOTES" means first mortgage notes offered for exchange hereby and issued pursuant to the Registration Rights Agreement and the Indenture. 96 "EXCLUDED PERSONS" means J. Thomas Long and William F. Cellini, each of such person's immediate family or a trust or similar entity existing solely for the benefit of such person or such person's immediate family. "FF&E INDEBTEDNESS" means any Indebtedness of the Company and its Subsidiaries and Indiana Gaming L.P. to any seller or other person incurred to finance any gaming or gaming related fixtures, furniture or equipment which, in the reasonable good faith judgment of the Board of Directors of the Company or the general partner of Indiana Gaming L.P., is incurred for a Material Casino, is directly related to a Related Business and is secured only by the assets so financed. "GAAP" means United States generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as approved by a significant segment of the accounting profession as in effect on the Issue Date. "GUARANTOR" means the Guarantors named as such on the cover of this Offering Memorandum, and any future newly created, acquired or designated Subsidiary of the Company. "INDEBTEDNESS" of any person means, without duplication, (a) all liabilities and obligations, contingent or otherwise, of such person, (i) in respect of borrowed money (whether or not the recourse of the lender is to the whole of the assets of such person or only to a portion thereof), (ii) evidenced by bonds, notes, debentures or similar instruments, (iii) representing the balance deferred and unpaid of the purchase price of any property or services, except such as would constitute accrued expenses or trade payables to trade creditors in the ordinary course of business that are not more than ninety (90) days past their original due date unless being contested in good faith, (iv) evidenced by bankers' acceptances or similar instruments issued or accepted by banks, (v) for the payment of money relating to a capitalized lease obligation, or (vi) evidenced by a letter of credit or a reimbursement obligation of such person with respect to any letter of credit; (b) all net obligations of such person under Interest Swap and Hedging Obligations; (c) all liabilities and obligations of others of the kind described in the preceding clause (a) or (b) that such person has guaranteed or that is otherwise its legal liability and all obligations to purchase, redeem or acquire any Capital Stock; and (d) any and all deferrals, renewals, extensions, refinancing and refundings (whether direct or indirect) of, or amendments, modifications or supplements to, any liability of the kind described in any of the preceding clauses (a), (b) or (c), or this clause (d), whether or not between or among the same parties, PROVIDED that, in calculating Indebtedness of the Company and its Consolidated Subsidiaries, Indebtedness of Indiana Gaming L.P. attributable to The Indiana Gaming Company solely because of its legal status as general partner of Indiana Gaming L.P. shall not be deemed such Indebtedness. "INDIANA GAMING L.P." means the Indiana Gaming Company, L.P. or any successor acquired to develop the proposed casino in Lawrenceburg, Indiana. "INTEREST SWAP AND HEDGING OBLIGATION" means any obligation of any person pursuant to any interest rate swap agreement, interest rate cap agreement, interest rate collar agreement, interest rate exchange agreement, currency exchange agreement or any other agreement or arrangement designed to protect against fluctuations in interest rates or currency values, including, without limitation, any arrangement whereby, directly or indirectly, such person is entitled to receive from time to time periodic payments calculated by applying either a fixed or floating rate of interest on a stated notional amount in exchange for periodic payments made by such person calculated by applying a fixed or floating rate of interest on the same notional amount. "INVESTMENT" by any person in any other person means (without duplication) (a) the acquisition (whether by purchase, merger, consolidation or otherwise) by such person (whether for cash, property, services, securities or otherwise) of capital stock, bonds, notes, debentures, partnership or other ownership interests or other securities, including any options or warrants, of such other person or any agreement to make any such acquisition; (b) the making by such person of any deposit with, or advance, loan or other extension of credit to, such other person (including the purchase of property from another person subject to 97 an understanding or agreement, contingent or otherwise, to resell such property to such other person) or any commitment to make any such advance, loan or extension (but excluding (a) accounts receivable or deposits arising in the ordinary course of business and (b) advances, loans or other extensions of credit by the Company or any of its Subsidiaries to the Company or any Subsidiary of the Company); (c) other than guarantees of Indebtedness of the Company to the extent permitted by the covenant "Limitation on Incurrence of Additional Indebtedness and Disqualified Capital Stock," the entering into by such person of any guarantee of, or other credit support or contingent obligation with respect to, Indebtedness or other liability of such other person; (d) the making of any capital contribution by such person to such other person, other than to the Company or a wholly owned Subsidiary of the Company; and (e) the designation by the Board of Directors of the Company of any person to be an Unrestricted Subsidiary. The Company shall be deemed to make an Investment in an amount equal to the fair market value of the net assets of any subsidiary (or, if neither the Company nor any of its Subsidiaries has theretofore made an Investment in such subsidiary, in an amount equal to the Investments being made), at the time that such subsidiary is designated an Unrestricted Subsidiary, and any property transferred to an Unrestricted Subsidiary from the Company or a Subsidiary shall be deemed an Investment valued at its fair market value at the time of such transfer. "ISSUE DATE" means the date of first issuance of the Notes under the Indenture. "JUNIOR INDEBTEDNESS" means Indebtedness of the Company or a Guarantor, as applicable, that is subordinated in right of payment to the Notes or such Guarantor's guarantee of the Notes, as applicable, or has a scheduled installment of principal due, by maturity, redemption, sinking fund payment or otherwise after the Stated Maturity of the Notes, except that the amount payable to the former Jazz shareholders shall not be deemed Junior Indebtedness if repaid in full at a discount for an amount not to exceed $3 million. "LAWRENCEBURG INVESTMENT" means the total aggregate Investment by the Company and the Guarantors in Indiana Gaming L.P. "LAWRENCEBURG INVESTMENT RETURN" means the complete repayment to the Company and the Guarantors (other than The Indiana Gaming Company) of the Lawrenceburg Investment, without credit for management fees, interest income, preferred dividends or provision for taxes. "MATERIAL CASINO" means any gaming establishment possessing at least 400 slot machines and at least 20 table games. "NET CASH PROCEEDS" means the aggregate amount of cash received by the Company in the case of a sale of Qualified Capital Stock, by the Company and its Subsidiaries in respect of an Asset Sale or an Event of Loss, by the Company and its Subsidiaries in respect of a Lawrenceburg Sale and by Indiana Gaming L.P. in respect of a Property Sale plus, in the case of an issuance of Qualified Capital Stock upon any exercise, exchange or conversion of securities (including options, warrants, rights and convertible or exchangeable debt) of the Company that were issued for cash on or after the Issue Date, the amount of cash originally received by the Company upon the issuance of such securities (including options, warrants, rights and convertible or exchangeable debt) less, in each case, the sum of all payments, fees, commissions and reasonable and customary expenses (including, without limitation, the fees and expenses of legal counsel and investment banking fees and expenses) incurred in connection with such Asset Sale, an Event of Loss, Lawrenceburg Sale, Property Sale or sale of Qualified Capital Stock, and, in the case of an Asset Sale, Lawrenceburg Sale, Property Sale or an Event of Loss only, less the amount (estimated reasonably and in good faith by the Company) of income, franchise, sales and other applicable taxes required to be paid by the Company or any of its respective Subsidiaries in connection with such Asset Sale, Lawrenceburg Sale, Property Sale or Event of Loss and, in the case of an Asset Sale, Property Sale or Event of Loss only, less the amounts required to be applied to the repayment of Indebtedness secured by a Lien otherwise permitted herein on the asset or assets that were the subject of such event and which Indebtedness is required by its terms to be repaid upon such event, and in the case of any Asset Sale, Property Sale or Lawrenceburg Sale only, less any reserve established by the Company or any of its Subsidiaries in accordance with GAAP against any liabilities associated with such sale and retained by the Company or any of its Subsidiaries, as the case may be, after such sale. 98 "PERMITTED INDEBTEDNESS" means any of the following: (a) The Company and the Guarantors may incur Indebtedness solely in respect of bankers acceptances and performance, appeal or bid bonds (to the extent that such incurrence does not result in the incurrence of any obligation to repay any obligation relating to borrowed money of others) in a principal amount not to exceed $10 million, all in the ordinary course of business in accordance with customary industry practices, in amounts and for the purposes customary in the Company's industry; (b) The Company may incur Indebtedness to any Guarantor, and any Guarantor may incur Indebtedness to any other Guarantor or to the Company; PROVIDED that, in the case of Indebtedness of the Company, such obligations shall be unsecured and subordinated in all respects to the Company's obligations pursuant to the Notes and any event that causes such Guarantor to no longer be a Subsidiary shall be an incurrence of Indebtedness; and (c) The Company may incur Indebtedness in the form of a guarantee of hotel construction in Baton Rouge in an amount not to exceed $5 million and otherwise permitted under clause (s) under "Limitation on Restricted Payments." "PERMITTED INVESTMENT" means (i) certificates of deposit and bank accounts with final maturities of one year or less issued by United States commercial banks having capital and surplus in excess of $100,000,000; (ii) commercial paper with a grade of no less than A1 or P1; (iii) direct obligations of the United States Government or a United States agency with a maturity of one year or less; and (iv) shares of money market mutual or similar funds having assets in excess of $500,000,000. "PERMITTED LIENS" means (i) Liens existing on the date of the Indenture as specifically identified in the Offering Memorandum or securing Indebtedness not to exceed $1 million incurred to purchase gaming and/ or office equipment; (ii) Liens for taxes, assessments, governmental charges or claims which are being contested in good faith by appropriate proceedings promptly instituted and diligently conducted and if a reserve or other appropriate provision, if any, as shall be required in conformity with GAAP shall have been made therefor; (iii) statutory Liens of landlords and carriers, warehousemen, mechanics, suppliers, materialmen, repairmen, or other like Liens arising in the ordinary course of business and with respect to amounts not yet delinquent or being contested in good faith by appropriate proceedings, and if a reserve or other appropriate provision, if any, as shall be required in conformity with GAAP shall have been made therefor; (iv) Liens incurred or deposits made in the ordinary course of business in connection with workers' compensation, unemployment insurance and other types of social security; (v) Liens incurred or deposits made to secure the performance of tenders, bids, leases, statutory obligations, surety and appeal bonds, government contracts, performance and return-of-money bonds and other obligations of a like nature incurred in the ordinary course of business (exclusive of obligations for the payment of borrowed money); (vi) easements, rights-of-way, restrictions, minor defects or irregularities in title and other similar charges or encumbrances not interfering in any material respect with the business of the Company or any of its Subsidiaries incurred in the ordinary course of business; (vii) Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of customs duties in connection with the importation of goods; (viii) judgment and attachment Liens not giving rise to an Event of Default; (ix) leases or subleases granted to others not interfering in any material respect with the business of the Company or any of its Subsidiaries; (x) any interest or title of a lessor in the property subject to any capital lease obligation or operating lease; (xi) Liens arising from filing Uniform Commercial Code financing statements regarding leases; (xii) Liens securing any Indebtedness which became Indebtedness of the Company pursuant to a transaction subject to the provisions of the Indenture described above under "Limitation on Merger, Sale or Consolidation" or which constitutes Acquired Indebtedness and which Liens were in existence at the time of such transaction (unless such Indebtedness was incurred or such Lien created in connection with, or in contemplation of, such transaction), so long as such Liens do not extend to or cover any property or assets of the Company or any Subsidiary of the Company other than property or assets acquired in such transaction; (xiii) Liens securing any assumption, guarantee or other liability which constitutes Acquired Indebtedness and which Liens were in existence at the time of such transaction (unless such assumption, guarantee or other liability was incurred or such Lien created in connection with, or in contemplation of, such person 99 becoming a Subsidiary of the Company), so long as such Liens do not extend to or cover any property or assets of the Company or any Subsidiary of the Company other than the assets of such person; and (xiv) any renewal of or substitution for any Lien permitted by any of the preceding clauses, PROVIDED, HOWEVER, that the Indebtedness secured is not increased nor the Lien extended to any additional property. Liens described under clauses (xii) and (xiii) above shall not be Permitted Liens in connection with an Acquisition which is funded in whole or part with Collateral or the proceeds of the sale of Collateral or out of distributions made by Indiana Gaming L.P. up to the amount of the Lawrenceburg Investment. "PROJECT DELAY" means (i) the failure of the Lawrenceburg Casino to commence operations on or prior to June 30, 1997 at either the temporary or the permanent location (for purposes of the preceding, commencement of gaming operations shall be deemed to occur at such time as the Lawrenceburg Casino is open to the public for gaming and is operating at least 950 gaming positions), (ii) the expiration or suspension of Indiana Gaming L.P.'s certificate of suitability and the failure of the Indiana Gaming Commission to renew such certificate prior to the issuance of a riverboat owner's license, which failure continues for a period of 30 days from the date of such expiration or suspension, (iii) the revocation or cancellation of Indiana Gaming L.P.'s certificate of suitability by the Indiana Gaming Commission, (iv) the denial of Indiana Gaming L.P.'s application for a permanent riverboat owner's license by the Indiana Gaming Commission, (v) a finding of unsuitability of Indiana Gaming L.P. by the Indiana Gaming Commission, (vi) the revocation or suspension of Indiana Gaming L.P.'s riverboat owner's license by the Indiana Gaming Commission which results in the loss of the legal right to operate the Lawrenceburg Casino, which loss continues for a period of 90 days or (vii) a finding of unsuitability of the Company or any of its subsidiaries by the Indiana Gaming Commission. "QUALIFIED CAPITAL STOCK" means any Capital Stock of the Company that is not Disqualified Capital Stock. "QUALIFIED EXCHANGE" means (i) any legal defeasance, redemption, retirement, repurchase or other acquisition of Capital Stock or Indebtedness of the Company issued on or after the Issue Date with the Net Cash Proceeds received by the Company from the substantially concurrent sale of Qualified Capital Stock, (ii) any exchange of Qualified Capital Stock for any Capital Stock or Indebtedness issued on or after the Issue Date or (iii) any exchange of Qualified Capital Stock for, or purchase with the net proceeds of a concurrent sale of Qualified Capital Stock of, any equity interest in Indiana Gaming L.P. not owned by a Subsidiary of the Company or an Unrestricted Subsidiary. "QUALIFIED GAMING VENTURE" means any person (other than Indiana Gaming L.P. and The Indiana Gaming Company) in which the Company owns an equity interest (a) which operates a Material Casino and any Related Business (b) which pursuant to contract or otherwise gives the right to direct or manage the day-to-day operation of such Material Casino to the Company or a Subsidiary of the Company, and (c) which either (i) does not have any consensual restriction on its ability to pay dividends or make other distributions to or on behalf of, or to pay any obligations to or on behalf of, or otherwise to transfer assets or property to or on behalf of, or make or pay any loans or advance to or on behalf of the Company or any Subsidiary, except for such exceptions generally contained in "Limitation on Dividends and Other Payment Restrictions Affecting Subsidiaries" or (ii) is operated pursuant to a management contract with the Company or one of its Subsidiaries at a management fee of no less than 2% of net win. "REFERENCE PERIOD" with regard to any person means the four full fiscal quarters (or such lesser period during which such person has been in existence) ended immediately preceding any date upon which any determination is to be made pursuant to the terms of the Notes or the Indenture. "REFINANCING INDEBTEDNESS" means Indebtedness or Disqualified Capital Stock (a) issued in exchange for, or the proceeds from the issuance and sale of which are used substantially concurrently to repay, redeem, defease, refund, refinance, discharge or otherwise retire for value, in whole or in part, or (b) constituting an amendment, modification or supplement to, or a deferral or renewal of ((a) and (b) above are, collectively, a "Refinancing"), any Indebtedness or Disqualified Capital Stock in a principal amount or, in the case of Disqualified Capital Stock, liquidation preference, not to exceed (i) the principal amount or, in the case of Disqualified Capital Stock, liquidation preference, of the Indebtedness or Disqualified Capital Stock so 100 Refinanced plus the amount of any premium paid in connection with such refinancing in accordance with the terms of documents governing the Indebtedness being refinanced and reasonable and customary fees and expenses incurred in connection with the Refinancing or (ii) if such Indebtedness being Refinanced was issued with an original issue discount, the accreted value thereof (as determined in accordance with GAAP) at the time of such Refinancing plus the amount of any premium paid in connection with such refinancing in accordance with the terms of documents governing the Indebtedness being refinanced and reasonable and customary fees and expenses incurred in connection with the Refinancing; PROVIDED that (A) any Refinancing Indebtedness incurred by any Subsidiary of the Company shall only be used to refinance outstanding Indebtedness or Disqualified Capital Stock of such Subsidiary, (B) Refinancing Indebtedness shall (x) not have an Average Life shorter than the Indebtedness or Disqualified Capital Stock to be so refinanced at the time of such Refinancing (or, if such Refinancing Indebtedness relates to the Convertible Notes, shorter than the Notes) and (y) in all respects, be no less subordinated or junior, if applicable, to the rights of the Noteholders than was the Indebtedness or Disqualified Capital Stock to be refinanced and (C) such Refinancing Indebtedness shall have a final stated maturity no earlier than the final stated maturity of the Indebtedness or Disqualified Capital Stock to be so refinanced which was scheduled to come due prior to the Stated Maturity (or, if such Refinancing Indebtedness relates to the Convertible Notes, no earlier than the Stated Maturity). "RELATED BUSINESS" means the gaming business and other businesses necessary for, incident to, connected with, arising out of, or developed or operated to permit or facilitate the conduct or pursuit of the gaming business (including developing or operating lodging facilities, sports or entertainment facilities, retail facilities, restaurants, night clubs, transportation and communications services or other related activities or enterprises and any additions or improvements thereto) and potential opportunities in the gaming business. "RESTRICTED PAYMENT" means, with respect to any person, (a) the declaration or payment of any dividend or other distribution in respect of Capital Stock of such person or any parent or Subsidiary of such person, (b) any payment on account of the purchase, redemption or other acquisition or retirement for value of Capital Stock of such person or any Subsidiary or parent of such person, (c) other than with the proceeds from the substantially concurrent sale of, or in exchange for, Refinancing Indebtedness any purchase, redemption, or other acquisition or retirement for value of, any payment in respect of any amendment of the terms of or any defeasance of, any Junior Indebtedness, directly or indirectly, by such person or a parent or Subsidiary of such person prior to the scheduled maturity, any scheduled repayment of principal, or scheduled sinking fund payment, as the case may be, of such Indebtedness and (d) any Investment by such person, other than a Permitted Investment; PROVIDED, HOWEVER, that the term "Restricted Payment" does not include (i) any dividend, distribution or other payment on or with respect to Capital Stock of an issuer to the extent payable solely in shares of Qualified Capital Stock of such issuer; or (ii) any dividend, distribution or other payment to the Company, or to any of its wholly owned Subsidiaries, by any of its Subsidiaries. "SIGNIFICANT SUBSIDIARY" means, at the time of determination, any Subsidiary of the Company that (a) accounted for more than 10% of the consolidated net income of the Company for the most recently completed fiscal year of the Company or (b) was the owner of more than 10% of the consolidated assets of the Company as of the end of such fiscal year, all as shown on the consolidated financial statements of the Company for such fiscal year. "SPECIFIED PARCELS" means either of the two defined parcels of real estate at the Riverside or Baton Rouge properties set aside for hotel development. "STATED MATURITY," when used with respect to any Note, means June 1, 2004. "SUBORDINATED INDEBTEDNESS" means Indebtedness of the Company or a Guarantor, as applicable, that is subordinated in right of payment to the Notes or such Guarantor's guarantee of the Notes, as applicable, in all respects and has no scheduled installment of principal due, by maturity, redemption, sinking fund payment or otherwise, on or prior to the Stated Maturity of the Notes. "SUBSIDIARY," with respect to any person, means (i) a corporation a majority of whose Capital Stock with voting power, under ordinary circumstances, to elect directors is at the time, directly or indirectly, owned by 101 such person, by such person and one or more Subsidiaries of such person or by one or more Subsidiaries of such person, (ii) any other person (other than a corporation) in which such person, one or more Subsidiaries of such person, or such person and one or more Subsidiaries of such person, directly or indirectly, at the date of determination thereof has at least majority ownership interest, or (iii) a partnership in which such person or a Subsidiary of such person is, at the time, a general partner. Notwithstanding the foregoing, no Unrestricted Subsidiary, including Indiana Gaming L.P., shall be considered a Subsidiary of the Company or of any Subsidiary of the Company. "UNRESTRICTED SUBSIDIARY" means any direct or indirect subsidiary of the Company that does not own any Capital Stock of, or own or hold any Lien on any property of, the Company or any other Subsidiary of the Company and that shall be designated an Unrestricted Subsidiary by the Board of Directors of the Company; PROVIDED that (i) such subsidiary shall not engage, to any substantial extent, in any line or lines of business activity other than a Related Business and (ii) neither immediately prior thereto nor after giving pro forma effect to such designation would there exist a Default or Event of Default. The Board of Directors of the Company may designate any Unrestricted Subsidiary to be a Subsidiary, PROVIDED that (i) no Default or Event of Default is existing or will occur as a consequence thereof and (ii) immediately after giving effect to such designation, on a PRO FORMA basis, the Company could incur at least $1.00 of Indebtedness pursuant to the Indebtedness Incurrence Ratio in paragraph (a) of the covenant "Limitation on Incurrence of Additional Indebtedness and Disqualified Capital Stock." Each such designation shall be evidenced by filing with the Trustee a certified copy of the resolution giving effect to such designation and an Officers' Certificate certifying that such designation complied with the foregoing conditions. Indiana Gaming L.P. and Iowa Development Corp. shall initially be designated Unrestricted Subsidiaries. Notwithstanding anything herein to the contrary, no subsidiary of the Company with an interest in Indiana Gaming L.P. may become an Unrestricted Subsidiary. CASH COLLATERAL AND DISBURSEMENT AGREEMENT Pursuant to the terms of the Indenture, the Company, the Trustee and LaSalle National Trust, N.A., as disbursement agent, entered into a Cash Collateral and Disbursement Agreement pursuant to which $94.3 million of the proceeds of the offering of the Old Notes was deposited into a disbursement account subject to the control of the disbursement agent. Funds in the disbursement account are available to fund the Company's pro rata share of Lawrenceburg Casino project disbursements. Funds may be released from the disbursement account upon certification by the Company to the disbursement agent (i) as to the proposed use of the project disbursement in the Lawrenceburg Casino project in conformity with the construction budget, (ii) that the amounts held in the disbursement account plus amounts contractually obligated to be contributed by Conseco and third party equipment financing are sufficient to complete the Lawrenceburg Casino project, (iii) that Conseco is no more than 90 days past due on any prior capital call, PROVIDED, HOWEVER, that any amounts not funded by Conseco that have been funded by the Company (other than through the disbursement account) in an aggregate amount not to exceed $10 million at any one time will not be considered past due and (iv) as to the satisfaction of certain other conditions. A portion of the funds may also be released to the Company from the disbursement account upon completion of the Lawrenceburg Casino project and upon funding of hotel construction by third party lenders. The total amount of disbursements made by the disbursement agent shall not exceed $35 million prior to the next time the certificate of suitability granted by the Indiana Gaming Commission to Indiana Gaming L.P. is formally renewed or extended by the Indiana Gaming Commission for at least 120 days or, if earlier, the date gaming operations are commenced with at least 950 gaming positions at the temporary gaming facility in Lawrenceburg. No disbursements may be made at any time if (i) Indiana Gaming L.P.'s certificate of suitability has been revoked or canceled or has expired or been suspended and has not been renewed by the Indiana Gaming Commission prior to issuance of a riverboat owner's license, (ii) Indiana Gaming L.P.'s application for a permanent riverboat owner's license is denied by the Indiana Gaming Commission, (iii) Indiana Gaming L.P. is found unsuitable by the Indiana Gaming Commission, (iv) Indiana Gaming L.P. has its riverboat owner's license revoked or suspended by the Indiana Gaming Commission, (v) the Company or any of its subsidiaries is found unsuitable by the Indiana Gaming Commission, or (vi) the Company, its subsidiaries or Indiana Gaming L.P. shall have received notice from the Indiana Gaming Commission of the commencement of proceedings by the Indiana Gaming Commission, the stated purpose of which is to formally consider taking any of the foregoing actions. The agreement grants the Trustee a first priority security interest in the 102 disbursement account, and permits the Trustee the right to access the disbursement account for certain payments of principal and interest, including the offer to purchase described under "Certain Covenants Relating to the Lawrenceburg Casino -- Repurchase of Notes on Certain Project Delays." BOOK ENTRY, DELIVERY AND FORM Except as set forth below, the Exchange Notes will initially be issued in the form of one or more registered Notes in global form (the "Global Notes"). Each Global Note will be deposited on the date of the acceptance for exchange of the Old Notes and the issuance of the Exchange Notes (the "Closing Date") with, or on behalf of, The Depository Trust Company (the "Depository") and registered in the name of Cede & Co., as nominee of the Depository. The Depository has advised the Company that it is a limited-purpose trust company that was created to hold securities for its participating organizations (collectively, the "Participants") and to facilitate the clearance and settlement of transactions in such securities between Participants through electronic book-entry changes in accounts of its Participants. The Depository's Participants include securities brokers and dealers (including the Initial Purchasers), banks and trust companies, clearing corporations and certain other organizations. Access to the Depository's system is also available to other entities such as banks, brokers, dealers and trust companies (collectively, the "Indirect Participants") that clear through or maintain a custodial relationship with a Participant, either directly or indirectly. The Company expects that pursuant to procedures established by the Depository (i) upon deposit of the Global Notes, the Depository will credit the accounts of Participants designated by the Initial Purchasers with an interest in the Global Notes and (ii) ownership of the Exchange Notes will be shown on, and the transfer of ownership thereof will be effected only through, records maintained by the Depository (with respect to the interests of Participants), the Participants and the Indirect Participants. The laws of some states require that certain persons take physical delivery in definitive form of securities that they own and that security interests in negotiable instruments can only be perfected by delivery of certificates representing the instruments. Consequently, the ability to transfer Exchange Notes or to pledge the Exchange Notes as collateral will be limited to such extent. So long as the Depository or its nominee is the registered owner of a Global Note, the Depository or such nominee, as the case may be, will be considered the sole owner or holder of the Exchange Notes represented by such Global Note for all purposes under the Indenture. Except as provided below, owners of beneficial interests in a Global Note will not be entitled to have Exchange Notes represented by such Global Note registered in their names, will not receive or be entitled to receive physical delivery of Certificated Securities, and will not be considered the owners or holders thereof under the Indenture for any purpose, including with respect to the giving of any directions, instructions or approvals to the Trustee thereunder. As a result, the ability of a person having a beneficial interest in Exchange Notes represented by a Global Note to pledge such interest to persons or entities that do not participate in the Depository's system, or to otherwise take actions with respect to such interest, may be affected by the lack of a physical certificate evidencing such interest. Accordingly, persons owning a beneficial interest in a Global Note must rely on the procedures of the Depository and, if such person is not a Participant or an Indirect Participant, on the procedures of the Participant through which such person owns its interest to exercise any rights of a holder under the Indenture or such Global Note. The Company understands that under existing industry practice, in the event the Company requests any action of Noteholders or a person that is an owner of a beneficial interest in a Global Note desires to take any action that the Depository, as the holder of such Global Note, is entitled to take, the Depository would authorize the Participants to take such action and the Participants would authorize persons owning through such Participants to take such action or would otherwise act upon the instructions of such persons. Neither the Company nor the Trustee will have any responsibility or liability for any aspect of the records relating to or payments made on account of Exchange Notes by the Depository, or for maintaining, supervising or reviewing any records of the Depository relating to such Exchange Notes. 103 Payments with respect to the principal of, premium, if any, and interest of any Exchange Notes represented by a Global Note registered in the name of the Depository or its nominee on the applicable record date will be payable by the Trustee to or at the direction of the Depository or its nominee in its capacity as the registered Holder of the Global Note representing such Exchange Notes under the Indenture. Under the terms of the Indenture, the Company and the Trustee may treat the persons in whose names the Exchange Notes, including the Global Notes, are registered as the owners thereof for the purpose of receiving such payments and for any and all other purposes whatsoever. Consequently, neither the Company nor the Trustee has or will have any responsibility or liability for the payment of such amounts to beneficial owners of Exchange Notes (including principal, premium, if any, and interest), or to immediately credit the accounts of the relevant Participants with such payment, in amounts proportionate to their respective holdings in principal amount of beneficial interest in the Global Note as shown on the records of the Depository. Payments by the Participants and the Indirect Participants to the beneficial owners of Exchange Notes will be governed by standing instructions and customary practice and will be the responsibility of the Participants or the Indirect Participants. CERTIFICATED SECURITIES If (i) the Company notifies the Trustee in writing that the Depository is no longer willing or able to act as a depository and the Company is unable to locate a qualified successor within 90 days or (ii) the Company, at its option, notifies the Trustee in writing that it elects to cause the issuance of Exchange Notes in definitive form under the Indenture, then, upon surrender by the Depository of its Global Note, Certificated Securities will be issued to each person that the Depository identifies as the beneficial owner of the Exchange Notes represented by the Global Note. In addition, subject to certain conditions, any person having a beneficial interest in a Global Note may, upon request to the Trustee, exchange such beneficial interest for Certificated Securities. Upon any such issuance, the Trustee is required to register such Certificated Securities in the name of such person or persons (or the nominee of any thereof), and cause the same to be delivered thereto. Neither the Company nor the Trustee shall be liable for any delay by the Depository or any Participant or Indirect Participant in identifying the beneficial owners of the related Exchange Notes and each such person may conclusively rely on, and shall be protected in relying on, instructions from the Depository for all purposes (including with respect to the registration and delivery, and the respective principal amounts, of the Exchange Notes to be issued). The information in this section concerning the Depository and the Depository's book-entry system has been obtained from sources that the Company believes to be reliable. The Company will have no responsibility for the performance by the Depository or its Participants of their respective obligations as described hereunder or under the rules and procedures governing their respective operations. SAME-DAY FUNDS SETTLEMENT AND PAYMENT The Indenture requires that payments in respect of the Exchange Notes represented by the Global Notes (including principal, premium, if any, interest and Liquidated Damages, if any) be made by wire transfer of immediately available funds to the accounts specified by the Global Note holder. With respect to Certificated Securities, the Company will make all payments of principal, premium, if any, interest and Liquidated Damages, if any, by wire transfer of immediately available funds to the accounts specified by the holders thereof or, if no such account is specified, by mailing a check to each such holder's registered address. Secondary trading in long-term notes and debentures of corporate issuers is generally settled in clearing-house or next-day funds. In contrast, the Exchange Notes represented by the Global Notes are expected to trade in the Depositary's Same-Day Funds Settlement System, and any permitted secondary market trading activity in such Exchange Notes will, therefore, be required by the Depositary to be settled in immediately available funds. The Company expects that secondary trading in the Certificated Securities will also be settled in immediately available funds. 104 OLD NOTES REGISTRATION RIGHTS; LIQUIDATED DAMAGES In connection with the sale of the Old Notes, the Company, the Guarantors and the Initial Purchasers entered into a registration rights agreement dated June 5, 1996 (the "Registration Rights Agreement") pursuant to which the Company and the Guarantors agreed, for the benefit of the holders of Old Notes, that they will, at their cost, (i) within 30 days after the date of original issue of the Old Notes use their respective reasonable best efforts to file a registration statement in accordance with the Securities Act (a "Exchange Offer Registration Statement") with the Commission with respect to a registered offer to exchange the Old Notes for the Exchange Notes, which will have terms substantially identical in all material respects to the Old Notes and (ii) use their reasonable best efforts to cause such Exchange Offer Registration Statement to be declared effective under the Securities Act within 120 days after such issue date. Upon the Registration Statement being declared effective, the Company will offer to holders of Old Notes who are able to make certain representations an opportunity to exchange properly tendered Old Notes for Exchange Notes. The Company has agreed to keep the Exchange Offer open for not less than 30 days (or longer if required by applicable law) after the date notice of such Exchange Offer is mailed to the holders of Old Notes. For each Old Note surrendered to the Company, pursuant to such Exchange Offer, the holder of such Old Notes will receive Exchange Notes having a principal amount at maturity equal to that of the surrendered Old Note. In the event that applicable interpretations of the staff of the Commission do not permit the Company to effect the Exchange Offer, or if for any other reason the Exchange Offer is not consummated within 165 days of the date of original issue of the Old Notes, the Company and the Guarantors will, at their own expense, use their reasonable best efforts to (a) as promptly as practicable, file a shelf registration statement covering resales of the Old Notes (a "Shelf Registration Statement"), (b) cause such Shelf Registration Statement to be declared effective under the Securities Act and (c) keep effective such Shelf Registration Statement until the earlier of 36 months following the date of original issue and such time as all of the Old Notes have been sold thereunder or otherwise cease to be a Transfer Restricted Security (as defined in the Registration Rights Agreement). The Company and the Guarantors will, in the event a Shelf Registration Statement is required to be filed by them, provide to each holder of the Old Notes copies of the prospectus which is a part of such Shelf Registration Statement, notify each such holder of the Old Notes when such Shelf Registration Statement for the Old Notes has become effective and take certain other actions as are required to permit unrestricted resales of the Old Notes. A holder of the Old Notes who sells such Old Notes pursuant to the Shelf Registration Statement generally would be required to be named as a selling security holder in the related prospectus and to deliver a prospectus to purchasers, will be subject to certain of the civil liability provisions under the Securities Act in connection with such sales and will be bound by the provisions of the Registration Rights Agreement which is applicable to such a holder (including certain indemnification and contribution rights and obligations). If (a) neither the Exchange Offer Registration Statement nor a Shelf Registration Statement is declared effective by the Commission on or prior to the 120th day after the date of original issuance of the Old Notes (the "Effectiveness Target Date"), (b) the Exchange Offer Registration Statement becomes effective and the Company and the Guarantors fail to consummate the Exchange Offer within 45 days of the earlier of the effectiveness of such registration statement or the Effectiveness Target Date, or (c) the Shelf Registration Statement is declared effective but thereafter ceases to be effective or usable in connection with resales of Old Notes during the period specified in the Registration Rights Agreement (each such event referred to in clauses (a) through (c) above a "Registration Default"), then the Company and the Guarantors will pay Liquidated Damages to each Noteholder, with respect to the first 90-day period immediately following the occurrence of such Registration Default in an amount equal to $.05 per week per $1,000 principal amount of Notes held by such holder. Upon a Registration Default, Liquidated Damages will accrue at the rate specified above until such Registration Default is cured and the amount of the Liquidated Damages will increase by an additional $.05 per week per $1,000 principal amount of Notes with respect to each subsequent 90-day period until all Registration Defaults have been cured, up to a maximum amount of Liquidated Damages of $.25 per week per $1,000 principal amount of Notes (regardless of whether one or more than 105 one Registration Default is outstanding). All accrued Liquidated Damages will be paid by the Company and the Guarantors on each Interest Payment Date to the Noteholders by wire transfer of immediately available funds or by mailing checks to their registered addresses if no such accounts have been specified. The summary herein of certain provisions of the Registration Rights Agreement does not purport to be complete and is subject to, and is qualified in its entirety by reference to, all the provisions of the Registration Rights Agreement, a copy of which has been filed as an exhibit to the Registration Statement of which this Prospectus is a part. CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES CERTAIN FEDERAL INCOME TAX CONSEQUENCES TO HOLDERS OF EXCHANGE NOTES The following summary of federal income tax consequences has been prepared by Winston & Strawn. The summary is based on current law and certain proposed regulations and is for general information only. Forthcoming legislative, regulatory, judicial or administrative changes or interpretations could affect the federal income tax consequences to holders of Exchange Notes. The tax treatment of a holder may vary depending upon whether the holder is a cash-method or accrual-method taxpayer and upon the holder's particular status. For example, certain holders, including insurance companies, tax-exempt organizations, financial institutions, broker-dealers and foreign persons may be subject to special rules not discussed below. EXCHANGE OFFER The exchange of Exchange Notes for Old Notes pursuant to the Exchange Offer will not be treated as an "exchange" for federal income tax purposes because the Exchange Notes will not be considered to differ materially in kind or extent from the Old Notes. Rather, the Exchange Notes received by a holder will be treated as a continuation of the Old Notes in the hands of such holder. As a result, there will be no federal income tax consequences to holders exchanging the Old Notes for the Exchange Notes pursuant to the Exchange Offer. The holder must continue to include stated interest in income as if the exchange (and waiver of accrued interest on the Old Notes from June 5, 1996 to the date of issuance of the Exchange Notes) had not occurred. If, however, the exchange of the Old Notes for the Exchange Notes were treated as an "exchange" for federal income tax purposes, such exchange would constitute a recapitalization for federal income tax purposes. Holders exchanging the Old Notes pursuant to such recapitalization would not recognize any gain or loss upon the exchange. SALE OR OTHER DISPOSITION OF EXCHANGE NOTES A holder of an Exchange Note will have a tax basis in the Exchange Note equal to the holder's purchase price for the Old Note, increased by the amount of interest (and market discount) that is included in the holder's gross income and decreased by payments of cash interest received by the holder. A holder of an Exchange Note will generally recognize gain or loss on the sale, exchange, redemption or retirement of the Exchange Note equal to the difference (if any) between the amount realized from such sale, exchange, redemption or retirement and the holder's basis in the Exchange Note. Such gain or loss will generally be long-term capital gain (except to the extent attributable to market discount) or loss if the Exchange Note has been held more than one year (including the period that such holder held the Old Note prior to exchange). BACKUP WITHHOLDING A noncorporate holder of Exchange Notes that either (a) is (i) a citizen or resident of the United States, (ii) a partnership or other entity created or organized in or under the laws of the United States or of any political subdivision thereof or (iii) an estate or trust the income of which is subject to United States federal income taxation regardless of its source or (b) is not described in the preceding clause (a), but whose income from interest with respect to the Exchange Notes or proceeds from the disposition of the Exchange Notes is effectively connected with such holder's conduct of a United States trade or business, and that receives interest with respect to the Exchange Notes or proceeds form the disposition of the Exchange Notes will generally not be subject to backup withholding on such payments or distributions if it certifies, under penalty of perjury, that it has furnished a correct Taxpayer Identification Number ("TIN") and it is not subject to 106 backup withholding either because it has not been notified by the Internal Revenue Service that is subject to backup withholding or because the Internal Revenue Service has notified it that it is no longer subject to backup withholding. Such certification may be made on an Internal Revenue Service Form W-9 or substantially similar form. However, backup withholding will apply to such a holder if the holder (i) fails to furnish its TIN, (ii) furnishes an incorrect TIN, (iii) is notified by the Internal Revenue Service that it has failed to properly report payments of interest or dividends or (iv) under certain circumstances, fails to make such certification. The Company will withhold (at a rate of 31%) all amounts required by law to be withheld from reportable payments made and with respect to the Exchange Notes. Any amounts withheld from a payment to a holder under the backup withholding rules will be allowed as a credit against such holder's United States federal income tax liability and may entitle such holder to a refund, provided that the required information is furnished to the Internal Revenue Service. Holders of the Exchange Notes should consult their tax advisors regarding the application of backup withholding in their particular situations, the availability of an exemption therefrom, and the procedure for obtaining such an exemption, if available. THE FOREGOING DISCUSSION OF CERTAIN FEDERAL INCOME TAX CONSEQUENCES IS FOR GENERAL INFORMATION ONLY AND IS NOT TAX ADVICE. ACCORDINGLY, EACH HOLDER OF EXCHANGE NOTES SHOULD CONSULT ITS OWN TAX ADVISOR AS TO PARTICULAR TAX CONSEQUENCES OF HOLDING, EXCHANGING OR SELLING THE EXCHANGE NOTES INCLUDING THE APPLICATION AND EFFECT OF ANY FEDERAL, STATE, LOCAL OR FOREIGN TAX LAWS, AND OF ANY CHANGES IN APPLICABLE TAX LAWS. PLAN OF DISTRIBUTION Based on interpretations by the Staff set forth in no-action letters issued to third parties, the Company believes that Exchange Notes issued pursuant to the Exchange Offer in exchange for the Old Notes may be offered for resale, resold and otherwise transferred by holders thereof (other than any holder which is (i) an affiliate of the Company, (ii) a broker-dealer who acquired Old Notes directly from the Company or (iii) a broker-dealer who acquired Old Notes as a result of market-making or other trading activities) without compliance with the registration and prospectus delivery provisions of the Securities Act provided that such Exchange Notes are acquired in the ordinary course of such holders' business, and such holders are not engaged in, and do not intend to engage in, and have no arrangement or understanding with any person to participate in, a distribution of such Exchange Notes; provided that broker-dealers ("Participating Broker-Dealers") receiving Exchange Notes in the Exchange Offer will be subject to a prospectus delivery requirement with respect to resales of such Exchange Notes. To date, the Staff has taken the position that Participating Broker-Dealers may fulfill their prospectus delivery requirements with respect to transactions involving an exchange of securities such as the exchange pursuant to the Exchange Offer (other than a resale of an unsold allotment from the sale of the Old Notes to the Initial Purchasers) with the prospectus contained in the registration statement. Pursuant to the Registration Rights Agreement, the Company has agreed to permit Participating Broker-Dealers and other persons, if any, subject to similar prospectus delivery requirements to use this Prospectus in connection with the resale of such Exchange Notes. The Company has agreed that, for a period of 180 days after the Exchange Date, it will make this Prospectus, and any amendment or supplement to this Prospectus, available to any broker-dealer that requests such documents in the Letter of Transmittal. Each holder of the Old Notes who wishes to exchange its Old Notes for Exchange Notes in the Exchange Offer will be required to make certain representations to the Company as set forth in "The Exchange Offer -- Terms and Conditions of the Letter of Transmittal." In addition, each holder who is a broker-dealer and who receives Exchange Notes for its own account in exchange for Old Notes that were acquired by it as a result of market-making activities or other trading activities, will be required to acknowledge that it will deliver a prospectus in connection with any resale by it of such Exchange Notes. 107 The Company will not receive any proceeds from any sale of Exchange Notes by broker-dealers. Exchange Notes received by broker-dealers for their own account pursuant to the Exchange Offer may be sold from time to time in one or more transactions in the over-the-counter market, in negotiated transactions, through the writing of options on the Exchange Notes or a combination of such methods of resale, at market prices prevailing at the time of resale, at prices related to such prevailing market prices or at negotiated prices. Any such resale may be made directly to purchasers or to or through brokers or dealers who may receive compensation in the form of commissions or concessions from any such broker-dealers and/ or the purchasers of any such Exchange Notes. Any broker-dealer that resells Exchange Notes that were received by it for its own account pursuant to the Exchange Offer and any broker or dealer that participates in a distribution of such Exchange Notes may be deemed to be an "underwriter" within the meaning of the Securities Act and any profit on any such resale of Exchange Notes and any commissions or concessions received by any such persons may be deemed to be underwriting compensation under the Securities Act. The Letter of Transmittal states that by acknowledging that it will deliver and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. The Company has agreed to pay all expenses incidental to the Exchange Offer other than commissions and concession of any brokers or dealers and will indemnify holders of the Notes (including any broker-dealers) against certain liabilities, including liabilities under the Securities Act, as set forth in the Registration Rights Agreement. LEGAL MATTERS The validity of the Exchange Notes offered will be passed on for the Company by Winston & Strawn, Chicago, Illinois. EXPERTS The consolidated financial statements of the Company at December 31, 1995 and 1994, and for each of the three years in the period ended December 31, 1995, appearing in this Prospectus and Registration Statement have been audited by Ernst & Young LLP, independent auditors, as set forth in their report thereon appearing elsewhere herein and are included in reliance upon such report given upon the authority of such firm as experts in accounting and auditing. The consolidated financial statements of Jazz Enterprises, Inc. as of February 28, 1995 and 1994, and for the related statements of operations, stockholders' equity (deficit), and cash flows for the years ended February 28, 1995 and 1994 and for the period from June 10, 1992 (date of inception) through February 28, 1993, included in this Prospectus have been audited by Grant Thornton LLP, independent auditors, as stated in their report appearing herein. 108 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE --------- CONSOLIDATED FINANCIAL STATEMENTS OF ARGOSY GAMING COMPANY Report of Independent Auditors............................................................................. F-2 Consolidated Balance Sheets at December 31, 1995 and 1994.................................................. F-3 Consolidated Statements of Income for the years ended December 31, 1995, 1994 and 1993..................... F-4 Consolidated Statements of Cash Flows for the years ended December 31, 1995, 1994 and 1993................. F-5 Consolidated Statements of Stockholders' Equity for the years ended December 31, 1995, 1994 and 1993....... F-6 Notes to Consolidated Financial Statements................................................................. F-7 Condensed Consolidated Balance Sheet at March 31, 1996 (unaudited)......................................... F-15 Condensed Consolidated Statements of Operations for the three months ended March 31, 1996 and 1995 (unaudited)...................................................................................... F-16 Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 1996 and 1995 (unaudited)...................................................................................... F-17 Notes to Condensed Consolidated Financial Statements (unaudited)........................................... F-18 FINANCIAL STATEMENTS OF JAZZ ENTERPRISES, INC. Report of Independent Certified Public Accountants......................................................... F-21 Balance Sheets............................................................................................. F-22 Statements of Operations................................................................................... F-23 Statements of Stockholders Equity (Deficit)................................................................ F-24 Statements of Cash Flows................................................................................... F-25 Notes to Financial Statements.............................................................................. F-27
F-1 REPORT OF INDEPENDENT AUDITORS The Board of Directors Argosy Gaming Company We have audited the accompanying consolidated balance sheets of Argosy Gaming Company as of December 31, 1995 and 1994, and the related consolidated statements of income, stockholders' equity and cash flows for each of the three years in the period ended December 31, 1995. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Argosy Gaming Company at December 31, 1995 and 1994, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 1995, in conformity with generally accepted accounting principles. Ernst & Young LLP Chicago, Illinois January 26, 1996 except for Note 13, as to which the date is July 1, 1996 F-2 ARGOSY GAMING COMPANY CONSOLIDATED BALANCE SHEETS (IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA)
DECEMBER 31, ---------------------- 1995 1994 ---------- ---------- ASSETS Current assets: Cash and cash equivalents............................................................ $ 16,159 $ 18,291 Marketable securities................................................................ 1,952 2,500 Accounts receivable.................................................................. 3,197 2,908 Income taxes receivable.............................................................. 2,197 1,374 Deferred income taxes................................................................ 1,372 1,469 Other current assets................................................................. 3,615 2,792 ---------- ---------- Total current assets............................................................... 28,492 29,334 ---------- ---------- Net property and equipment............................................................. 239,480 167,548 ---------- ---------- Other assets: Notes receivable..................................................................... 1,893 22,956 Deposits............................................................................. 2,051 2,640 Prepaid rent......................................................................... 2,917 4,000 Deferred finance costs, net of accumulated amortization of $1,813 in 1995 and $382 in 1994................................................................................ 5,404 4,393 Goodwill, net of accumulated amortization of $349.................................... 23,519 Other................................................................................ 6,126 1,960 ---------- ---------- Total other assets................................................................. 41,910 35,949 ---------- ---------- Total assets........................................................................... $ 309,882 $ 232,831 ---------- ---------- ---------- ---------- LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable..................................................................... $ 16,921 $ 4,863 Accrued payroll and related expenses................................................. 6,842 4,022 Other accrued liabilities............................................................ 7,364 4,348 Installment contracts payable........................................................ 1,147 7,415 Progressive jackpot liabilities...................................................... 2,656 1,427 Current maturities of long-term debt................................................. 399 431 ---------- ---------- Total current liabilities.......................................................... 35,329 22,506 ---------- ---------- Long-term debt......................................................................... 169,303 115,000 Deferred income taxes.................................................................. 5,167 1,750 Minority interests..................................................................... 2,543 2,988 Commitments and contingent liabilities (Note 11) Stockholders' equity: Common stock, $.01 par; 60,000,000 shares authorized; 24,333,333 shares issued and outstanding in 1995 and 1994........................................................ 243 243 Capital in excess of par............................................................. 71,865 71,865 Retained earnings.................................................................... 25,432 18,479 ---------- ---------- Total stockholders' equity......................................................... 97,540 90,587 ---------- ---------- Total liabilities and stockholders' equity............................................. $ 309,882 $ 232,831 ---------- ---------- ---------- ----------
See accompanying notes to consolidated financial statements. F-3 ARGOSY GAMING COMPANY CONSOLIDATED STATEMENTS OF INCOME (IN THOUSANDS, EXCEPT PER SHARE DATA)
YEARS ENDED DECEMBER 31, --------------------------------- 1995 1994 1993 ---------- ---------- --------- REVENUES: Casino....................................................................... $ 237,613 $ 138,425 $ 60,182 Admissions................................................................... 15,300 12,177 6,440 Food, beverage and other..................................................... 18,537 12,036 4,381 ---------- ---------- --------- 271,450 162,638 71,003 Less promotional allowances.................................................. (18,759) (9,593) (3,478) ---------- ---------- --------- Net revenues................................................................... 252,691 153,045 67,525 ---------- ---------- --------- COSTS AND EXPENSES: Casino....................................................................... 117,725 64,997 25,308 Food, beverage and other..................................................... 17,242 11,876 4,490 Other operating expenses..................................................... 16,910 9,897 5,078 Selling, general and administrative.......................................... 45,814 23,674 8,903 Depreciation and amortization................................................ 20,450 9,846 3,333 Development and preopening costs............................................. 3,411 9,761 4,609 Notes receivable writeoff.................................................... 3,477 Flood costs.................................................................. 1,477 ---------- ---------- --------- 225,029 130,051 53,198 ---------- ---------- --------- Income from operations......................................................... 27,662 22,994 14,327 ---------- ---------- --------- OTHER INCOME (EXPENSE): Interest income.............................................................. 436 1,081 1,254 Interest expense............................................................. (14,708) (8,182) (800) ---------- ---------- --------- (14,272) (7,101) 454 ---------- ---------- --------- Income before income taxes and minority interest............................... 13,390 15,893 14,781 Income tax expense............................................................. (6,621) (6,453) (3,956) Minority interest.............................................................. 184 195 ---------- ---------- --------- Net income..................................................................... $ 6,953 $ 9,635 $ 10,825 ---------- ---------- --------- ---------- ---------- --------- Net income per share........................................................... $ .29 $ .40 ---------- ---------- ---------- ---------- Pro forma net income per share (Note 8)........................................ $ .38 --------- ---------
See accompanying notes to consolidated financial statements. F-4 ARGOSY GAMING COMPANY CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS)
YEARS ENDED DECEMBER 31, ------------------------------------ 1995 1994 1993 ---------- ----------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income.................................................................. $ 6,953 $ 9,635 $ 10,825 Adjustments to reconcile net income to net cash provided from operating activities:................................................................ Depreciation and amortization............................................. 21,880 10,452 3,486 Deferred income taxes..................................................... 4,381 830 (699) Notes receivable writeoff................................................. 3,477 Minority interests........................................................ 184 Changes in operating assets and liabilities net of the effects of the purchase of Jazz Enterprises, Inc.: Accounts receivable..................................................... (289) (2,387) (422) Other current assets.................................................... (699) (1,198) (345) Accounts payable........................................................ 12,058 1,761 2,698 Accrued liabilities..................................................... 2,810 5,405 1,535 Income taxes receivable................................................. (823) 285 (1,659) ---------- ----------- ----------- Net cash provided from operating activities............................. 49,932 24,783 15,419 ---------- ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Sales of marketable securities............................................ 548 4,250 122,975 Purchases of marketable securities........................................ (129,725) Increase in notes receivable.............................................. (5,178) (9,606) (13,350) Purchases of property and equipment....................................... (71,854) (112,013) (36,027) Acquisition of business................................................... (9,388) Deposits.................................................................. (772) (1,345) (9,307) ---------- ----------- ----------- Net cash used in investing activities................................... (86,644) (118,714) (65,434) ---------- ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from line of credit.............................................. 49,500 44,400 Repayment of line of credit............................................... (4,000) (44,400) Payments on installment contracts......................................... (6,268) (3,124) (3,009) Proceeds from issuance of long-term debt.................................. 115,000 Payments on long-term debt................................................ (186) (3,901) (17,093) Increase in deferred finance costs........................................ (2,441) (4,775) Proceeds from public offering, net of expenses of $7,657.................. 74,676 Capital contribution from partner......................................... 1,718 Other..................................................................... (3,743) 1,618 96 ---------- ----------- ----------- Net cash provided from financing activities............................. 34,580 104,818 54,670 ---------- ----------- ----------- Net (decrease) increase in cash and cash equivalents........................ (2,132) 10,887 4,655 Cash and cash equivalents, beginning of year................................ 18,291 7,404 2,749 ---------- ----------- ----------- Cash and cash equivalents, end of year...................................... $ 16,159 $ 18,291 $ 7,404 ---------- ----------- ----------- ---------- ----------- -----------
See accompanying notes to consolidated financial statements. F-5 ARGOSY GAMING COMPANY CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (IN THOUSANDS, EXCEPT SHARE DATA)
CAPITAL IN TOTAL COMMON EXCESS OF RETAINED STOCKHOLDERS' SHARES STOCK PAR EARNINGS EQUITY ------------ ----------- ------------ --------- ------------ Balance, December 31, 1992....................... 20,000,000 $ 200 $ 13 $ 2,599 $ 2,812 Sale of common stock........................... 4,333,333 43 74,633 74,676 Distributions to stockholders.................. (7,361) (7,361) Termination of S-Corporation election.......... (2,781) 2,781 Net income..................................... 10,825 10,825 ------------ ----- ------------ --------- ------------ Balance, December 31, 1993....................... 24,333,333 243 71,865 8,844 80,952 Net income..................................... 9,635 9,635 ------------ ----- ------------ --------- ------------ Balance, December 31, 1994....................... 24,333,333 243 71,865 18,479 90,587 Net income..................................... 6,953 6,953 ------------ ----- ------------ --------- ------------ Balance, December 31, 1995....................... 24,333,333 $ 243 $ 71,865 $ 25,432 $ 97,540 ------------ ----- ------------ --------- ------------ ------------ ----- ------------ --------- ------------
See accompanying notes to consolidated financial statements. F-6 ARGOSY GAMING COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION Argosy Gaming Company (collectively with its subsidiaries, "Argosy" or "Company") is engaged in the business of providing casino style gaming and related entertainment to the public and, through its subsidiaries, operates riverboat casinos in Alton, Illinois; Riverside, Missouri; Baton Rouge, Louisiana; and Sioux City, Iowa. Indiana Gaming Company, L.P., a limited partnership in which the Company is general partner and holds a 57.5% partnership interest, holds a preliminary certificate of suitability from the Indiana Gaming Commission and is developing a riverboat casino and related entertainment and support facilities in Lawrenceburg, Indiana ("Lawrenceburg Project"). The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. The consolidated financial statements include the accounts of Argosy and its controlled subsidiaries and partnerships. All significant intercompany transactions have been eliminated. Under certain conditions subsidiaries are required to obtain approval of state gaming authorities before making distributions to Argosy. CASH AND CASH EQUIVALENTS -- The Company considers cash and all highly liquid investments with an original maturity of three months or less to be cash equivalents. MARKETABLE SECURITIES -- Marketable securities, classified as available for sale, are recorded at fair market value which approximates cost. PROPERTY AND EQUIPMENT -- Property and equipment is recorded at cost. Depreciation and amortization is computed on the straight-line method over the following estimated useful lives: Leasehold improvements: 5 to 31 years Riverboats, docks and improvements: 5 to 20 years Furniture, fixtures and equipment: 5 to 10 years DEFERRED FINANCE COSTS -- Deferred finance costs are amortized over the life of the respective loans using the effective interest method. GOODWILL -- Goodwill represents the cost in excess of fair value of net assets acquired and is being amortized over 40 years. CASINO REVENUES AND PROMOTIONAL ALLOWANCES -- The Company recognizes as casino revenues the net win from gaming activities, which is the difference between gaming wins and losses. The retail value of admissions and food and beverage, which were provided to customers without charge, has been included in revenues, and a corresponding amount has been deducted as promotional allowances. The estimated cost of providing promotional allowances has been included in costs and expenses as follows:
YEARS ENDED DECEMBER 31, ------------------------------- 1995 1994 1993 --------- --------- --------- Admissions....................................................... $ 4,601 $ 3,399 $ 1,015 Food, beverage and other......................................... 2,989 2,775 213
ADMISSIONS REVENUE -- Admissions revenue is recognized at the time the related service is performed. ADVERTISING COSTS -- The Company expenses advertising costs as incurred. Advertising expense was $7,908, $4,448 and $2,149 in 1995, 1994, and 1993 respectively. DEVELOPMENT AND PREOPENING COSTS -- Development costs incurred in an effort to identify and develop new gaming locations are expensed as incurred, as there can be no assurance that such costs, if capitalized, would be realizable. Preopening costs are expensed as incurred. F-7 ARGOSY GAMING COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) INCOME TAXES -- Prior to a reorganization that occurred on February 25, 1993 (in connection with the Company's initial public offering), the Company's predecessor entities elected to be taxed as S-Corporations. Therefore, all federal and certain state taxes were obligations of the individual stockholders of the predecessor companies. The predecessor entities were, however, subject to Illinois Replacement Tax, which is an S-Corporation level tax based on income. The replacement tax rate was 1.5 percent for the period prior to the reorganization. Effective with the reorganization, the Company became subject to applicable federal and state income taxes and, as a result, adopted the liability method in accounting for income taxes. The effect of this change in tax status was to increase net income for the year ended December 31, 1993, by $632. RECLASSIFICATIONS -- Certain amounts in prior years' financial statements have been reclassified to conform to the 1995 presentation. 2. PROPERTY AND EQUIPMENT Property and equipment consists of the following:
DECEMBER 31, ---------------------- 1995 1994 ---------- ---------- Land...................................................................................... $ 18,828 $ 6,555 Leasehold and shore improvements.......................................................... 14,449 14,561 Riverboats, docks and improvements........................................................ 113,707 109,957 Furniture, fixtures and equipment......................................................... 48,936 40,249 Construction in progress.................................................................. 77,188 11,892 ---------- ---------- 273,108 183,214 Less accumulated depreciation and amortization............................................ (33,628) (15,666) ---------- ---------- Net property and equipment.............................................................. $ 239,480 $ 167,548 ---------- ---------- ---------- ----------
3. LONG-TERM DEBT Long-term debt consists of the following:
DECEMBER 31, ---------------------- 1995 1994 ---------- ---------- Senior secured line of credit............................................................. $ 45,500 $ Convertible subordinated notes due June 1, 2001, convertible into common stock at $17.70 per share, interest payable semi-annually at 12%......................................... 115,000 115,000 Notes payable, principal and interest payments due quarterly through September 2015, discounted at 10.5%...................................................................... 9,202 Other..................................................................................... 431 ---------- ---------- 169,702 115,431 Less: Current maturities.................................................................. 399 431 ---------- ---------- Long-term debt, less current maturities................................................... $ 169,303 $ 115,000 ---------- ---------- ---------- ----------
On March 8, 1995, the Company entered into a $100 million bank revolving senior secured line of credit ("Credit Facility"). The Credit Facility accrues interest, at the Company's option, at prime plus 1 1/4% or the London Eurodollar lending rate plus 2.5% and expires on December 31, 1997. The weighted average interest rate at December 31, 1995 was 8.5%. The Company also pays a commitment equal to the sum of 50 basis points per annum on the unused portions of the Credit Facility. The Credit Facility is secured by substantially all of the assets of the Company. The Credit Facility is senior to the Company's other long-term debt. F-8 ARGOSY GAMING COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) 3. LONG-TERM DEBT (CONTINUED) Terms of the Credit Facility allow for a $20 million revolving line of credit, to be used for working capital and general corporate purposes and an $80 million expansion line of credit to be used for expansion projects. Availability under the $80 million expansion line decreases quarterly beginning January 1, 1997. At December 31, 1995 outstanding borrowings under the $20 million revolving line of credit were $12 million and borrowings under the $80 million expansion line were $33.5 million. The outstanding principal balance under the Credit Facility of $45,500 at December 31, 1995 approximates fair value. The Credit Facility contains restrictions on the payment of dividends on the Company's common stock and a requirement that any future joint ventures shall be deemed subsidiaries of the Company and, will therefore, be required to be additional secured guarantors under the Credit Facility, as well as other covenants customary in a senior secured financing. The Company anticipates that as of March 31, 1996 it will be unable to comply with certain financial covenants contained in the credit agreement governing the Credit Facility. The Company plans, however, to repay all borrowings outstanding and terminate the Credit Facility with a portion of the net proceeds from a financing which is underway. In the event the financing is not consummated prior to the anticipated covenant violation, the Company believes that the requisite number of banks participating in the Credit Facility will agree to waive the Company's non-compliance with these financial covenants. The convertible subordinated notes ("Notes") are convertible into common stock at anytime and may be redeemed by the Company on or after June 1, 1997, in whole or in part at specified percentages of principal plus accrued and unpaid interest to the date of redemption. The Notes are subordinated to prior payment in full of all senior indebtedness as defined, including such indebtedness incurred in the future. The aggregate fair value of the notes based on the closing NASDAQ Smallcap Market price was approximately $104,075 at December 31, 1995. Interest expense for the years ended December 31, 1995, 1994, and 1993 was $14,708 (net of $3,203 capitalized) $8,182 (net of $1,665 capitalized), and $800, respectively. Maturies of long-term debt at December 31, 1995 for each of the next five fiscal years are as follows: 1996............................................... $ 399 1997............................................... 45,943 1998............................................... 491 1999............................................... 545 2000............................................... 604
F-9 ARGOSY GAMING COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) 4. INCOME TAXES Income tax expense for the years ended December 31, 1995, 1994 and 1993 consists of the following:
1995 1994 1993 --------- --------- --------- Current: Federal.................................................................. $ 1,522 $ 4,316 $ 3,918 State.................................................................... 760 1,307 587 --------- --------- --------- 2,282 5,623 4,505 --------- --------- --------- Deferred: Federal.................................................................. 3,704 815 (483) State.................................................................... 635 15 (66) --------- --------- --------- 4,339 830 (549) --------- --------- --------- Income tax expense......................................................... $ 6,621 $ 6,453 $ 3,956 --------- --------- --------- --------- --------- ---------
The provision for income taxes for the years ended December 31, 1995, 1994 and 1993, differs from that computed at the federal statutory corporate tax rate as follows:
1995 1994 1993 --------- --------- --------- Federal statutory rate...................................................... 35.0% 35.0% 35.0% State income taxes, net of federal benefit.................................. 6.8 5.0 4.8 Prior year taxes............................................................ 4.4 Goodwill amortization....................................................... 0.9 Federal and state benefit of S-Corporation status through February 24, 1993....................................................................... (5.0) Impact of change in tax status on net temporary differences................. (4.3) Tax-exempt interest income.................................................. (0.7) (5.9) Other, net.................................................................. 2.3 1.3 2.2 --- --- --- 49.4% 40.6% 26.8% --- --- --- --- --- ---
The tax effects of significant temporary differences representing deferred tax assets and liabilities at December 31, 1995 and 1994 are as follows:
1995 1994 --------- --------- Depreciation....................................................................... $ (8,684) $ (5,364) Preopening......................................................................... 4,609 3,877 Other, net......................................................................... 876 1,206 --------- --------- (3,199) (281) Valuation allowance................................................................ (595) --------- --------- Net deferred tax liability......................................................... $ (3,794) $ (281) --------- --------- --------- ---------
5. SUPPLEMENTAL CASH FLOW INFORMATION The Company acquired equipment in the amounts of $1,681, $9,564 and $4,025 in 1995, 1994 and 1993 respectively which was financed through installment contracts. In 1993 the Company issued $7,361 in unsecured notes payable to stockholders relating to their fourth quarter 1992 and first quarter 1993 S-Corporation earnings. F-10 ARGOSY GAMING COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) 5. SUPPLEMENTAL CASH FLOW INFORMATION (CONTINUED) The Company paid $16,052, $8,220 and $695 for interest, and $3,105, $5,325 and $5,968 for income taxes in 1995, 1994, and 1993 respectively. 6. LEASES Future minimum lease payments for operating leases with initial terms in excess of one year as of December 31, 1995 are as follows:
YEARS ENDING DECEMBER 31, - ------------------------------------------------------------ 1996........................................................ $ 2,673 1997........................................................ 1,142 1998........................................................ 584 1999........................................................ 429 2000........................................................ 394 Thereafter.................................................. 15,352
Rent expense for the years ended December 31, 1995, 1994, and 1993 was $4,947, $2,221, and $555, respectively. 7. PURCHASE OF JAZZ ENTERPRISES, INC. Effective May 30, 1995 the Company acquired 100% of the stock of Jazz Enterprises, Inc. ("Jazz"), formerly a 10% partner in the Company's Baton Rouge, Louisiana riverboat casino. The acquisition was accounted for as a purchase. Terms of the transaction allowed the Company to acquire Jazz's 10% limited partnership interest in the Company's Baton Rouge casino and all of Jazz's interest in the Catfish Town real estate development. Under terms of the purchase agreement, the Company made initial cash payments to Jazz totalling $8,500 and is required to make additional payments of $1,350 annually for ten years, and payments of $500 annually for the following ten years. The net present value of these additional payments was approximately $9,400 assuming a discount rate of 10.5%, and is included in long-term debt in the December 31, 1995 balance sheet. In addition, the Company forgave loans to Jazz and its principals of approximately $20,700, assumed certain construction obligations, ordinary course accounts payable and other liabilities totalling approximately $7,300 and paid expenses of approximately $900. Under terms of the Purchase Agreement substantially all other obligations of Jazz existing at the time of the purchase remain the responsibility of the former owners of Jazz. The table below sets forth the pro forma historical operating results of the Company for the years ended December 31, 1995 and 1994 giving effect to the acquisition as if the acquisition occurred on January 1, 1994. The Company's fiscal year end is December 31 and Jazz's year end is February 28. The pro forma operating results of the years ended December 31, 1995 and 1994 were prepared using the Company's operating results for the year ended December 31, 1995 and 1994 and Jazz's operating results for period January 1, 1995 F-11 ARGOSY GAMING COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) 7. PURCHASE OF JAZZ ENTERPRISES, INC. (CONTINUED) through May 30, 1995 (the effective date which Jazz became a wholly owned subsidiary of the Company) and the year ended February 28, 1995. Jazz's revenues and net loss for the months of January and February 1995 are immaterial.
YEARS ENDED DECEMBER 31, ---------------------- 1995 1994 ---------- ---------- (UNAUDITED) Net Revenues.................................................................... $ 252,719 $ 153,862 ---------- ---------- ---------- ---------- Income from operations.......................................................... 26,762 18,746 ---------- ---------- ---------- ---------- Interest expense................................................................ 15,480 10,156 ---------- ---------- ---------- ---------- Net income...................................................................... 5,712 5,393 ---------- ---------- ---------- ---------- Net income per share............................................................ .23 .22 ---------- ---------- ---------- ----------
The pro forma condensed statements of operations are not necessarily indicative of either future results of operations or results that might have been achieved if the foregoing transactions had been consummated as of the indicated dates. 8. PRO FORMA NET INCOME PER SHARE Pro forma data presented below for 1993 assumes that the Company's reorganization would have occurred on January 1, 1993 and that the Company would have issued 551,798 additional shares of common stock to retire related party debt of approximately $13,000 on January 1, 1993, and would have incurred federal and state income taxes as a C-Corporation since that date.
YEAR ENDED DECEMBER 31, 1993 ------------- Income before income taxes............................................................... $ 14,781 Reduction in interest charges............................................................ 145 Pro forma income tax expense............................................................. (5,821) ------------- Pro forma net income..................................................................... $ 9,105 ------------- ------------- Pro forma common shares outstanding...................................................... 23,763,513 ------------- -------------
Pro forma income tax expense has been computed under SFAS 109 using an effective tax rate of 39% based on taxable income of approximately $14,926 in 1993. 9. STOCK OPTION PLANS The Company adopted the Argosy Gaming Company Stock Option Plan, as amended, ("Stock Option Plan"), which provides for the grant of non-qualified stock options for up to 2,500,000 shares of common stock to key employees of the Company. As of December 31, 1995, options representing 2,445,253 shares of common stock were outstanding at exercise prices ranging between $16.75 and $19.38 per share. These options expire in December 2003 through August 2005. The Company also has adopted the Argosy Gaming Company 1993 Directors Stock Option Plan ("Directors Option Plan"), which provides for a total of 50,000 shares of common stock to be authorized and F-12 ARGOSY GAMING COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) 9. STOCK OPTION PLANS (CONTINUED) reserved for issuance. The Directors Option Plan provides for the grant of non-qualified stock options at fair market value to non-employee directors of the Company as of the date such individuals become directors of the Company. Under the Directors Option Plan options for 21,000 shares of common stock are outstanding at December 31, 1995 at prices ranging from $11.50 to $19.00. The directors options expire between 1998 and 2000. Options outstanding under these plans at December 31, 1995, are exercisable as follows:
STOCK OPTION DIRECTORS PLAN OPTION PLAN --------- ----------- Currently exercisable............................................................. 569,705 17,000 1996.............................................................................. 465,548 2,000 1997.............................................................................. 460,000 2,000 1998.............................................................................. 460,000 1999.............................................................................. 460,000 2000.............................................................................. 30,000
The Company follows Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees (APB 25) and related interpretations in accounting for its employee stock options. Under APB 25, when the exercise price of employee stock options equals the market price of the underlying stock on the date of grant, no compensation expense is recognized. 10. EMPLOYEES BENEFIT PLAN In 1994, the Company established a 401(k) defined-contribution plan which covers substantially all of its full-time employees. Participants can contribute a maximum of 10% of their eligible salaries (as defined) subject to maximum limits, as determined by provisions of the Internal Revenue Code, and the Company will match 100% of participants' contributions up to 5% of their eligible salaries. Expense recognized under the Plan was approximately $1,708 and $587 in 1995 and 1994, respectively. 11. COMMITMENTS AND CONTINGENT LIABILITIES DEVELOPMENT OPPORTUNITIES LAWRENCEBURG, INDIANA -- On June 30, 1995 Indiana Gaming Company L.P. (the "Indiana Partnership") was awarded a preliminary suitability certificate from the Indiana Gaming Commission to develop a riverboat casino project on the Ohio River in Lawrenceburg, Indiana. The Company is a 57.5% general partner in the Indiana Partnership. Capital contributions to the Indiana Partnership will be made on the same basis as the partners' equity ownership. Funding for the Indiana Partnership is expected to be provided by capital contributions and capital loans by the partners. The partnership's current estimate for the development and construction costs for the Lawrenceburg casino and entertainment project is $210 million. Additionally, under the Lawrenceburg partnership agreement, after the third anniversary date of commencement of operations at the Lawrenceburg Casino, each limited partner has the right to sell its interest to the other partners (pro rata in accordance with their respective percentage interests). F-13 ARGOSY GAMING COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) 11. COMMITMENTS AND CONTINGENT LIABILITIES (CONTINUED) This proposed gaming project is subject to the satisfaction of numerous conditions. Before gaming can commence, the Company must obtain numerous permits and licenses, including licensing for its employees as well as final licensing from the gaming commission of the State. In addition, the Company must construct gaming facilities. There can be no assurance that this proposed gaming project will become operational. OTHER -- A predecessor entity to the Company ("Predecessor"), as a result of a certain shareholder loan transaction, could be subject to federal and certain state income taxes (plus interest and penalties, if any) if it is determined that it failed to satisfy all of the requirements of the S-Corporation provisions of the Internal Revenue Code ("Code") relating to the prohibition concerning a second class of stock. An audit is currently being conducted by the Internal Revenue Service ("IRS") of the Company's federal income tax returns for the 1992 and 1993 tax years and the IRS has asserted the S-Corporation status as one of the issues although the IRS has yet to make a formal claim of deficiency. If the IRS successfully challenges the Predecessor's S-corporation status, the Company would be required to pay federal and certain state income taxes on the Predecessor's taxable income from the commencement of its operations until February 25, 1993 (plus interest and penalties, if any, thereon until the date of payment). If the Predecessor was required to pay federal and state income taxes on its taxable earnings through February 25, 1993, such payments could amount to approximately $11,400, including interest through December 31, 1995, but excluding penalties, if any. While the Company believes the Predecessor has legal authority for its position that it is not subject to federal and certain state income taxes because it met the S-Corporation requirements, no assurances can be given that the Predecessor's position will be upheld. This contingent liability could have a material adverse effect on the Company's results of operations, financial condition and cash flows. No provision has been made for this contingency in the accompanying consolidated financial statements. 12. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
FIRST SECOND THIRD FOURTH --------- --------- --------- --------- 1995: Net revenues.......................................................... $ 60,374 $ 65,162 $ 66,637 $ 60,518 Income from operations................................................ 6,221 10,028 6,585 4,828 Other expense, net.................................................... 3,844 3,859 3,879 2,690 Net income............................................................ 1,468 3,312 1,654 519 Net income per share.................................................. .06 .14 .07 .02 1994: Net revenues.......................................................... $ 22,906 $ 26,269 $ 44,323 $ 59,547 Income from operations................................................ 2,333 3,481 5,433 11,747 Other expense, net.................................................... 138 948 2,371 3,644 Net income............................................................ 1,341 1,491 1,837 4,966 Net income per share.................................................. .06 .06 .08 .20
- ------------ (a) Income from operations for the third quarter of 1995 includes a charge of $3,477 related to the writeoff of a note receivable. F-14 ARGOSY GAMING COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) 13. SUBSEQUENT EVENT On May 31, 1996, the Company issued $235,000,000 of 13 1/4% First Mortgage Notes due 2004 (the "Notes") in a private placement transaction. On July 1, 1996, the Company filed a Registration Statement on Form S-4 to effect an exchange of the privately placed Notes with identical Notes registered with the Securities and Exchange Commission. The Notes rank senior in right of payment to all existing and future indebtedness of the Company. The Notes are secured, subject to certain prior liens, by a first lien on (i) substantially all of the assets of the Company including the assets used in the Company's Alton, Riverside, Baton Rouge, and Sioux City operations, (ii) a pledge of all the capital stock of, and partnership interests in, the Company's subsidiaries, excluding the Company's partnership interest in its Sioux City property, (iii) a pledge of the intercompany notes payable to the Company from its subsidiaries and (iv) an assignment of the proceeds of the management agreement relating to the proposed Lawrenceburg Casino project. The collateral for the notes does not include assets of the Company's Lawrenceburg Casino project. The following tables present summarized balance sheet and operating statement information of the Company as of December 31, 1995 and 1994 and for each of the years in the three year period ended December 31, 1995. The column labeled "Parent Company" represents the holding company for each of the Company's direct subsidiaries, the column labeled "Guarantors" represents each of the Company's direct subsidiaries, all of which are wholly-owned by the parent company, and the column labeled "Non-Guarantors" represents the partnerships which operate the Company's casino in Sioux City and its proposed casino in Lawrenceburg, Indiana. Summarized balance sheet information as of December 31, 1995 and 1994 is as follows:
DECEMBER 31, 1995 ---------------------------------------------------------------- PARENT NON- COMPANY GUARANTORS GUARANTORS ELIMINATIONS CONSOLIDATED ---------- ----------- ----------- ------------ ------------ Assets: Current assets............................... $ 5,998 $ 25,562 $ 2,904 $ (5,972) $ 28,492 Non-current assets........................... 259,670 259,418 21,140 (258,838) 281,390 ---------- ----------- ----------- ------------ ------------ $ 265,668 $ 284,980 $ 24,044 $ (264,810) $ 309,882 ---------- ----------- ----------- ------------ ------------ ---------- ----------- ----------- ------------ ------------ Liabilities and Equity: Current liabilities.......................... $ 6,648 $ 27,316 $ 3,861 $ (2,496) $ 35,329 Noncurrent liabilities....................... 161,480 15,533 3,401 (3,401) 177,013 Shareholder's equity......................... 97,540 242,131 16,782 (258,913) 97,540 ---------- ----------- ----------- ------------ ------------ $ 265,668 $ 284,980 $ 24,044 $ (264,810) $ 309,882 ---------- ----------- ----------- ------------ ------------ ---------- ----------- ----------- ------------ ------------ DECEMBER 31, 1994 ---------------------------------------------------------------- PARENT NON- COMPANY GUARANTORS GUARANTORS ELIMINATIONS CONSOLIDATED ---------- ----------- ----------- ------------ ------------ Assets: Current assets............................... $ 8,432 $ 20,665 $ 237 $ -- $ 29,334 Non-current assets........................... 199,759 191,637 4,575 (192,474) 203,497 ---------- ----------- ----------- ------------ ------------ $ 208,191 $ 212,302 $ 4,812 $ (192,474) $ 232,831 ---------- ----------- ----------- ------------ ------------ ---------- ----------- ----------- ------------ ------------ Liabilities and Equity: Current liabilities.......................... $ 2,148 $ 20,358 $ -- $ -- $ 22,506 Noncurrent liabilities....................... 115,456 4,282 -- -- 119,738 Shareholder's equity......................... 90,587 187,662 4,812 (192,474) 90,587 ---------- ----------- ----------- ------------ ------------ $ 208,191 $ 212,302 $ 4,812 $ (192,474) $ 232,831 ---------- ----------- ----------- ------------ ------------ ---------- ----------- ----------- ------------ ------------
F-15 ARGOSY GAMING COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) 13. SUBSEQUENT EVENT (CONTINUED) Summarized operating statement information for the years ended December 31, 1995, 1994 and 1993 is as follows:
DECEMBER 31, 1995 ----------------------------------------------------------------- PARENT NON- COMPANY GUARANTORS GUARANTORS ELIMINATIONS CONSOLIDATED ----------- ----------- ----------- ------------ ------------ Net revenues..................................... $ 4,071 $ 233,205 $ 21,994 $ (6,579) $ 252,691 Costs and expenses............................... 14,161 195,517 21,930 (6,579) 225,029 Net interest income (expense).................... (8,964) (5,185) (123) -- (14,272) Net income (loss)................................ 6,953 18,101 (59) (18,042) 6,953 DECEMBER 31, 1994 ----------------------------------------------------------------- PARENT NON- COMPANY GUARANTORS GUARANTORS ELIMINATIONS CONSOLIDATED ----------- ----------- ----------- ------------ ------------ Net revenues..................................... $ 4,844 $ 152,654 -- $ (4,453) $ 153,045 Costs and expenses............................... 9,521 124,144 839 (4,453) 130,051 Net interest income (expense).................... (6,620) (481) -- -- (7,101) Net income (loss)................................ (9,635) 17,252 (839) (16,413) 9,635 DECEMBER 31, 1993 ----------------------------------------------------------------- PARENT NON- COMPANY GUARANTORS GUARANTORS ELIMINATIONS CONSOLIDATED ----------- ----------- ----------- ------------ ------------ Net revenues..................................... $ 0 $ 67,525 -- -- $ 67,525 Costs and expenses............................... 3,301 49,362 535 -- 53,198 Net interest income (expense).................... 1,226 (772) -- -- 454 Net income (loss)................................ 10,825 11,035 (535) (10,500) 10,825 ----------- ----------- ----------- ------------ ------------ ----------- ----------- ----------- ------------ ------------
F-16 ARGOSY GAMING COMPANY CONDENSED CONSOLIDATED BALANCE SHEET (IN THOUSANDS, EXCEPT SHARE DATA)
MARCH 31, 1996 ----------- (UNAUDITED) CURRENT ASSETS: Cash and cash equivalents.......................................................................... $ 28,129 Other current assets............................................................................... 12,390 ----------- Total current assets............................................................................. 40,519 ----------- NET PROPERTY AND EQUIPMENT........................................................................... 263,076 OTHER ASSETS: Goodwill........................................................................................... 23,371 Other, net......................................................................................... 17,959 ----------- TOTAL OTHER ASSETS................................................................................. 41,330 ----------- TOTAL ASSETS......................................................................................... $ 344,925 ----------- ----------- CURRENT LIABILITIES: Accounts payable and accrued liabilities........................................................... $ 28,656 Other current liabilities.......................................................................... 7,170 ----------- Total current liabilities........................................................................ 35,826 ----------- LONG-TERM DEBT....................................................................................... 194,803 OTHER LONG-TERM OBLIGATIONS.......................................................................... 17,803 STOCKHOLDERS' EQUITY: Common stock, $.01 par; 60,000,000 shares authorized; 24,333,333 shares issued and outstanding in 1995 and 1994..................................................................................... 243 Capital in excess of par........................................................................... 71,865 Retained earnings.................................................................................. 24,385 ----------- Total stockholders' equity....................................................................... 96,493 ----------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY........................................................... $ 344,925 ----------- -----------
See accompanying notes to condensed consolidated financial statements. F-17 ARGOSY GAMING COMPANY CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS, PER SHARE DATA)
THREE MONTHS ENDED ------------------------ MARCH 31, MARCH 31, 1996 1995 ----------- ----------- (UNAUDITED) (UNAUDITED) REVENUES: Casino................................................................................ $ 58,791 $ 56,593 Admissions............................................................................ 1,995 4,168 Food, beverage and other.............................................................. 6,055 3,703 ----------- ----------- 66,841 64,464 Less: promotional allowances.......................................................... (4,152) (4,090) ----------- ----------- Net revenues............................................................................ 62,689 60,374 COSTS AND EXPENSES: Casino................................................................................ 29,071 28,987 Food, beverage and other.............................................................. 5,276 4,160 Other operating expenses.............................................................. 4,368 3,384 Selling, general and administrative................................................... 14,318 12,577 Depreciation and amortization......................................................... 5,889 4,579 Development and preopening costs...................................................... 1,855 466 ----------- ----------- 60,777 54,153 ----------- ----------- Income from operations.................................................................. 1,912 6,221 ----------- ----------- OTHER INCOME (EXPENSE): Interest income....................................................................... 90 98 Interest expense...................................................................... (4,211) (3,942) ----------- ----------- (4,121) (3,844) ----------- ----------- (Loss) Income before income taxes and minority interests................................ (2,209) 2,377 Income tax benefit (expense)............................................................ 867 (934) Minority interests...................................................................... 295 25 ----------- ----------- Net (loss) income....................................................................... $ (1,047) $ 1,468 ----------- ----------- ----------- ----------- NET (LOSS) INCOME PER SHARE............................................................. $ (.04) $ .06 ----------- ----------- ----------- -----------
See accompanying notes to condensed consolidated financial statements. F-18 ARGOSY GAMING COMPANY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS)
THREE MONTHS ENDED ------------------------ MARCH 31, MARCH 31, 1996 1995 ----------- ----------- (UNAUDITED) (UNAUDITED) CASH FLOWS FROM OPERATING ACTIVITIES: Net (loss) income.................................................................. $ (1,047) $ 1,468 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization...................................................... 6,314 5,026 Minority interests................................................................. (295) (25) Changes in operating assets and liabilities: Other current assets............................................................. (57) (1,746) Accounts payable and accrued liabilities......................................... 841 9,751 ----------- ----------- Net cash provided by operating activities...................................... 5,756 14,474 ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Deposits........................................................................... (132) (19) Increase in notes receivable....................................................... (2,295) Purchases of property and equipment................................................ (29,283) (12,559) ----------- ----------- Net cash used in investing activities.......................................... (29,415) (14,873) ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from line of credit....................................................... 25,500 2,000 Repayments on line of credit....................................................... (2,000) Payments on long-term debt and installment contracts............................... (345) (1,861) Capital contributions from partner................................................. 10,389 Increase in other assets........................................................... 85 (1,811) ----------- ----------- Net cash provided by (used in) financing activities.............................. 35,629 (3,672) ----------- ----------- Net increase (decrease) in cash and cash equivalents................................. 11,970 (4,071) Cash and cash equivalents, beginning of period....................................... 16,159 18,291 ----------- ----------- Cash and cash equivalents, end of period............................................. $ 28,129 $ 14,220 ----------- ----------- ----------- -----------
See accompanying notes to condensed consolidated financial statements. F-19 ARGOSY GAMING COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) 1. BASIS OF PRESENTATION Argosy Gaming Company (collectively with its subsidiaries, "Argosy" or "Company") is engaged in the business of providing casino style gaming and related entertainment to the public and, through its subsidiaries, operates riverboat casinos in Alton, Illinois; Riverside, Missouri; Baton Rouge, Louisiana; and Sioux City, Iowa. Also, Indiana Gaming Company, L.P., a limited partnership in which the Company is general partner and holds a 57.5% partnership interest, holds a preliminary certificate of suitability from the Indiana Gaming Commission and is developing a riverboat casino and related entertainment and support facilities in Lawrenceburg, Indiana ("Lawrenceburg Project"). The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. Interim results may not necessarily be indicative of results which may be expected for any other interim period or for the year as a whole. For further information, refer to the financial statements and footnotes included elsewhere in this Offering Memorandum. The accompanying unaudited condensed consolidated financial statements contain all adjustments which are, in the opinion of management, necessary to present fairly the financial position and the results of operations for the periods indicated. Such adjustments include only normal recurring accruals. Certain 1995 amounts have been reclassified to conform to the 1996 financial statement presentation. 2. SENIOR SECURED LINE OF CREDIT On March 8, 1995, the Company entered into a $100 million revolving secured line of credit, with a group of banks (the "Credit Facility"). The Credit Facility accrues interest, at the Company's option, at prime + 1 1/4% or the London Eurodollar lending rate plus 250 basis points and expires on December 31, 1997. The Credit Facility is secured by substantially all of the assets of the Company. The Credit Facility is senior to the Company's 12% Convertible Subordinated Notes due 2001. Terms of the Credit Facility allow for a $20 million revolving line of credit, to be used for working capital and general corporate purposes and an $80 million expansion line of credit to be used for expansion projects. Availability under the $80 million expansion line decreases beginning January 1, 1997. The Credit Facility contains restrictions on the payment of dividends on the Company's common stock and a requirement that any future joint ventures shall be deemed subsidiaries of the Company and, will therefore, be required to be additional secured guarantors under the credit agreement, as well as other covenants customary in a senior secured financing. On May 15, 1996, the Company obtained a waiver from compliance with certain financial covenants from the banks participating in the Credit Facility. This waiver is valid until June 28, 1996. The Company plans to consummate a proposed $235 million offering of first mortgage notes prior to June 28, 1996 and to repay all borrowings outstanding under and terminate the Credit Facility with a portion of the net proceeds from the proposed financing. 3. ACQUISITION OF JAZZ ENTERPRISES, INC. Effective May 30, 1995 the Company acquired 100% of the stock of Jazz Enterprises, Inc. ("Jazz"), formerly a 10% partner in the Company's Baton Rouge, Louisiana riverboat casino. The acquisition was accounted for as a purchase. Terms of the transaction allowed the Company to acquire Jazz's 10% limited partnership interest in the Company's Baton Rouge Casino, all of Jazz's interest in the Catfish Town real estate development and allowed the Company to extinguish the external lease fee between the Baton Rouge Casino and Jazz. F-20 ARGOSY GAMING COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) 3. ACQUISITION OF JAZZ ENTERPRISES, INC. (CONTINUED) Under terms of the purchase agreement the Company made initial payments to Jazz totalling $8,500 and is required to make additional payments of $1,350 annually for ten years, and payments of $500 annually for the following ten years. The net present value of these additional payments was approximately $9,400, at the date of acquisition, assuming a discount rate of 10.5%. In addition, the Company forgave loans to Jazz and its principals of approximately $20,700 and assumed certain construction obligations, ordinary course accounts payable and other liabilities totalling approximately $7,300 and paid expenses of approximately $900. Under terms of the Purchase Agreement, substantially all other obligations of Jazz existing at the time of the purchase remain the responsibility of the former owners of Jazz. The table below sets forth the pro forma historical operating results of the Company for the three months ended March 31, 1996 and 1995 giving effect to the acquisition as if the acquisition occurred on January 1, 1995. The Company's fiscal year end is December 31 and Jazz's year end is February 28. The pro forma operating results for the three months ended March 31, 1996 and 1995 were prepared using the Company's and Jazz's historical operating results for the three months ended March 31, 1996 and 1995 respectively.
THREE MONTHS ENDED ------------------------------ MARCH 31, 1996 MARCH 31, 1995 -------------- -------------- Net Revenues........................................................ $ 62,689 $ 60,402 ------- ------- ------- ------- Net Income.......................................................... (1,047) 1,256 ------- ------- ------- ------- Earnings per share.................................................. (.04) .05 ------- ------- ------- -------
The unaudited pro forma condensed statements of operations are not necessarily indicative of either future results of operations or results that might have been achieved if the foregoing transactions had been consummated as of the indicated dates. 4. COMMITMENTS AND CONTINGENT LIABILITIES LAWRENCEBURG, INDIANA DEVELOPMENT -- On June 30, 1995 Indiana Gaming Company L.P. (the "Indiana Partnership") was awarded a preliminary suitability certificate from the Indiana Gaming Commission to develop a riverboat casino project on the Ohio River in Lawrenceburg, Indiana. The Company is a 57.5% general partner in the Indiana Partnership. Capital contributions to the Indiana Partnership, up to a total project cost of $225 million, will be made on the same basis as the partners' equity ownership with any excess project cost being the responsibility of the Company. Funding for the Indiana Partnership is expected to be provided by capital contributions and capital loans by the partners. The partnership's current estimate for the development and construction costs for the Lawrenceburg Project is $210 million. Additionally, under the Lawrenceburg partnership agreement, after the third anniversary date of commencement of operations at the Lawrenceburg Casino, each limited partner has the right to sell its interest to the other partners (pro rata in accordance with their respective percentage interests). This proposed gaming project is subject to the satisfaction of numerous conditions. Before gaming can commence, the Company must obtain numerous permits and licenses, including licensing for its employees as well as final licensing from the gaming commission of the State. In addition, the Company must construct gaming facilities. There can be no assurance that this proposed gaming project will become operational. F-21 ARGOSY GAMING COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) 4. COMMITMENTS AND CONTINGENT LIABILITIES (CONTINUED) OTHER -- A predecessor entity to the Company ("Predecessor"), as a result of a certain shareholder loan transaction, could be subject to federal and certain state income taxes (plus interest and penalties, if any) if it is determined that it failed to satisfy all of the requirements of the S-Corporation provisions of the Internal Revenue Code ("Code") relating to the prohibition concerning a second class of stock. An audit is currently being conducted by the Internal Revenue Service ("IRS") of the Company's federal income tax returns for the 1992 and 1993 tax years and the IRS has asserted the S-Corporation status as one of the issues although the IRS has yet to make a formal claim of deficiency. If the IRS successfully challenges the Predecessor's S-Corporation status, the Company would be required to pay federal and certain state income taxes on the Predecessor's taxable income from the commencement of its operations until February 25, 1993 (plus interest and penalties, if any, thereon until the date of payment). If the Predecessor was required to pay federal and state income taxes on its taxable earnings through February 25, 1993, such payments could amount to approximately $11,600, including interest through March 31, 1996, but excluding penalties, if any. While the Company believes the Predecessor has legal authority for its position that it is not subject to federal and certain state income taxes because it met the S-Corporation requirements, no assurances can be given that the Predecessor's position will be upheld. This contingent liability could have a material adverse effect on the Company's results of operations, financial condition and cash flows. No provision has been made for this contingency in the accompanying condensed consolidated financial statements. The Company is subject, from time to time, to various legal and regulatory proceedings, in the ordinary course of business. The Company believes that these proceedings will not have a material effect on the financial condition of the Company. F-22 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS Board of Directors Jazz Enterprises, Inc. We have audited the accompanying balance sheets of Jazz Enterprises, Inc. as of February 28, 1995 and 1994, and the related statements of operations, stockholders' equity (deficit), and cash flows for the years ended February 28, 1995 and 1994 and for the period from June 10, 1992 (date of inception) through February 28, 1993. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Jazz Enterprises, Inc. as of February 28, 1995 and 1994, and the results of its operations and its cash flows for each of the two years in the period ended February 28, 1995 and for the period June 10, 1992 (date of inception) through February 28, 1993 in conformity with generally accepted accounting principles. Grant Thornton LLP Reno, Nevada July 10, 1995 F-23 JAZZ ENTERPRISES, INC. BALANCE SHEETS ASSETS
FEBRUARY 28, ---------------------------- 1995 1994 MAY 30, ------------- ------------- 1995 ------------- (UNAUDITED) CURRENT ASSETS Cash and cash equivalents......................................... $ 5,572 $ 1,508 $ 140,122 Receivables....................................................... 47,516 47,516 36,394 Due from affiliate................................................ -- -- 175,000 Prepaid expenses.................................................. 161,563 170,794 77,760 ------------- ------------- ------------- Total current assets............................................ 214,651 219,818 429,276 PROPERTY AND EQUIPMENT.............................................. 21,477,253 21,427,872 13,273,609 NOTES RECEIVABLE -- RELATED PARTY................................... 1,892,966 1,861,523 807,203 OTHER ASSETS Escrow deposits................................................... -- -- 255,000 Investment in partnership......................................... 1,550,458 1,550,458 350,232 Deposits.......................................................... 198,247 198,714 231,868 Other assets...................................................... 3,359 3,647 4,791 ------------- ------------- ------------- $ 25,336,934 $ 25,262,032 $ 15,351,979 ------------- ------------- ------------- ------------- ------------- ------------- LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) CURRENT LIABILITIES Bank overdraft.................................................... $ -- $ 234,059 $ -- Short-term borrowings............................................. 1,810,680 1,810,680 -- Short-term borrowings -- related party............................ 7,879,087 7,879,087 -- Notes payable..................................................... 3,352,469 3,352,469 -- Accounts payable.................................................. 490,324 434,651 135,399 Accounts payable -- affiliate..................................... 362,983 182,638 -- Accrued liabilities............................................... 949,936 815,872 54,119 State income taxes payable........................................ 130,000 65,000 37,722 ------------- ------------- ------------- Total current liabilities....................................... 14,975,479 14,774,456 227,240 ------------- ------------- ------------- NOTES PAYABLE....................................................... 15,000,000 15,000,000 17,081,376 ------------- ------------- ------------- COMMITMENTS AND CONTINGENCIES....................................... -- -- -- STOCKHOLDERS' EQUITY (DEFICIT) Common stock, no par value, 100,000 shares authorized, 200 shares issued........................................................... 1 1 1 Additional paid-in capital........................................ 3,194,278 2,547,891 100,000 Accumulated deficit............................................... (7,832,824) (7,060,316) (2,056,638) ------------- ------------- ------------- (4,638,545) (4,512,424) (1,956,637) ------------- ------------- ------------- $ 25,336,934 $ 25,262,032 $ 15,351,979 ------------- ------------- ------------- ------------- ------------- -------------
The accompanying notes are an integral part of these statements. F-24 JAZZ ENTERPRISES, INC. STATEMENTS OF OPERATIONS
PERIOD FROM JUNE 10, 1992 THREE MONTHS ENDED (DATE OF ------------------------ YEAR ENDED FEBRUARY 28, INCEPTION) MAY 30, MAY 31, ---------------------------- THROUGH 1995 1994 1995 1994 FEBRUARY 28, 1993 ----------- ----------- ------------- ------------- ----------------- (UNAUDITED) REVENUES Rental revenue -- buildings....... $ -- $ 245,882 $ 817,346 $ 918,222 $ -- Lease revenue..................... -- -- 812,793 -- -- ----------- ----------- ------------- ------------- ----------------- -- 245,882 1,630,139 918,222 -- ----------- ----------- ------------- ------------- ----------------- COSTS AND EXPENSES Rental expenses................... 47,579 180,299 788,221 497,540 -- Pre-opening expenses Rent expense.................... 6,205 73,196 288,512 159,684 -- Salaries and employee benefits....................... 136,674 227,335 1,361,953 434,672 22,466 Advertising and business promotion...................... 27,200 26,381 66,030 93,492 -- Consulting fees................. 4,668 21,866 30,971 203,413 -- Professional fees............... 120,595 22,595 1,051,244 40,347 1,029 Management fees................. 180,000 180,000 720,000 720,000 120,000 Travel.......................... 9,826 66,869 218,145 291,733 5,930 Other general and administrative costs.......................... 87,631 127,165 457,548 328,960 18,216 Depreciation and amortization... 25,078 14,633 62,118 11,598 172 Write down associated with real estate owned................... -- -- 1,385,680 -- -- ----------- ----------- ------------- ------------- ----------------- 645,456 940,339 6,430,422 2,781,439 167,813 ----------- ----------- ------------- ------------- ----------------- OTHER INCOME (EXPENSE) Interest income................... 31,459 9,213 82,682 12,114 -- Gain on sale of assets............ -- -- 59,757 -- -- Interest expense.................. (93,511) (22,253) (282,259) -- -- ----------- ----------- ------------- ------------- ----------------- (62,052) (13,040) (139,820) 12,114 -- ----------- ----------- ------------- ------------- ----------------- Loss before income tax provision...................... (707,508) (707,497) (4,940,103) (1,851,103) (167,813) INCOME TAX PROVISION................ 65,000 59,990 63,575 37,722 -- ----------- ----------- ------------- ------------- ----------------- NET LOSS........................ $ (772,508) $ (767,487) $ (5,003,678) $ (1,888,825) $ (167,813) ----------- ----------- ------------- ------------- ----------------- ----------- ----------- ------------- ------------- ----------------- NET LOSS PER SHARE.............. $ (3,862.54) $ (3,837.44) $ (25,018.39) $ (9,444.13) $ (839.07) ----------- ----------- ------------- ------------- ----------------- ----------- ----------- ------------- ------------- ----------------- SHARES USED IN CALCULATION...... 200 200 200 200 200 ----------- ----------- ------------- ------------- ----------------- ----------- ----------- ------------- ------------- -----------------
The accompanying notes are an integral part of these statements. F-25 JAZZ ENTERPRISES, INC. STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
COMMON STOCK ADDITIONAL ------------------------ PAID-IN ACCUMULATED SHARES AMOUNT CAPITAL DEFICIT TOTAL ----------- ----------- ------------ ------------- ------------- BALANCE AT FEBRUARY 28, 1993....................... 200 $ 1 $ 100,000 $ (167,813) $ (67,812) Net loss........................................... -- -- -- (1,888,825) (1,888,825) --- --- ------------ ------------- ------------- BALANCE AT FEBRUARY 28, 1994....................... 200 1 100,000 (2,056,638) (1,956,637) Capital contributions.............................. -- -- 2,447,891 -- 2,447,891 Net loss........................................... -- -- -- (5,003,678) (5,003,678) --- --- ------------ ------------- ------------- BALANCE AT FEBRUARY 28, 1995....................... 200 1 2,547,891 (7,060,316) (4,512,424) Capital contributions (unaudited).................. -- -- 646,387 -- 646,387 Net loss (unaudited)............................... -- -- -- (772,508) (772,508) --- --- ------------ ------------- ------------- BALANCE AT MAY 30, 1995 (UNAUDITED)................ 200 $ 1 $ 3,194,278 $ (7,832,824) $ (4,638,545) --- --- ------------ ------------- ------------- --- --- ------------ ------------- -------------
The accompanying notes are an integral part of these statements. F-26 JAZZ ENTERPRISES, INC. STATEMENTS OF CASH FLOWS
PERIOD FROM JUNE 10, 1992 THREE MONTHS ENDED (DATE OF --------------------- YEAR ENDED FEBRUARY 28, INCEPTION) MAY 30, MAY 31, ----------------------- THROUGH 1995 1994 1995 1994 FEBRUARY 28, 1993 --------- ---------- ---------- ----------- ----------------- (UNAUDITED) INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS CASH FLOWS FROM OPERATING ACTIVITIES: Net loss.................................. $(772,508) $ (767,487) $(5,003,678) $(1,888,825) $(167,813) --------- ---------- ---------- ----------- ----------------- Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Depreciation and amortization........... 35,643 25,198 104,377 36,249 172 Write down associated with real estate owned.................................. -- -- 1,385,680 -- -- Gain on sale of assets.................. -- -- (59,757) -- -- Investment in partnership............... -- (107,522) (700,172) (315,177) (35,055) (Increase) decrease in receivables...... -- 29,144 (11,122) (36,394) -- (Increase) decrease in prepaid expenses............................... 9,231 32,647 (93,034) (77,760) -- (Increase) decrease in other assets..... 467 3,616 35,154 (235,089) (2,499) Increase in accounts payable and accrued liabilities............................ 189,737 1,743,205 1,370,860 181,573 450 Increase in state income taxes payable................................ 65,000 60,000 27,278 37,722 -- --------- ---------- ---------- ----------- ----------------- Total adjustments..................... 300,078 1,786,288 2,057,264 (408,876) (36,932) --------- ---------- ---------- ----------- ----------------- Net cash provided by (used in) operating activities................. (472,430) 1,018,801 (2,946,414) (2,297,701) (204,745) --------- ---------- ---------- ----------- ----------------- CASH FLOWS FROM INVESTING ACTIVITIES: Increase (decrease) in bank overdraft..... (234,059) -- 234,059 -- -- Proceeds from sale of assets.............. -- -- 100,529 -- -- (Increase) decrease in escrow deposit..... -- (50,303) 255,000 (255,000) -- Capital expenditures...................... (84,736) (1,671,536) (5,330,708) (13,143,010) (158,595) Loans and advances to related parties..... (31,443) 71,752 (1,054,320) (807,203) -- --------- ---------- ---------- ----------- ----------------- Net cash used in investing activities........................... (350,238) (1,650,087) (5,795,440) (14,205,213) (158,595) --------- ---------- ---------- ----------- -----------------
The accompanying notes are an integral part of these statements. F-27 JAZZ ENTERPRISES, INC. STATEMENTS OF CASH FLOWS -- CONTINUED
PERIOD FROM JUNE 10, 1992 THREE MONTHS ENDED (DATE OF --------------------- YEAR ENDED FEBRUARY 28, INCEPTION) MAY 30, MAY 31, ----------------------- THROUGH 1995 1994 1995 1994 FEBRUARY 28, 1993 --------- ---------- ---------- ----------- ----------------- (UNAUDITED) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from short-term borrowings -- related party............................ $ -- $2,500,000 $7,879,087 $ -- $ -- Proceeds from issuance of long-term debt..................................... -- 51,611 51,611 15,348,389 -- Principal payments on long-term debt...... -- -- -- (400,000) -- Advances to and from affiliate............ 180,345 (75,206) 761,002 1,339,702 -- Payments to and from affiliate............ -- 175,000 175,000 (1,778,242) 263,540 Contributed capital....................... 646,387 -- 1,869,527 -- 100,000 Increase (decrease) in construction related payable.......................... -- (2,132,987) (2,132,987) 2,132,987 -- --------- ---------- ---------- ----------- ----------------- Net cash provided by financing activities............................. 826,732 518,418 8,603,240 16,642,836 363,540 --------- ---------- ---------- ----------- ----------------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS............................ 4,064 (112,868) (138,614) 139,922 200 CASH AT BEGINNING OF PERIOD................. 1,508 140,122 140,122 200 -- --------- ---------- ---------- ----------- ----------------- CASH AT END OF PERIOD....................... $ 5,572 $ 27,254 $ 1,508 $ 140,122 $ 200 --------- ---------- ---------- ----------- ----------------- --------- ---------- ---------- ----------- ----------------- SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Cash paid for interest.................... $ 104 $ 422 $ 5,692 $ -- $ -- Cash paid for state income taxes.......... -- -- 37,722 -- -- SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES: Equipment acquisitions financed by vendor................................... $ -- $ 18,663 $ 18,663 $ 7,495 $ -- Due to affiliate paid by stockholders..... -- -- 578,364 -- -- Construction costs and other payables paid on behalf of the Company by Argosy Gaming Company.................................. -- -- 3,352,469 -- -- Land acquired in exchange for notes payable.................................. -- -- 425,000 -- --
The accompanying notes are an integral part of these statements. F-28 JAZZ ENTERPRISES, INC. NOTES TO FINANCIAL STATEMENTS FEBRUARY 28, 1995, 1994 AND 1993 AND MAY 30, 1995 AND MAY 31, 1994 (DATA RELATED TO MAY 30, 1995 AND MAY 31, 1994 IS UNAUDITED) NOTE A -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Jazz Enterprises, Inc., a Louisiana corporation, was incorporated on June 10, 1992 for the purpose of developing a riverboat gaming operation and an entertainment complex, known as "Catfish Town" in Baton Rouge, Louisiana. Since March 1993, when the Company obtained preliminary regulatory approval to develop and construct a riverboat casino facility, the Company's activities have consisted of applying for the license for the riverboat casino operation, land acquisitions, design, construction, and renovations at Catfish Town and negotiating contracts. In connection with the construction of the riverboat casino, the Company entered into certain transactions in order to provide financing for the projects (see notes F and M). The riverboat casino commenced operations on September 30, 1994. During the year ended February 28, 1995, the Company began operations and is no longer considered a development stage enterprise. A summary of the significant accounting policies consistently applied in the preparation of the accompanying financial statements follows: 1. INTERIM FINANCIAL STATEMENTS The financial statements for the three months ended May 30, 1995 and May 31, 1994 are unaudited; however, in the opinion of management, all adjustments, consisting of normal recurring adjustments necessary for a fair presentation of the Company's financial position and results of operations for such periods have been included. The results for the three months ended May 30, 1995 are not necessarily indicative of the results to be expected for the year ending February 28, 1996. 2. DEFERRED PRE-OPENING COSTS Costs incurred which directly relate to obtaining the preliminary regulatory approval for the gaming license for the Baton Rouge riverboat casino, have been capitalized in the expectation that they will benefit future periods. Such costs incurred to date consist primarily of gaming application fees and legal fees incurred in connection with obtaining regulatory approval for a gaming license to operate a riverboat casino in Baton Rouge, Louisiana. The Company recorded these assets as Investment in Partnership on September 30, 1994 (see notes A6 and K). Regulatory approval for the gaming license was received on September 30, 1994 in conjunction with the opening of the riverboat casino operation. Costs incurred to date which are primarily related to obtaining financing, negotiating contracts, and other costs which are not expected to benefit future periods have been expensed as nonrecoverable pre-opening expenses in the Statements of Operations. 3. DEPRECIATION AND AMORTIZATION Depreciation and amortization is provided for in amounts sufficient to relate the cost of the assets to operations over their estimated service lives principally on a straight-line basis based upon the following estimated useful lives: Buildings and improvements..................................... 39 years 5 to 7 Equipment, furniture and fixtures.............................. years
4. INCOME TAXES Income taxes are recorded in accordance with the liability method specified by Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes." Under the asset and liability approach for financial accounting and reporting for income taxes, the following basic principles are applied in accounting for income taxes at the date of the financial statements: (a) a current liability or asset is recognized for the estimated taxes payable or refundable on taxes for the current year, (b) a deferred tax F-29 JAZZ ENTERPRISES, INC. NOTES TO FINANCIAL STATEMENTS (CONTINUED) FEBRUARY 28, 1995, 1994 AND 1993 AND MAY 30, 1995 AND MAY 31, 1994 (DATA RELATED TO MAY 30, 1995 AND MAY 31, 1994 IS UNAUDITED) NOTE A -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 4. INCOME TAXES (CONTINUED) liability or asset is recognized for the estimated future tax effects attributable to temporary differences and carryforwards; (c) the measurement of current and deferred tax liabilities and assets is based on the provisions of the enacted tax law; the effects of future changes in tax laws or rates are not anticipated; and (d) the measurement of deferred taxes is reduced, if necessary, by the amount of any tax benefits that, based upon available evidence, are not expected to be realized. Certain events and application of the tax laws create temporary differences between the tax basis of an asset and a liability and its reported amount in the financial statements. The Company's principal type of differences between asset and liabilities for financial statement and tax return purposes are reporting on the accrual basis method for financial statement purposes and the cash basis method for tax purposes, and pre-opening expenses expensed for financial statement purposes and deferred for tax purposes. 5. CASH EQUIVALENTS For the purposes of cash flows, the Company considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents. 6. INVESTMENT IN PARTNERSHIP The Company's 10% interest in Catfish Queen Partnership, in which the Company is a limited partner, is accounted for on the cost basis since, as a limited partner, the Company cannot participate in the management of the limited partnership. 7. CAPITALIZATION OF INTEREST The Company capitalizes, as a part of the internal cost of constructing major assets for its own use, a portion of the interest cost incurred during the construction period. Of the total interest of $478,222 incurred for the year ended February 28, 1995, $195,963 was capitalized. Of the total interest of $178,247 incurred for the three months ended May 30, 1995, $84,736 was capitalized. 8. RECLASSIFICATIONS THE 1994 AND 1993 FINANCIAL STATEMENTS REFLECT CERTAIN RECLASSIFICATIONS, WHICH HAVE NO EFFECT ON NET LOSS, TO CONFORM TO CLASSIFICATIONS IN THE CURRENT YEAR. NOTE B -- NOTE RECEIVABLE -- RELATED PARTY Note receivable from related party consisted of the following:
FEBRUARY 28, ------------------------ MAY 30, 1995 1995 1994 ------------ ------------ ---------- Note receivable from the Company's Chairman of the Board and majority stockholder, dated December 1, 1992. The note is an unsecured variable rate note with interest payable at the short-term applicable Federal rate......................................... $ 1,892,966 $ 1,861,523 $ 807,203 ------------ ------------ ---------- ------------ ------------ ----------
F-30 JAZZ ENTERPRISES, INC. NOTES TO FINANCIAL STATEMENTS (CONTINUED) FEBRUARY 28, 1995, 1994 AND 1993 AND MAY 30, 1995 AND MAY 31, 1994 (DATA RELATED TO MAY 30, 1995 AND MAY 31, 1994 IS UNAUDITED) NOTE C -- FIXED ASSETS Fixed assets, at cost, consist of the following:
FEBRUARY 28, ---------------------------- MAY 30, 1995 1995 1994 ------------- ------------- ------------- Buildings and improvements...................... $ 4,289,861 $ 4,289,861 $ 3,932,947 Equipment, furniture and fixtures............... 580,638 580,638 213,949 ------------- ------------- ------------- 4,870,499 4,870,499 4,146,896 Accumulated depreciation and amortization....... (174,080) (138,725) (35,492) ------------- ------------- ------------- 4,696,419 4,731,774 4,111,404 Construction in progress........................ 11,694,791 11,610,054 5,136,405 Land............................................ 5,086,043 5,086,044 4,025,800 ------------- ------------- ------------- $ 21,477,253 $ 21,427,872 $ 13,273,609 ------------- ------------- ------------- ------------- ------------- -------------
On June 21, 1994, the Company purchased property in exchange for promissory notes in the amount of $1,810,680 due October 30, 1994, which is thirty days after the Company received their gaming license from the State of Louisiana. The Company failed to make payment on the notes and is being sued for non-payment. The Company has also filed a countersuit against the broker regarding the value of the property, which was subsequently discovered to be worth approximately $425,000. The notes have been recorded on the Company's books as of February 28, 1995 and the property written down to estimated net realizable value with a corresponding charge to expense of $1,385,680. NOTE D -- SHORT-TERM BORROWINGS Notes payable in the amount of $1,810,680, including interest at 8% are due October 30, 1994 (see note C). NOTE E -- SHORT-TERM BORROWINGS -- RELATED PARTY Short-term borrowings from a related party consisted of the following:
FEBRUARY 28, -------------------------- MAY 30, 1995 1995 1994 ------------ ------------ ------------ Notes payable to the Company's Chairman of the Board and majority stockholder, including interest at 8.5%, unsecured.................................... $ 4,889,087 $ 4,889,087 $ -- Note payable to the Company's Chairman of the Board and majority stockholder. The note is an unsecured variable rate note including interest at the bank's prime rate plus 1%................................. 2,990,000 2,990,000 -- ------------ ------------ ------------ $ 7,879,087 $ 7,879,087 $ -0- ------------ ------------ ------------ ------------ ------------ ------------
NOTE F -- NOTES PAYABLE As of February 28, 1995, Argosy Gaming Company loaned the Company $15 million, of which $12.5 million was primarily used by the Company for land-based development. The loan would be repaid as an offset against any lease payments in excess of $3 million annually with the remaining balance due on September 30, F-31 JAZZ ENTERPRISES, INC. NOTES TO FINANCIAL STATEMENTS (CONTINUED) FEBRUARY 28, 1995, 1994 AND 1993 AND MAY 30, 1995 AND MAY 31, 1994 (DATA RELATED TO MAY 30, 1995 AND MAY 31, 1994 IS UNAUDITED) NOTE F -- NOTES PAYABLE (CONTINUED) 2004 (note M). As a result of the sale of 100% of the common stock of the Company to Argosy Gaming, the lease fees were suspended, and no loan payments have been made. The loan is collateralized by a first mortgage on certain real estate and all outstanding shares of common stock of the Company and is personally guaranteed by the Company's Chairman of the Board and majority stockholder. In anticipation of the sale of 100% of the common stock of the Company to Argosy Gaming, Argosy paid $3,352,469 in construction costs and other payables which are considered loans to the Company as of February 28, 1995. Had the transaction not been completed, these loans would have become due and payable upon 90 days notice of termination. NOTE G -- ACCRUED LIABILITIES Accrued liabilities consist of the following:
FEBRUARY 28, MAY 30, --------------------- 1995 1995 1994 ---------- ---------- --------- Accrued salaries, wages and other employee benefits........ $ 1,633 $ 45,850 $ 32,719 Accrued interest payable................................... 650,673 472,530 -- Accrued settlement agreement............................... 275,000 275,000 -- Other...................................................... 22,630 22,492 21,400 ---------- ---------- --------- $ 949,936 $ 815,872 $ 54,119 ---------- ---------- --------- ---------- ---------- ---------
NOTE H -- LEASES The Company owns certain buildings at Catfish Town which are leased under non-cancelable operating leases. The Company is responsible for payment of taxes, insurance and maintenance costs related to the properties. Certain leases contain provisions for one and two renewal options for five years. The leases expire on various dates through March 1998. The cost of the leased buildings is $1,656,956, and the related accumulated depreciation was $77,475, $66,910 and $24,651 at May 30, 1995 and February 28, 1995 and 1994, respectively. Future minimum lease payments due to the Company under these noncancellable lease agreements are as follows: Years ending February 28, 1996........................... $ 468,223 1997........................... 340,723 1998........................... 28,394 -------- $ 837,340 -------- --------
The Company also leases certain land under non-cancelable operating leases, which expire at various dates through August 2000. The leases contain renewal provisions and are subject to annual rent adjustments in May 1998 and January 1999, respectively, and every fifth year thereafter for increases in the Consumer Price Index. The Company is required to pay insurance, taxes and operating expenses. F-32 JAZZ ENTERPRISES, INC. NOTES TO FINANCIAL STATEMENTS (CONTINUED) FEBRUARY 28, 1995, 1994 AND 1993 AND MAY 30, 1995 AND MAY 31, 1994 (DATA RELATED TO MAY 30, 1995 AND MAY 31, 1994 IS UNAUDITED) NOTE H -- LEASES (CONTINUED) The minimum rental commitment under these operating leases are as follows: Years ending February 28, 1996........................... $ 237,975 1997........................... 237,975 1998........................... 237,975 1999........................... 237,975 2000........................... 180,677 Thereafter..................... 63,020 ----------- $ 1,195,597 ----------- -----------
Total rent expense under the above leases for the years ended February 28, 1995 and 1994 was $241,262 and $159,684, respectively. NOTE I -- RELATED PARTY TRANSACTIONS The Company entered into a management contract with Lodging and Gaming Systems, Inc., a corporation owned 60% by the Company's Chairman of the Board and majority stockholder, to receive administrative, accounting and supervisory services to be renegotiated on an annual basis. Management fees paid during the years ended February 28, 1995 and 1994 and from the period June 10, 1992 (date of inception) to February 28, 1993 were $720,000, $720,000 and $120,000, respectively. In conjunction with the sale of the Company's stock to Argosy Gaming Company (note M), the Company terminated the shared services agreement with Lodging and Gaming Systems, Inc. In addition, the Company reimbursed Lodging and Gaming Systems, Inc. for certain payroll, travel, and other expenses advanced on behalf of or supplied to the Company during the years ended February 28, 1995 and 1994 and from the period June 10, 1992 (date of inception) to February 28, 1993 of approximately $-0-, $1,778,000 and $-0-, respectively. Accounts payable to Lodging Systems, Inc. amounted to $362,983, $182,638 and $-0- at May 30, 1995 and February 28, 1995 and 1994, respectively. Accounts receivable from Lodging Systems, Inc. amounted to $-0-, $-0- and $175,000 at May 30, 1995 and February 28, 1995 and 1994, respectively. NOTE J -- INCOME TAXES The provision for income taxes in the accompanying statements of operations consist of the following:
FEBRUARY 28, MAY 30, MAY 31, ------------------------------- 1995 1994 1995 1994 1993 --------- --------- --------- --------- --------- CURRENT: State.......................................... $ 65,000 $ 59,990 $ 63,575 $ 37,722 $ -- DEFERRED: Federal........................................ -- -- -- -- -- --------- --------- --------- --------- --------- $ 65,000 $ 59,990 $ 63,575 $ 37,722 $ -0- --------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
At February 28, 1995, the Company had federal net operating loss carryforwards of $249,350, which expire through 2011. F-33 JAZZ ENTERPRISES, INC. NOTES TO FINANCIAL STATEMENTS (CONTINUED) FEBRUARY 28, 1995, 1994 AND 1993 AND MAY 30, 1995 AND MAY 31, 1994 (DATA RELATED TO MAY 30, 1995 AND MAY 31, 1994 IS UNAUDITED) NOTE J -- INCOME TAXES (CONTINUED) The components of net deferred tax assets and liabilities are as follows:
FEBRUARY 28, -------------------------- MAY 30, 1995 1995 1994 ------------- ------------- ----------- DEFERRED TAX ASSETS: Write down associated with real estate owned..... $ 471,132 $ 471,132 $ -- Accounts payable and accruals.................... 553,616 419,761 23,647 Federal operating loss carryforwards............. 97,465 84,779 11,778 Preopening expenses.............................. 1,688,151 1,564,435 639,620 ------------- ------------- ----------- 2,810,364 2,540,107 675,045 ------------- ------------- ----------- DEFERRED TAX LIABILITIES: Accounts receivable and prepaid expenses......... 42,408 45,706 23,415 Fixed assets and other assets.................... 151,968 150,521 1,369 ------------- ------------- ----------- 194,376 196,227 24,784 ------------- ------------- ----------- Valuation allowance.............................. (2,615,988) (2,343,880) (650,261) ------------- ------------- ----------- Net deferred taxes............................. $ -0- $ -0- $ -0- ------------- ------------- ----------- ------------- ------------- -----------
NOTE K -- INVESTMENT IN PARTNERSHIP The Company has entered into a Partnership with Argosy Gaming Company (Argosy), in which the Company owns 10% and Argosy owns 90% to operate a riverboat casino in Baton Rouge, Louisiana, which opened September 30, 1994. The Company contributed its State of Louisiana riverboat gaming license and certain leases to the partnership. The partnership leases, for a minimum of five years, a docking site and office and warehouse space from the Company. Rent under terms of the lease are 6% of adjusted gross receipts up to $50 million, 9% of adjusted gross receipts between $50 million and $75 million and 10% of adjusted gross receipts over $75 million. Lease revenues in the amount of $413,138 were received for the period September 30, 1994 through October 31, 1994. Lease revenues for the month of November 1994 in the amount of $399,655 have not been paid to the Company and have been reflected as an additional contribution to the Partnership. As a result of the sale of 100% of the common stock of the Company to Argosy Gaming, the lease fees were suspended (note M). NOTE L -- LEGAL SETTLEMENTS In April 1993, the Company signed a mutual release and settlement agreement with a corporation in which it had executed a term sheet for formation of a limited partnership to construct and operate a riverboat casino. Under the terms of the agreement, the Company paid $250,000 on November 10, 1994 after receiving final licensing approval. In April 1993, the Company signed a general release and settlement agreement with a corporation in which it has executed a letter of intent as to the formation of a partnership and the gaming application process. Under the terms of the agreement, the Company paid $50,000 in April 1993 and is required to pay $350,000 upon the September 30, 1994 licensing approval as follows: $25,000 within 30 days of license approval, $25,000 within 60 days of license approval, and $25,000 every 90 days thereafter. At February 28, 1995, $275,000 is outstanding. F-34 JAZZ ENTERPRISES, INC. NOTES TO FINANCIAL STATEMENTS (CONTINUED) FEBRUARY 28, 1995, 1994 AND 1993 AND MAY 30, 1995 AND MAY 31, 1994 (DATA RELATED TO MAY 30, 1995 AND MAY 31, 1994 IS UNAUDITED) NOTE M -- CAPITAL TRANSACTIONS On December 5, 1994, the stockholders of the Company entered in an agreement to sell 100% of the common stock of the Company to Argosy. Under the terms of the agreement, Argosy was appointed as both construction manager and general manager of the Catfish Town Project for the Company and has full and complete control and authority to make all construction, operational and management decisions for the Company with regard to construction and completion of the entire project. The agreement provided for the suspension of the lease fee from the partnership in consideration of Argosy's costs to manage and develop the Catfish Town Project. As a result of the suspension of the lease on December 5, 1994, the financial statements do not include any lease revenue or any costs incurred by Argosy from that date forward. Further, under the terms of the agreement, Argosy would assume certain ordinary course accounts payable and construction obligations as of December 1, 1994 of approximately $2,000,000. The transaction was consummated on May 30, 1995, and as a result, the stockholders contributed capital to the Company in the amount of $2,447,891 for the year ended February 28, 1995 and $646,387 for the period March 1, 1995 through May 30, 1995. During the year ended February 28, 1995, the Company's Chairman of the Board exercised an option to purchase 75% of the outstanding shares of common stock from the current stockholders. NOTE N -- CREDIT RISK The Company maintains its cash and cash equivalents in bank deposit accounts which, at times, may exceed federally insured limits. The Company has not experienced any losses in such accounts. The Company believes it is not exposed to any significant credit risk on cash and cash equivalents. NOTE O -- CONTINGENCIES Various lawsuits, claims and proceedings of a nature considered normal to its businesses are pending against the Company and certain of its affiliates. The Company believes, after reviewing such matters and consulting with the Company's counsel, that any liability which may ultimately be incurred with respect to these matters is not expected to have a material effect on either the Company's financial position or results of operations. F-35 - ------------------------------------------- ------------------------------------------- - ------------------------------------------- ------------------------------------------- NO PERSON HAS BEEN AUTHORIZED IN CONNECTION WITH THE EXCHANGE OFFER MADE BY THIS PROSPECTUS TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR GUARANTORS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR THE SOLICITATION OF AN OFFER TO BUY, THE EXCHANGE NOTES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY OR THE GUARANTORS SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE. -------------- TABLE OF CONTENTS
PAGE Available Information.......................... 3 Incorporation of Certain Documents by Reference..................................... 3 Prospectus Summary............................. 4 Risk Factors................................... 16 Use of Proceeds................................ 30 The Exchange Offer............................. 30 Capitalization................................. 38 Selected Consolidated Financial Data........... 39 Management's Discussion and Analysis of Financial Condition and Results of Operations.................................... 41 Description of Certain Indebtedness............ 47 Business....................................... 48 Lawrenceburg Casino Partnership Agreement...... 60 Regulatory Matters............................. 62 Management..................................... 75 Description of Exchange Notes.................. 78 Old Notes Registration Rights; Liquidated Damages....................................... 105 Certain United States Federal Income Tax Consequences.................................. 106 Plan of Distribution........................... 107 Legal Matters.................................. 108 Experts........................................ 108 Index to Financial Statements.................. F-1
[LOGO] Offer to Exchange $1,000 principal amount of its 13 1/4% First Mortgage Notes due 2004 which have been registered under the Securities Act for each $1,000 principal amount of its outstanding 13 1/4% First Mortgage Notes due 2004 ------------------------------- PROSPECTUS ------------------------------- THE EXCHANGE AGENT FOR THE EXCHANGE OFFER IS: FIRST NATIONAL BANK OF COMMERCE BY FACSIMILE: (504) 623-1095 CONFIRMATION BY TELEPHONE: (504) 623-7581 BY MAIL: Trust Security Services First National Bank of Commerce P.O. Box 60279 New Orleans, Louisiana 70160-0279 Attention: Rebecca Norton BY HAND DELIVERY/OVERNIGHT DELIVERY: Trust Security Services First National Bank of Commerce 210 Baronne Street Basement Level New Orleans, Louisiana 70112 Attention: Rebecca Norton , 1996 - ------------------------------------------- ------------------------------------------- - ------------------------------------------- ------------------------------------------- INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS Section 145 of the Delaware General Corporation Law ("Delaware GCU") empowers a corporation, subject to certain limitations, to indemnify its directors and officers against expenses (including attorneys' fees, judgments, fines and certain settlements) actually and reasonably incurred by them in connection with any suit or proceeding to which they are a party so long as they acted in good faith and in a manner reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to a criminal action or proceeding, so long as they had no reasonable cause to believe their conduct to have been unlawful. The Registrant's Certificate of Incorporation and By-laws provide that the Registrant shall indemnify its directors and such of its officers, employees and agents as the Board of Directors may determine from time to time, to the fullest extent permitted by Section 145 of the Delaware GCL. Section 102 of the Delaware GCL permits a Delaware corporation to include in its certificate of incorporation a provision eliminating or limiting a director's liability to a corporation or its stockholders for monetary damages for breaches of fiduciary duty. The enabling statute provides, however, that liability for breaches of the duty of loyalty, acts or omissions not in good faith or involving intentional misconduct, or knowing violation of the law, and the unlawful purchase or redemption of stock or payment of unlawful dividends or the receipt of improper personal benefits cannot be eliminated or limited in this manner. The Registrant's Certificate of Incorporation and By-Laws include a provision which eliminates, to the fullest extent permitted, director liability for monetary damages for breaches of fiduciary duty. ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (a)Exhibits:
EXHIBIT NUMBER DESCRIPTION - ----------- -------------------------------------------------------------------------------------------------------- 3.1 Amended and Restated Certificate of Incorporation of the Company (previously filed with the Securities and Exchange Commission ("SEC") as an Exhibit to the Company's Registration Statement on Form S-1 (File No. 33-55878) and incorporated herein by reference). 3.2 Amended and Restated By-laws of the Company (previously filed with the SEC as an Exhibit to the Company's Registration Statement on Form S-1 (File No. 33-55878) and incorporated herein by reference). 4.1 Form of the Company's 13 1/4% First Mortgage Notes due 2004 issued on June 5, 1996 in the aggregate principal amount of $235,000,000. 4.2 Form of Guarantee issued on June 5, 1996 by Alton Gaming Company, Argosy of Louisiana, Inc., Catfish Queen Partnership in Commendam, The Indiana Gaming Company, Iowa Gaming Company, Jazz Enterprises, Inc., The Missouri Gaming Company and The St. Louis Gaming Company. 4.3 Indenture dated as of June 5, 1996 by and among the Company, First National Bank of Commerce, as Trustee, and the Guarantors named therein, for the Company's $235,000,000 of 13 1/4% First Mortgage Notes due 2004. 4.4 Registration Rights Agreement dated as of June 5, 1996 by and among the Company, the Guarantors named therein and the Initial Purchasers named therein. 4.5 Cash Collateral and Disbursement Agreement dated June 5, 1996 by and among the Company, First National Bank of Commerce, as Trustee, and LaSalle National Trust, N.A., as disbursement agent. 4.6 Form of Security Agreement dated as of June 5, 1996 by and between First National Bank of Commerce, as Trustee, and the Company, as Grantor.
II-1
EXHIBIT NUMBER DESCRIPTION - ----------- -------------------------------------------------------------------------------------------------------- 4.7 Form of Subsidiary Security Agreements dated as of June 5, 1996 by and between First National Bank of Commerce, as Trustee, and each of Alton Gaming Company, Argosy of Louisiana, Inc., Catfish Queen Partnership in Commendam, The Indiana Gaming Company, Iowa Gaming Company, Jazz Enterprises, Inc., The Missouri Gaming Company and The St. Louis Gaming Company, each as a Grantor. 4.8 Form of Pledge Agreement dated as of June 5, 1996 by and between First National Bank of Commerce, as Trustee, and the Company, as Pledgor. 4.9 Form of Subsidiary Pledge Agreements dated as of June 5, 1996 by and between First National Bank of Commerce, as Trustee, and each of Alton Gaming Company, Argosy of Louisiana, Inc., Catfish Queen Partnership in Commendam, The Indiana Gaming Company, Iowa Gaming Company, Jazz Enterprises, Inc., The Missouri Gaming Company and The St. Louis Gaming Company, each as a Pledgor. 4.10 Form of First Preferred Ship Mortgages dated as of June 5, 1996 executed in favor of First National Bank of Commerce, as Trustee, by each of Alton Gaming Company (relating to Argosy I, Alton Belle Casino II and Alton Landing), Catfish Queen Partnership in Commendam (relating to Argosy III), The Missouri Gaming Company (relating to Argosy IV), Iowa Gaming Company (relating to Argosy V) and the Company (relating to Spirit of America). 4.11 Form of Deed of Trust, Assignment of Leases and Rents and Security Agreement dated as of June 5, 1996 by and among the Company, First National Bank of Commerce, as Trustee, and Chicago Title Insurance Company. 4.12 Form of Mortgage of Jazz Enterprises, Inc., and Catfish Queen Partnership in Commendam to Secure Present and Future Indebtedness, Assignment of Leases and Rents and Security Agreement dated as of June 5, 1996 execute in favor of First National Bank of Commerce, as Trustee. 4.13 Specimen Common Stock Certificate (previously filed with the SEC as an Exhibit to the Company's Registration Statement on Form S-1 (File No. 33-55878) and incorporated herein by reference). 4.14 Indenture dated as of June 6, 1994 between the Company and Bank One, Springfield, as trustee, for the Company's $115,000,000 12% Convertible Subordinated Notes due 2001 (previously filed with the SEC as an Exhibit to the Company's Registration Statement on Form S-3 (File No. 33-76456) and incorporated herein by reference). 4.15 Specimen 12% Convertible Subordinated Note due 2001 (previously filed with the SEC as an Exhibit to the Company's Registration Statement on Form S-3 (File No. 33-76456) and incorporated herein by reference). 4.16 Registration Rights Agreement (previously filed with the SEC as an Exhibit to the Company's Registration Statement on Form S-3 (File No. 33-76456) and incorporated herein by reference). 5.1 Legal Opinion of Winston & Strawn regarding the validity of the issuance of the 13 1/4% First Mortgage Notes due 2004 (to be filed by amendment). 9.1 Pratt Voting Trust Agreement dated as of May 5, 1992 by and between John Biggs Pratt, Sr. and Stephanie Pratt (previously filed with the SEC as an Exhibit to the Company's Registration Statement on Form S-1 (File No. 33-55878) and incorporated herein by reference).
II-2
EXHIBIT NUMBER DESCRIPTION - ----------- -------------------------------------------------------------------------------------------------------- 10.1 Lease dated August 1, 1992 by and between Edward McPike d/b/a Grand Properties and Alton Riverboat Gambling Partnership (previously filed with the SEC as an Exhibit to the Company's Form 10-K for the year ended December 31, 1994 and incorporated herein by reference). 10.2 Bond and Easement Agreement dated as of April 18, 1991 by and between the Alton Riverboat Gambling Partnership and the City of Alton, Illinois (previously filed with the SEC as an Exhibit to the Company's Registration Statement on Form S-1 (File No. 33-55878) and incorporated herein by reference). 10.3 Employment Agreement by and between the Company and J. Thomas Long (previously filed with the SEC as an Exhibit to the Company's Form 10-K for the year ended December 31, 1995 and incorporated herein by reference). 10.4 Employment Agreement by and between the Company and Patsy S. Hubbard (previously filed with the SEC as an Exhibit to the Company's Form 10-K for the year ended December 31, 1995 and incorporated herein by reference). 10.5 Stock Option Plan (previously filed with the SEC as an Exhibit to the Company's Registration Statement on Form S-1 (File No. 33-55878) and incorporated herein by reference). 10.6 Form of Indemnification Agreement (previously filed with the SEC as an Exhibit to the Company's Registration Statement on Form S-1 (File No. 33-55878) and incorporated herein by reference). 10.7 Director Option Plan (previously filed with the SEC as an Exhibit to the Company's Registration Statement on Form S-1 (File No. 33-55878) and incorporated herein by reference). 10.8 Argosy Gaming Company Savings Plan (previously filed with the SEC as an Exhibit to the Company's Form 8-K dated March 10, 1994 and incorporated herein by reference). 10.9 Letter Agreement dated as of January 28, 1993 by and between L. Thomas Lakin and the Alton Riverboat Gambling Partnership (previously filed with the SEC as an Exhibit to the Company's Registration Statement on Form S-1 (File No. 33-55878) and incorporated herein by reference). 10.10 Letter Agreement dated as of January 28, 1993 by and between the Alton Riverboat Gambling Partnership and H. Steven Norton (previously filed with the SEC as an Exhibit to the Company's Registration Statement on Form S-1 (File No. 33-55878) and incorporated herein by reference). 10.11 Letter Agreement dated March 29, 1995 by and between Floyd C. Warmann and the Company (previously filed with the SEC as an exhibit to the Company's Form 10-K for the year ended December 31, 1994 dated March 31, 1995 and incorporated herein by reference). 10.12 Agreement to Purchase Stock dated January 30, 1995 by and among the Company, Jazz Enterprises, Inc. and the signatory shareholders of Jazz Enterprises, Inc. (previously filed with the SEC as an Exhibit to the Company's Form 10-K for the year ended December 31, 1994 and incorporated herein by reference). 10.13 Contract dated June 7, 1993 by and among the City of Riverside, Missouri, The Missouri Gaming Company and the Company, together with amendments thereto (previously filed with the SEC as an Exhibit to the Company's Form 8-K dated March 10, 1994 and incorporated herein by reference).
II-3
EXHIBIT NUMBER DESCRIPTION - ----------- -------------------------------------------------------------------------------------------------------- 10.14 Second Amended and Restated Agreement of Limited Partnership dated February 21, 1996 of Indiana Gaming Company, L.P. (previously filed with the SEC as an Exhibit to the Company's Form 10-K for the year ended December 31, 1995 and incorporated herein by reference). 10.15 Management Agreement dated April 11, 1994 by and between Indiana Gaming Company, L.P. and The Indiana Gaming Company, as amended by Amendment No. 1 to Management Agreement dated February 21, 1996 (previously filed with the SEC as an Exhibit to the Company's Form 10-K for the year ended December 31, 1995 and incorporated herein by reference). 10.16 Affirmation of Limited Parent Guaranty of Argosy Gaming Company in favor of the partners of Indiana Gaming Company, L.P. dated February 21, 1996 (previously filed with the SEC as an Exhibit to the Company's Form 10-K for the year ended December 31, 1995 and incorporated herein by reference). 10.17 Vessel Construction Contract by and between Service Marine Industries, Inc. and Indiana Gaming Company, L.P. dated as of November 14, 1995 (previously filed with the SEC as an Exhibit to the Company's Form 10-K for the year ended December 31, 1995 and incorporated herein by reference). 10.18 Riverboat Gaming Development Agreement between the City of Lawrenceburg, Indiana and Indiana Gaming Company, L.P. dated as of April 13, 1994 as amended by Amendment Number One to Riverboat Development Agreement between the City of Lawrenceburg, Indiana and Indiana Gaming Company, L.P. dated as of December 28, 1995 (previously filed with the SEC as an Exhibit to the Company's Form 10-K for the year ended December 31, 1995 and incorporated herein by reference). 10.19 Guaranty of Development Agreement dated as of April 13, 1994 by the Company in favor of the City of Lawrenceburg (previously filed with the SEC as an Exhibit to the Company's Form 10-K for the year ended December 31, 1995 and incorporated herein by reference). 10.20 Charter Agreement dated October 27, 1994 by and between President Riverboat Casino-New York, Inc. and The Missouri Gaming Company (previously filed with the SEC as an Exhibit to the Company's Form 10-K for the year ended December 31, 1994 and incorporated herein by reference). 12.1 Statement re Computation of Earnings to Fixed Charges 21 List of Subsidiaries 23.1 Consent of Ernst & Young LLP 23.2 Consent of Grant Thornton LLP 24 Powers of Attorney of certain directors 25.1 Statement of Eligibility and Qualification on Form T-1 under the Trust Indenture Act of 1939 of First National Bank of Commerce, as Trustee under the Indenture relating to the 13 1/4% First Mortgage Notes due 2004. 99.1 Form of Letter of Transmittal 99.2 Form of Notice of Guaranteed Delivery 99.3 Form of Letter to Securities Dealers, Commercial Banks, Trust Companies and Other Nominees 99.4 Form of Letter to Clients 99.5 Guidelines for Certification of Taxpayer Identification Number on Form W-9
II-4 (b)Financial Statement Schedules None. All schedules are omitted because the required information is not present in amounts sufficient to require submission of the schedule or because the information required is included in the financial statements or notes thereto. ITEM 22. UNDERTAKINGS Insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended, may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and win be governed by the final adjudication of such issue. The undersigned Registrant hereby undertakes that: (1) For purposes of determining any liability under the Securities Act of 1933, as amended, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective. (2) For the purpose of determining any liability under the Securities Act of 1933, as amended, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein and this offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3) For the purpose of determining any liability under the Securities Act of 1933, each filing of the Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 that is incorporated by reference in this registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. The undersigned registrant hereby undertakes to respond to requests for information that is incorporated by reference into the prospectus pursuant to Items 4, 10(b), 11, or 13 of this Form, within one business day of receipt of such request, and to send the incorporated documents by first class mail or other equally prompt means. This includes information contained in documents filed subsequent to the effective date of the registration statement through the date of responding to the request. The undersigned registrant hereby undertakes to supply by means of a post-effective amendment all information concerning a transaction, and the company being acquired therein, that was not the subject of and included in the registration statement when it became effective. II-5 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned thereunto duly authorized, in the City of Alton, State of Illinois on June 28, 1996. ARGOSY GAMING COMPANY By: /s/ J. THOMAS LONG ----------------------------------- J. Thomas Long CHIEF EXECUTIVE OFFICER Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following persons on the dates and in the capacities indicated.
SIGNATURE TITLE DATE - ----------------------------------------------- ------------------------------------------- --------------- /s/ J. THOMAS LONG Chief Executive Officer and Director ------------------------------------- June 28, 1996 J. Thomas Long /s/ JOSEPH G. URAM Executive Vice President, Chief ------------------------------------- Financial Officer (Principal June 28, 1996 Joseph G. Uram Accounting Officer) /s/ EDWARD F. BRENNAN* ------------------------------------- Director Edward F. Brennan /s/ GEORGE L. BRISTOL* ------------------------------------- Director George L. Bristol /s/ F. LANCE CALLIS* ------------------------------------- Director F. Lance Callis /s/ WILLIAM F. CELLINI* *By: /s/ J. THOMAS LONG -------------------------- ------------------------------------- Director J. Thomas Long William F. Cellini ATTORNEY-IN-FACT /s/ JIMMY F. GALLAGHER* ------------------------------------- Director June 28, 1996 Jimmy F. Gallagher /s/ WILLIAM McENERY* ------------------------------------- Director William McEnery /s/ JOHN B. PRATT, SR.* ------------------------------------- Director John B. Pratt, Sr.
II-6 INDEX TO EXHIBITS
EXHIBIT NUMBER DESCRIPTION PAGE - ----------- ------------------------------------------------------------------------------------------------ --------- 3.1 Amended and Restated Certificate of Incorporation of the Company (previously filed with the Securities and Exchange Commission ("SEC") as an Exhibit to the Company's Registration Statement on Form S-1 (File No. 33-55878) and incorporated herein by reference). 3.2 Amended and Restated By-laws of the Company (previously filed with the SEC as an Exhibit to the Company's Registration Statement on Form S-1 (File No. 33-55878) and incorporated herein by reference). 4.1 Form of the Company's 13 1/4% First Mortgage Notes due 2004 issued on June 5, 1996 in the aggregate principal amount of $235,000,000. 4.2 Form of Guarantee issued on June 5, 1996 by Alton Gaming Company, Argosy of Louisiana, Inc., Catfish Queen Partnership in Commendam, The Indiana Gaming Company, Iowa Gaming Company, Jazz Enterprises, Inc., The Missouri Gaming Company and The St. Louis Gaming Company. 4.3 Indenture dated as of June 5, 1996 by and among the Company, First National Bank of Commerce, as Trustee, and the Guarantors named therein, for the Company's $235,000,000 of 13 1/4% First Mortgage Notes due 2004. 4.4 Registration Rights Agreement dated as of June 5, 1996 by and among the Company, the Guarantors named therein and the Initial Purchasers named therein. 4.5 Cash Collateral and Disbursement Agreement dated June 5, 1996 by and among the Company, First National Bank of Commerce, as Trustee, and LaSalle National Trust, N.A., as disbursement agent. 4.6 Form of Security Agreement dated as of June 5, 1996 by and between First National Bank of Commerce, as Trustee, and the Company, as Grantor. 4.7 Form of Subsidiary Security Agreements dated as of June 5, 1996 by and between First National Bank of Commerce, as Trustee, and each of Alton Gaming Company, Argosy of Louisiana, Inc., Catfish Queen Partnership in Commendam, The Indiana Gaming Company, Iowa Gaming Company, Jazz Enterprises, Inc., The Missouri Gaming Company and The St. Louis Gaming Company, each as a Grantor. 4.8 Form of Pledge Agreement dated as of June 5, 1996 by and between First National Bank of Commerce, as Trustee, and the Company, as Pledgor. 4.9 Form of Subsidiary Pledge Agreements dated as of June 5, 1996 by and between First National Bank of Commerce, as Trustee, and each of Alton Gaming Company, Argosy of Louisiana, Inc., Catfish Queen Partnership in Commendam, The Indiana Gaming Company, Iowa Gaming Company, Jazz Enterprises, Inc., The Missouri Gaming Company and The St. Louis Gaming Company, each as a Pledgor. 4.10 Form of First Preferred Ship Mortgages dated as of June 5, 1996 executed in favor of First National Bank of Commerce, as Trustee, by each of Alton Gaming Company (relating to Argosy I, Alton Belle Casino II and Alton Landing), Catfish Queen Partnership in Commendam (relating to Argosy III), The Missouri Gaming Company (relating to Argosy IV), Iowa Gaming Company (relating to Argosy V) and the Company (relating to Spirit of America). 4.11 Form of Deed of Trust, Assignment of Leases and Rents and Security Agreement dated as of June 5, 1996 by and among the Company, First National Bank of Commerce, as Trustee, and Chicago Title Insurance Company. 4.12 Form of Mortgage of Jazz Enterprises, Inc., and Catfish Queen Partnership in Commendam to Secure Present and Future Indebtedness, Assignment of Leases and Rents and Security Agreement dated as of June 5, 1996 execute in favor of First National Bank of Commerce, as Trustee.
EXHIBIT NUMBER DESCRIPTION PAGE - ----------- ------------------------------------------------------------------------------------------------ --------- 4.13 Specimen Common Stock Certificate (previously filed with the SEC as an Exhibit to the Company's Registration Statement on Form S-1 (File No. 33-55878) and incorporated herein by reference). 4.14 Indenture dated as of June 6, 1994 between the Company and Bank One, Springfield, as trustee, for the Company's $115,000,000 12% Convertible Subordinated Notes due 2001 (previously filed with the SEC as an Exhibit to the Company's Registration Statement on Form S-3 (File No. 33-76456) and incorporated herein by reference). 4.15 Specimen 12% Convertible Subordinated Note due 2001 (previously filed with the SEC as an Exhibit to the Company's Registration Statement on Form S-3 (File No. 33-76456) and incorporated herein by reference). 4.16 Registration Rights Agreement (previously filed with the SEC as an Exhibit to the Company's Registration Statement on Form S-3 (File No. 33-76456) and incorporated herein by reference). 5.1 Legal Opinion of Winston & Strawn regarding the validity of the issuance of the 13 1/4% First Mortgage Notes due 2004 (to be filed by amendment). 9.1 Pratt Voting Trust Agreement dated as of May 5, 1992 by and between John Biggs Pratt, Sr. and Stephanie Pratt (previously filed with the SEC as an Exhibit to the Company's Registration Statement on Form S-1 (File No. 33-55878) and incorporated herein by reference). 10.1 Lease dated August 1, 1992 by and between Edward McPike d/b/a Grand Properties and Alton Riverboat Gambling Partnership (previously filed with the SEC as an Exhibit to the Company's Form 10-K for the year ended December 31, 1994 and incorporated herein by reference). 10.2 Bond and Easement Agreement dated as of April 18, 1991 by and between the Alton Riverboat Gambling Partnership and the City of Alton, Illinois (previously filed with the SEC as an Exhibit to the Company's Registration Statement on Form S-1 (File No. 33-55878) and incorporated herein by reference). 10.3 Employment Agreement by and between the Company and J. Thomas Long (previously filed with the SEC as an Exhibit to the Company's Form 10-K for the year ended December 31, 1995 and incorporated herein by reference). 10.4 Employment Agreement by and between the Company and Patsy S. Hubbard (previously filed with the SEC as an Exhibit to the Company's Form 10-K for the year ended December 31, 1995 and incorporated herein by reference). 10.5 Stock Option Plan (previously filed with the SEC as an Exhibit to the Company's Registration Statement on Form S-1 (File No. 33-55878) and incorporated herein by reference). 10.6 Form of Indemnification Agreement (previously filed with the SEC as an Exhibit to the Company's Registration Statement on Form S-1 (File No. 33-55878) and incorporated herein by reference). 10.7 Director Option Plan (previously filed with the SEC as an Exhibit to the Company's Registration Statement on Form S-1 (File No. 33-55878) and incorporated herein by reference). 10.8 Argosy Gaming Company Savings Plan (previously filed with the SEC as an Exhibit to the Company's Form 8-K dated March 10, 1994 and incorporated herein by reference). 10.9 Letter Agreement dated as of January 28, 1993 by and between L. Thomas Lakin and the Alton Riverboat Gambling Partnership (previously filed with the SEC as an Exhibit to the Company's Registration Statement on Form S-1 (File No. 33-55878) and incorporated herein by reference).
EXHIBIT NUMBER DESCRIPTION PAGE - ----------- ------------------------------------------------------------------------------------------------ --------- 10.10 Letter Agreement dated as of January 28, 1993 by and between the Alton Riverboat Gambling Partnership and H. Steven Norton (previously filed with the SEC as an Exhibit to the Company's Registration Statement on Form S-1 (File No. 33-55878) and incorporated herein by reference). 10.11 Letter Agreement dated March 29, 1995 by and between Floyd C. Warmann and the Company (previously filed with the SEC as an exhibit to the Company's Form 10-K for the year ended December 31, 1994 dated March 31, 1995 and incorporated herein by reference). 10.12 Agreement to Purchase Stock dated January 30, 1995 by and among the Company, Jazz Enterprises, Inc. and the signatory shareholders of Jazz Enterprises, Inc. (previously filed with the SEC as an Exhibit to the Company's Form 10-K for the year ended December 31, 1994 and incorporated herein by reference). 10.13 Contract dated June 7, 1993 by and among the City of Riverside, Missouri, The Missouri Gaming Company and the Company, together with amendments thereto (previously filed with the SEC as an Exhibit to the Company's Form 8-K dated March 10, 1994 and incorporated herein by reference). 10.14 Second Amended and Restated Agreement of Limited Partnership dated February 21, 1996 of Indiana Gaming Company, L.P. (previously filed with the SEC as an Exhibit to the Company's Form 10-K for the year ended December 31, 1995 and incorporated herein by reference). 10.15 Management Agreement dated April 11, 1994 by and between Indiana Gaming Company, L.P. and The Indiana Gaming Company, as amended by Amendment No. 1 to Management Agreement dated February 21, 1996 (previously filed with the SEC as an Exhibit to the Company's Form 10-K for the year ended December 31, 1995 and incorporated herein by reference). 10.16 Affirmation of Limited Parent Guaranty of Argosy Gaming Company in favor of the partners of Indiana Gaming Company, L.P. dated February 21, 1996 (previously filed with the SEC as an Exhibit to the Company's Form 10-K for the year ended December 31, 1995 and incorporated herein by reference). 10.17 Vessel Construction Contract by and between Service Marine Industries, Inc. and Indiana Gaming Company, L.P. dated as of November 14, 1995 (previously filed with the SEC as an Exhibit to the Company's Form 10-K for the year ended December 31, 1995 and incorporated herein by reference). 10.18 Riverboat Gaming Development Agreement between the City of Lawrenceburg, Indiana and Indiana Gaming Company, L.P. dated as of April 13, 1994 as amended by Amendment Number One to Riverboat Development Agreement between the City of Lawrenceburg, Indiana and Indiana Gaming Company, L.P. dated as of December 28, 1995 (previously filed with the SEC as an Exhibit to the Company's Form 10-K for the year ended December 31, 1995 and incorporated herein by reference). 10.19 Guaranty of Development Agreement dated as of April 13, 1994 by the Company in favor of the City of Lawrenceburg (previously filed with the SEC as an Exhibit to the Company's Form 10-K for the year ended December 31, 1995 and incorporated herein by reference). 10.20 Charter Agreement dated October 27, 1994 by and between President Riverboat Casino-New York, Inc. and The Missouri Gaming Company (previously filed with the SEC as an Exhibit to the Company's Form 10-K for the year ended December 31, 1994 and incorporated herein by reference). 12.1 Statement re Computation of Earnings to Fixed Charges 21 List of Subsidiaries
EXHIBIT NUMBER DESCRIPTION PAGE - ----------- ------------------------------------------------------------------------------------------------ --------- 23.1 Consent of Ernst & Young LLP 23.2 Consent of Grant Thornton LLP 24 Powers of Attorney of certain directors 25.1 Statement of Eligibility and Qualification on Form T-1 under the Trust Indenture Act of 1939 of First National Bank of Commerce, as Trustee under the Indenture relating to the 13 1/4% First Mortgage Notes due 2004. 99.1 Form of Letter of Transmittal 99.2 Form of Notice of Guaranteed Delivery 99.3 Form of Letter to Securities Dealers, Commercial Banks, Trust Companies and Other Nominees 99.4 Form of Letter to Clients 99.5 Guidelines for Certification of Taxpayer Identification Number on Form W-9
(This page has been left blank intentionally.) EX-4.1 2 EXHIBIT 4.1 EXHIBIT 4.1 ----------- FORM OF NOTE ARGOSY GAMING COMPANY 13 1/4% FIRST MORTGAGE NOTES DUE 2004 Unless and until it is exchanged in whole or in part for Securities in definitive form, this Security may not be transferred except as a whole by the Depository to a nominee of the Depository or by a nominee of the Depository to the Depository or another nominee of the Depository or by the Depository or any such nominee to a successor Depository or a nominee of such successor Depository. Unless this certificate is presented by an authorized representative of The Depository Trust Company (55 Water Street, New York, New York) ("DTC"), to the Company or its agent for registration of transfer, exchange or payment, and any certificate issued is registered in the name of Cede & Co. or such other name as requested by an authorized representative of DTC (and any payment is made to Cede & Co. or such other entity as is requested by an authorized representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest herein.(1) THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY PRIOR TO THE DATE (THE "RESALE RESTRICTION TERMINATION DATE") WHICH IS THREE YEARS AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF SUCH SECURITY) ONLY (A) TO THE - -------------- 1 This paragraph should only be added if the Security is issued in global form. COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL ACCREDITED INVESTOR WITHIN THE MEANING OF RULE 501(A)(1),(2),(3) OR (7) UNDER THE SECURITIES ACT THAT IS ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, IN EACH CASE IN A MINIMUM PRINCIPAL AMOUNT OF THE SECURITIES OF $100,000 FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO OR FOR OFFER OR SALE IN CONNECTION WITH ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (F) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S AND THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSE (D),(E), OR (F) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND IN EACH OF THE FOREGOING CASES, A CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THE OTHER SIDE OF THIS SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE COMPANY AND THE TRUSTEE. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE. THESE SECURITIES MAY BE TRANSFERRED ONLY IN COMPLIANCE WITH APPLICABLE GAMING LAWS.(2) - -------------- 2 This paragraph should be included only for the Original Notes. No. $ Argosy Gaming Company, a Delaware corporation (hereinafter called the "Company," which term includes any successor corporation under the Indenture hereinafter referred to), for value received, hereby promises to pay to _____, or registered assigns, the principal sum of _____ Dollars, on June 1, 2004. Interest Payment Dates: December 1 and June 1. Record Dates: November 15 and May 15. Reference is made to the further provisions of this Security on the reverse side, which will, for all purposes, have the same effect as if set forth at this place. IN WITNESS WHEREOF, the Company has caused this Instrument to be duly executed under its corporate seal. Dated: ___________ ARGOSY GAMING COMPANY By: ------------------- Attest: President - ------------------- Secretary [FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION] This is one of the Securities described in the within-mentioned Indenture. First National Bank of Commerce By: Authorized Signatory Dated: ARGOSY GAMING COMPANY 13 1/4% FIRST MORTGAGE NOTES DUE 2004 1. INTEREST. Argosy Gaming Company, a Delaware corporation (the "Company"), promises to pay interest on the principal amount of this Security at a rate of 13 1/4% per annum. To the extent it is lawful, the Company promises to pay interest on any interest payment due but unpaid on such principal amount at a rate of 13 1/4% per annum compounded semi-annually. The Company will pay interest semi-annually on June 1 and December 1 of each year (each, an "Interest Payment Date"), commencing December 1, 1996. Interest on the Securities will accrue from the most recent date to which interest has been paid on either the Series A or Series B Notes pursuant to the Indenture or, if no interest has been paid, from June 5, 1996. Interest will be computed on the basis of a 360-day year consisting of twelve 30-day months. 2. METHOD OF PAYMENT. The Company shall pay interest (and Liquidated Damages, if any) on the Securities (except defaulted interest) to the persons who are the registered Holders at the close of business on the Record Date immediately preceding the Interest Payment Date. Holders must surrender Securities to a Paying Agent to collect principal payments. Except as provided below, the Company shall pay principal and interest (and Liquidated Damages, if any) in such coin or currency of the United States of America as at the time of payment shall be legal tender for payment of public and private debts ("Cash"). The Securities will be payable as to principal, premium and interest (and Liquidated Damages, if any) at the office or agency of the Company maintained for such purpose within the City and State of New York or, at the option of the Company, payment of principal, premium and interest (and Liquidated Damages, if any) may be made by check mailed to the Holders at their addresses set forth in the register of Holders, and PROVIDED that payment by wire transfer of immediately available funds will be required with respect to principal of and interest (and Liquidated Damages, if any) and premium on all Global Securities and all other Securities the Holders of which shall have provided wire transfer instructions to the Company or the Paying Agent. 3. PAYING AGENT AND REGISTRAR. Initially, First National Bank of Commerce (the "Trustee") will act as Paying Agent and Registrar. The Company may change any Paying Agent, Registrar or Co-registrar without notice to the Holders. The Company or any of its Subsidiaries may, subject to certain exceptions, act as Paying Agent, Registrar or Co-registrar. 4. INDENTURE. The Company issued the Securities under an Indenture, dated June 5, 1996 (the "Indenture"), between the Company, the Guarantors named therein and the Trustee. Capitalized terms herein are used as defined in the Indenture unless otherwise defined herein. The terms of the Securities include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act, as in effect on the date of the Indenture. The Securities are subject to all such terms, and Holders of Securities are referred to the Indenture and said Act for a statement of them. The Securities are senior secured obligations of the Company limited in aggregate principal amount to $235,000,000. 5. REDEMPTION. Except as provided in this Paragraph 5 or as provided in Section 3.2 of the Indenture, the Company shall not have the right to redeem any Securities. The Securities are redeemable in whole or from time to time in part at any time on or after June 1, 2000, at the option of the Company, at the Redemption Price (expressed as a percentage of principal amount) set forth below, if redeemed during the 12-month period commencing June 1 of each of the years indicated below, in each case (subject to the right of Holders of record on the Record Date to receive interest due on an Interest Payment Date that is on or prior to such Redemption Date), plus any accrued but unpaid interest (and Liquidated Damages, if any) to the Redemption Date. YEAR REDEMPTION PRICE ---- ---------------- 2000 . . . . . . . . . . . . . 106.625% 2001 . . . . . . . . . . . . . 104.417% 2002 . . . . . . . . . . . . . 102.208% 2003 and thereafter . . . . . 100.000% Any redemption of the Notes shall comply with Article III of the Indenture. 6. NOTICE OF REDEMPTION. Except as required by a Gaming Authority with respect to a redemption provided for in Section 3.2 of the Indenture, notice of redemption will be mailed by first class mail at least 30 days but not more than 60 days before the Redemption Date (unless a shorter notice shall be required by any Governmental Authority) to each Holder of Securities to be redeemed at his registered address. Securities in denominations larger than $1,000 may be redeemed in part. Except as set forth in the Indenture, from and after any Redemption Date, if monies for the redemption of the Securities called for redemption shall have been deposited with the Paying Agent on such Redemption Date, the Securities called for redemption will cease to bear interest and the only right of the Holders of such Securities will be to receive payment of the Redemption Price, plus any accrued but unpaid interest (and Liquidated Damages, if any) to the Redemption Date. 7. DENOMINATIONS; TRANSFER; EXCHANGE. The Securities are in registered form, without coupons, in denominations of $1,000 and integral multiples of $1,000. A Holder may register the transfer of, or exchange Securities in accordance with, the Indenture. The Registrar may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and to pay any taxes and fees required by law or permitted by the Indenture. The Registrar need not register the transfer of or exchange any Securities selected for redemption. 8. PERSONS DEEMED OWNERS. The registered Holder of a Security may be treated as the owner of it for all purposes. 9. UNCLAIMED MONEY. If money for the payment of principal or interest remains unclaimed for two years, the Trustee and the Paying Agent(s) will pay the money back to the Company at its written request. After that, all liability of the Trustee and such Paying Agent(s) with respect to such money shall cease. 10. DISCHARGE PRIOR TO REDEMPTION OR MATURITY. If the Company at any time deposits into an irrevocable trust with the Trustee Cash or U.S. Government Obligations sufficient to pay the principal of and interest (and Liquidated Damages, if any) on the Securities to redemption or maturity and complies with the other provisions of the Indenture relating thereto, the Company will be discharged from certain provisions of the Indenture and the Securities (including the financial covenants, but excluding its obligation to pay the principal of and interest (and Liquidated Damages, if any) on the Securities). 11. AMENDMENT; SUPPLEMENT; WAIVER. Subject to certain exceptions, the Indenture or the Securities may be amended or supplemented with the written consent of the Holders of a majority, and in certain cases a supermajority, in aggregate principal amount of the Securities then outstanding, and any existing Default or Event of Default or compliance with any provision may be waived with the consent of the Holders of a majority in aggregate principal amount of the Securities then outstanding. Without notice to or consent of any Holder, the parties thereto may amend or supplement the Indenture or the Securities to, among other things, cure any ambiguity, defect or inconsistency, provide for uncertificated Securities in addition to or in place of certificated Securities, comply with the TIA or make any other change that does not adversely affect the rights of any Holder of a Security. 12. RESTRICTIVE COVENANTS. The Indenture imposes certain limitations on the ability of the Company and its Subsidiaries to, among other things, incur additional Indebtedness and Disqualified Capital Stock, make payments in respect of its Capital Stock, enter into transactions with Affiliates, incur Liens, merge or consolidate with any other person and sell, lease, transfer or otherwise dispose of substantially all of its properties or assets. The limitations are subject to a number of important qualifications and exceptions. The Company must annually report to the Trustee on compliance with such limitations. 13. CHANGE OF CONTROL. In the event there shall occur any Change of Control, each Holder of Securities shall have the right, at such Holder's option but subject to the limitations and conditions set forth in the Indenture, to require the Company to purchase on the Change of Control Purchase Date in the manner specified in the Indenture, all or any part (in integral multiples of $1,000) of such Holder's Securities at a cash price equal to 101% of the principal amount thereof, together with accrued but unpaid interest (and Liquidated Damages, if any) to and including the Change of Control Purchase Date. 14. SECURITY. In order to secure the obligations under the Indenture, the Company, the Guarantors and the Trustee have entered into certain security agreements in order to create security interests in certain assets and properties of the Company and the Guarantors. 15. OFFERS TO PURCHASE. The Indenture requires the Company to make Offers to Purchase to purchase Securities in various principal amounts at either 100% or 101% of the principal amount thereof, together with accrued but unpaid interest (and Liquidated Damages, if any), to the date of purchase in the event of certain asset sales, loss of certain licenses and certain events with respect to the Lawrenceburg Casino, and from certain distributions from the Lawrenceburg Casino. 16. GAMING LAWS. The rights of the Holder of this Security and any owner of any beneficial interest in this Security are subject to the Gaming Laws and the jurisdiction and requirements of the Gaming Authorities and the further limitations and requirements set forth in the Indenture. 17. SUCCESSORS. When a successor assumes all the obligations of its predecessor under the Securities and the Indenture, the predecessor will be released from those obligations. 18. DEFAULTS AND REMEDIES. If an Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in aggregate principal amount of Securities then outstanding may declare all the Securities to be due and payable immediately in the manner and with the effect provided in the Indenture. Holders of Securities may not enforce the Indenture or the Securities except as provided in the Indenture. The Trustee may require indemnity satisfactory to it before it enforces the Indenture or the Securities. Subject to certain limitations, Holders of a majority in aggregate principal amount of the Securities then outstanding may direct the Trustee in its exercise of any trust or power. 19. TRUSTEE DEALINGS WITH COMPANY. The Trustee under the Indenture, in its individual or any other capacity, may make loans to, accept deposits from, and perform services for the Company or its Affiliates, and may otherwise deal with the Company or its Affiliates as if it were not the Trustee. 20. NO RECOURSE AGAINST OTHERS. No direct or indirect stockholder, director, officer or employee, as such, past, present or future of the Company or any successor corporation shall have any personal liability in respect of the obligations of the Company under the Securities or the Indenture by reason of his status as such stockholder, director, officer or employee. Each Holder of a Security by accepting a Security waives and releases all such liability. The waiver and release are part of the consideration for the issuance of the Securities. 21. AUTHENTICATION. This Security shall not be valid until the Trustee or authenticating agent signs the certificate of authentication on the other side of this Security. 22. ABBREVIATIONS AND DEFINED TERMS. Customary abbreviations may be used in the name of a Holder of a Security or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act). 23. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company will cause CUSIP numbers to be printed on the Securities as a convenience to the Holders of the Securities. No representation is made as to the accuracy of such numbers as printed on the Securities and reliance may be placed only on the other identification numbers printed hereon. [FORM OF ASSIGNMENT] I or we assign this Security to (Print or type name, address and zip code of assignee) Please insert Social Security or other identifying number of assignee_________________ and irrevocably appoint ___________ agent to transfer this Security on the books of the Company. The agent may substitute another to act for him. Dated: __________ Signed: (Sign exactly as your name appears on the other side of this Security) OPTION OF HOLDER TO ELECT PURCHASE If you want to elect to have this Security purchased by the Company pursuant to any of the following provisions of the Indenture, check the appropriate box: / / Section 5.14; / / Section 5.16; / / Section 5.17; / / Section 5.18; / / Section 5.19; / / Article XII If you want to elect to have only part of this Security purchased by the Company pursuant to the Indenture, state the principal amount you want to be purchased: $________ Date: ________________ Signature: (Sign exactly as your name appears on the other side of this Security) SCHEDULE OF EXCHANGES OF DEFINITIVE SECURITIES(3) The following exchanges of a part of this Global Security for Definitive Securities have been made: Amount of Amount of Principal Amount Signature of decrease in increase in of this Global authorized Principal Amount Principal Amount Security following officer of of this Global of this Global such decrease (or Trustee or Date of Exchange Security Security increase) Securities Custodian - -----------------------------------------------------------------------------------------------------
- -------------- 3 This schedule should only be added if the Security is issued in global form. CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR REGISTRATION OF TRANSFER OF SECURITIES(4) Re: [ ]% FIRST MORTGAGE NOTES DUE 2004 OF ARGOSY GAMING COMPANY This Certificate relates to $______ principal amount of Securities held in(5) / / book-entry or / / definitive form by _______ (the "Transferor"). The Transferor(5): / / has requested the Trustee by written order to deliver in exchange for its beneficial interest in the Global Security held by the Depository a Security or Securities in definitive, registered form of authorized denominations and an aggregate principal amount equal to its beneficial interest in such Global Security (or the portion thereof indicated above); or / / has requested the Trustee by written order to exchange or register the transfer of a Security or Securities. In connection with such request and in respect of each such Security, the Transferor does hereby certify that Transferor is familiar with the Indenture relating to the above-captioned Securities and as provided in Section 2.6 of such Indenture, the transfer of this Security does not require registration under the Securities Act (as defined below) because:5 / / Such Security is being acquired for the Transferor's own account, without transfer (in satisfaction of Section 2.6(a)(ii)(A) or Section 2.6(d)(i)(A) of the Indenture). / / Such Security is being transferred to a "qualified institutional buyer" (as defined in Rule 144A under the Securities Act of 1933, as amended (the "Securities Act")) in reliance on Rule 144A (in satisfaction of Section 2.6(a)(ii)(B) or Section 2.6(d)(i)(B) of the Indenture). / / Such Security is being transferred in accordance with (i) Rule 144 or Regulation S under the Securities Act, (ii) pursuant to an effective registration statement under the Securities Act, (iii) to - -------------- 4 The following should be included only for Original Notes. 5 Check applicable box. an "institutional accredited investor" within the meaning of Rule 501(A)(1), (2), (3) or (7) under the Securities Act that is acquiring the Security for its own account, or for the account of such an institutional accredited investor, in each case in a minimum principal amount of the Securities of $100,000, not with a view to or for offer or sale in connection with any distribution in violation of the Securities Act or (iv) in reliance on another exemption from registration under the securities Act (in satisfaction of Section 2.6(a)(ii)(C) or Section 2.6(d)(i)(C) of the Indenture). To effect such transfer, the Trustee or the Company may require delivery of an Opinion of Counsel, certification and/or other information satisfactory to it, and in case of a transfer pursuant to clause (iii) above, will require a transferee letter of representation. [INSERT NAME OF TRANSFEROR] By: Date:___________________ By: Attest: EX-4.2 3 EXHIBIT 4.2 EXHIBIT 4.2 ----------- SCHEDULE TO EXHIBIT 4.2 ----------------------- The Guarantees executed by each of the following parties in favor of First National Bank of Commerce, as Trustee, are substantially identical in all material respects except as indicated below. SCHEDULE OF GUARANTORS EXECUTING GUARANTEES ------------------------------------------- Alton Gaming Company Argosy of Louisiana, Inc. Catfish Queen Partnership in Commendam The Indiana Gaming Company Iowa Gaming Company Jazz Enterprises, Inc. The Missouri Gaming Company The St. Louis Gaming Company Pursuant to Paragraph 2 of Item 601 of S-K, the following form is filed in lieu of the various Guarantees. Any material details in which such Guarantees differ from the enclosed form document are described in the enclosed form document. FORM OF GUARANTEE ----------------- For value received, __________________, a _______________ corporation, hereby irrevocably, unconditionally guarantees to the Holder of the Security upon which this Guarantee is endorsed the due and punctual payment, as set forth in the Indenture pursuant to which such Security and this Guarantee were issued, of the principal of, premium (if any) and interest (and Liquidated Damages, if any) on such Security when and as the same shall become due and payable for any reason according to the terms of such Security and Article XIII of the Indenture. The Guarantee of the Security upon which this Guarantee is endorsed will not become effective until the Trustee signs the certificate of authentication on such Security. EX-4.3 4 EXHIBIT 4.3 EXHIBIT 4.3 ----------- ARGOSY GAMING COMPANY, Issuer, and THE GUARANTORS NAMED HEREIN and FIRST NATIONAL BANK OF COMMERCE, Trustee ________________ INDENTURE Dated as of June 5, 1996 ________________ $235,000,000 13 1/4% First Mortgage Notes due 2004 CROSS-REFERENCE TABLE TIA Indenture Section Section - ------- ------- 310(a)(1) . . . . . . . . . . . . . . . . . . . . . 8.10 (a)(2) . . . . . . . . . . . . . . . . . . . . . 8.10 (a)(3) . . . . . . . . . . . . . . . . . . . . . N.A. (a)(4) . . . . . . . . . . . . . . . . . . . . . N.A. (a)(5) . . . . . . . . . . . . . . . . . . . . . 8.10 (b) . . . . . . . . . . . . . . . . . . . . . 8.8; . . . . . . . . . . . . . . . . . . . . . 8.10; . . . . . . . . . . . . . . . . . . . . . 14.2 (c) . . . . . . . . . . . . . . . . . . . . . N.A. 311(a) . . . . . . . . . . . . . . . . . . . . . 8.11 (b) . . . . . . . . . . . . . . . . . . . . . 8.11 (c) . . . . . . . . . . . . . . . . . . . . . N.A. 312(a) . . . . . . . . . . . . . . . . . . . . . 2.5 (b) . . . . . . . . . . . . . . . . . . . . . 14.3 (c) . . . . . . . . . . . . . . . . . . . . . 14.3 313(a) . . . . . . . . . . . . . . . . . . . . . 8.6 (b)(1) . . . . . . . . . . . . . . . . . . . . . N.A. (b)(2) . . . . . . . . . . . . . . . . . . . . . 8.6 (c) . . . . . . . . . . . . . . . . . . . . . 8.6; . . . . . . . . . . . . . . . . . . . . . 14.2 (d) . . . . . . . . . . . . . . . . . . . . . 8.6 314(a) . . . . . . . . . . . . . . . . . . . . . 5.8; . . . . . . . . . . . . . . . . . . . . . 5.7 (b) . . . . . . . . . . . . . . . . . . . . . 4.2 (c)(1) . . . . . . . . . . . . . . . . . . . . . 2.2; . . . . . . . . . . . . . . . . . . . . . 8.2; . . . . . . . . . . . . . . . . . . . . . 14.4 (c)(2) . . . . . . . . . . . . . . . . . . . . . 8.2; . . . . . . . . . . . . . . . . . . . . . 14.4 (c)(3) . . . . . . . . . . . . . . . . . . . . . 4.1 (d) . . . . . . . . . . . . . . . . . . . . . 4.1 (e) . . . . . . . . . . . . . . . . . . . . . 14.5 (f) . . . . . . . . . . . . . . . . . . . . . N.A. 315(a) . . . . . . . . . . . . . . . . . . . . . 8.1(b) (b) . . . . . . . . . . . . . . . . . . . . . 8.5; . . . . . . . . . . . . . . . . . . . . . 8.6; . . . . . . . . . . . . . . . . . . . . . 14.2 (c) . . . . . . . . . . . . . . . . . . . . . 8.1(a) (d) . . . . . . . . . . . . . . . . . . . . . 8.2; . . . . . . . . . . . . . . . . . . . . . 7.11; . . . . . . . . . . . . . . . . . . . . . 8.1(c) (e) . . . . . . . . . . . . . . . . . . . . . 7.14 316(a)(last sentence) . . . . . . . . . . . . . . . 2.9 (a)(1)(A) . . . . . . . . . . . . . . . . . . 7.11 (a)(1)(B) . . . . . . . . . . . . . . . . . . . 7.12 (a)(2) . . . . . . . . . . . . . . . . . . . . . N.A. (b) . . . . . . . . . . . . . . . . . . . . . 7.12; i . . . . . . . . . . . . . . . . . . . . . 7.8 317(a)(1) . . . . . . . . . . . . . . . . . . . . . 7.3 (a)(2) . . . . . . . . . . . . . . . . . . . . . 7.4 (b) . . . . . . . . . . . . . . . . . . . . . 2.4 318(a) . . . . . . . . . . . . . . . . . . . . . 14.1 - -------------- N.A. means Not Applicable Note: This Cross-Reference Table shall not, for any purpose, be deemed to be a part of the Indenture. ii TABLE OF CONTENTS Page ---- ARTICLE I DEFINITIONS AND INCORPORATION BY REFERENCE Section 1.1 Definitions . . . . . . . 1 Section 1.2 Incorporation by Reference of TIA . . . . . . . . . 25 Section 1.3 Rules of Construction . . 26 ARTICLE II THE SECURITIES Section 2.1 Form and Dating . . . . . 26 Section 2.2 Execution and Authentication . . . . . 27 Section 2.3 Registrar and Paying Agent 28 Section 2.4 Paying Agent to Hold Assets in Trust . . . . 28 Section 2.5 Securityholder Lists. . . 29 Section 2.6 Transfer and Exchange . . 29 Section 2.7 Replacement Securities. . 37 Section 2.8 Outstanding Securities. . 37 Section 2.9 Treasury Securities . . . 38 Section 2.10 Temporary Securities. . . 38 Section 2.11 Cancellation. . . . . . . 38 Section 2.12 Defaulted Interest. . . . 38 ARTICLE III REDEMPTION Section 3.1 Right of Redemption . . . 39 Section 3.2 Redemption Pursuant to Gaming Laws . . . . . . 39 Section 3.3 Notices to Trustee. . . . 40 Section 3.4 Selection of Securities to Be Redeemed . . . . . 40 Section 3.5 Notice of Redemption. . . 40 Section 3.6 Effect of Notice of Redemption . . . . . . . 42 Section 3.7 Deposit of Redemption Price . . . . . . . . . 42 Section 3.8 Securities Redeemed in Part . . . . . . . . . . 43 ARTICLE IV SECURITY Section 4.1 Security Interest . . . . 43 Section 4.2 Recording; Opinions of Counsel . . . . . . . . 43 Section 4.3 Disposition of Certain Collateral . . . . . . . 44 Section 4.4 Collateral Account. . . . 46 Section 4.5 Certain Releases of Collateral . . . . . . . 48 Section 4.6 Payment of Expenses . . . 49 Section 4.7 Suits to Protect the Collateral . . . . . . . 49 Section 4.8 Trustee's Duties. . . . . 50 iii ARTICLE V COVENANTS Page Section 5.1 Payment of Securities . . 50 Section 5.2 Maintenance of Office or Agency . . . . . . . 51 Section 5.3 Limitation on Restricted Payments . . . . . . . . 51 Section 5.4 Corporate Existence . . . 52 Section 5.5 Payment of Taxes and Other Claims . . . . . . 53 Section 5.6 Maintenance of Insurance. 53 Section 5.7 Compliance Certificate; Notice of Default . . . 54 Section 5.8 Reports . . . . . . . . . 54 Section 5.9 Waiver of Stay, Extension or Usury Laws . . . . . . . . . . 55 Section 5.10 Limitation on Transactions with Affiliates . . . . 55 Section 5.11 Limitation on Incurrence of Additional Indebtedness and Disqualified Capital Stock. . . . . . . . . . 56 Section 5.12 Limitation on Dividends and Other Payment Restrictions Affecting Subsidiaries . . . . . . 58 Section 5.13 Limitation on Liens Securing Indebtedness . 59 Section 5.14 Limitation on Sale of Assets and Subsidiary Stock . . . . . . . . . 59 Section 5.15 Limitation on Use of Proceeds . . . . . . . . 64 Section 5.16 Repurchase of Notes on Certain Project Delays . 65 Section 5.17 Repurchase of Notes in Connection with Sale of Lawrenceburg Interest. . 67 Section 5.18 Repurchase of Notes in Connection with Repayment of Lawrenceburg Investment . . . . . . . 70 Section 5.19 Repurchase of Notes on Loss of Material Casino . . . . . . . . . 74 Section 5.20 Limitation on Activities of The Indiana Gaming Company and Indiana Gaming L.P. . . . . . . 76 Section 5.21 Limitation on Lines of Business . . . . . . . . 77 Section 5.22 Limitation on Status as Investment Company . . . 77 Section 5.23 Future Subsidiary Guarantors . . . . . . . 77 Section 5.24 Rule 144A Information Requirement . . . . . . 78 ARTICLE VI SUCCESSOR CORPORATION Section 6.1 Limitation on Merger, Sale or Consolidation . . . . 78 Section 6.2 Successor Corporation Substituted . . . . . . 79 iv ARTICLE VII Page EVENTS OF DEFAULT AND REMEDIES Section 7.1 Events of Default . . . . 80 Section 7.2 Acceleration of Maturity Date; Rescission and Annulment . . . . . . . 82 Section 7.3 Collection of Indebtedness and Suits for Enforcement by Trustee . . . . . . . . 83 Section 7.4 Trustee May File Proofs of Claim . . . . . . . . 84 Section 7.5 Trustee May Enforce Claims Without Possession of Securities . . . . . . . 85 Section 7.6 Priorities. . . . . . . . 85 Section 7.7 Limitation on Suits . . . 85 Section 7.8 Unconditional Right of Holders to Receive Principal, Premium and Interest . . . . . . . . 86 Section 7.9 Rights and Remedies Cumulative . . . . . . 87 Section 7.10 Delay or Omission Not Waiver . . . . . . . 87 Section 7.11 Control by Holders. . . . 87 Section 7.12 Waiver of Past Default. . 88 Section 7.13 Undertaking for Costs . . 88 Section 7.14 Restoration of Rights and Remedies . . . . . . 89 ARTICLE VIII TRUSTEE Section 8.1 Duties of Trustee . . . . 89 Section 8.2 Rights of Trustee . . . . 91 Section 8.3 Individual Rights of Trustee . . . . . . . . 92 Section 8.4 Trustee's Disclaimer. . . 92 Section 8.5 Notice of Default . . . . 92 Section 8.6 Reports by Trustee to Holders . . . . . . . . 93 Section 8.7 Compensation and Indemnity . . . . . . . 93 Section 8.8 Replacement of Trustee. . 94 Section 8.9 Successor Trustee by Merger, Etc. . . . . . . 95 Section 8.10 Eligibility; Disqualification . . . . 95 Section 8.11 Preferential Collection of Claims against Company . . . . . . . . 95 ARTICLE IX LEGAL DEFEASANCE AND COVENANT DEFEASANCE Section 9.1 Option to Effect Legal Defeasance or Covenant Defeasance . . 96 Section 9.2 Legal Defeasance and Discharge . . . . . . . 96 Section 9.3 Covenant Defeasance . . . 96 Section 9.4 Conditions to Legal or Covenant Defeasance . . 97 Section 9.5 Deposited Cash and U.S. Government Obligations to Be Held in Trust; Other Miscellaneous Provisions . . . . . . . 100 v Section 9.6 Repayment to Issuers . . 101 Section 9.7 Reinstatement . . . . . . 101 Section 9.8 Termination of Obligations upon Cancellation of the Securities . . . . . . . 101 ARTICLE X AMENDMENTS, SUPPLEMENTS AND WAIVERS Section 10.1 Supplemental Indentures Without Consent of Holders . . . . . . . . 102 Section 10.2 Amendments, Supplemental Indentures and Waivers with Consent of Holders . . . . . . . . 103 Section 10.3 Compliance with TIA . . . 105 Section 10.4 Revocation and Effect of Consents . . . . . . 105 Section 10.5 Notation on or Exchange of Securities . . . . . 106 Section 10.6 Trustee to Sign Amendments, Etc. . . . . 106 ARTICLE XI MEETINGS OF SECURITYHOLDERS Section 11.1 Purposes for Which Meetings May Be Called . . . . . . . . . 107 Section 11.2 Manner of Calling Meetings . . . . . . . . 107 Section 11.3 Call of Meetings by Company or Holders . . . 108 Section 11.4 Who May Attend and Vote at Meetings . . . . . . 108 Section 11.5 Regulations May Be Made by Trustee; Conduct of the Meeting; Voting Rights; Adjournment . . . . . . 108 Section 11.6 Voting at the Meeting and Record to Be Kept. . 109 Section 11.7 Exercise of Rights of Trustee or Securityholders May Not Be Hindered or Delayed by Call of Meeting . . . . . . . 110 ARTICLE XII RIGHT TO REQUIRE REPURCHASE Section 12.1 Repurchase of Securities at Option of the Holder upon Change of Control. . 110 ARTICLE XIII GUARANTEE Section 13.1 Guarantee . . . . . . . . 113 Section 13.2 Execution and Delivery of Guarantee . . . . . . 115 Section 13.3 Certain Bankruptcy Events . . . . . . . . . 115 Section 13.4 Release of Guarantee. . . 115 Section 13.5 Future Guarantors . . . . 116 vi ARTICLE XIV MISCELLANEOUS Section 14.1 TIA Controls . . . . . . 116 Section 14.2 Notices . . . . . . . . . 116 Section 14.3 Communications by Holders with Other Holders . . . 117 Section 14.4 Certificate and Opinion as to Conditions Precedent . . . . . . . 118 Section 14.5 Statements Required in Certificate or Opinion . 118 Section 14.6 Rules by Trustee, Paying Agent, Registrar . . . . 119 Section 14.7 Legal Holidays. . . . . . 119 Section 14.8 Governing Law . . . . . . 119 Section 14.9 No Adverse Interpretation of Other Agreements . . 119 Section 14.10 No Recourse against Others . . . . . . . . . 120 Section 14.11 Successors. . . . . . . . 120 Section 14.12 Duplicate Originals . . . 120 Section 14.13 Severability. . . . . . . 120 Section 14.14 Table of Contents, Headings, Etc. . . . . . 120 vii Page ---- EXHIBITS Exhibit A - Form of Note Exhibit B - Form of Guarantee Exhibit C-1 and C-2 - Forms of Deed of Trust Exhibit D - Form of Parent Pledge Agreement Exhibit E - Form of Subsidiary Pledge Agreement Exhibit F - Form of Ship Mortgage Exhibit G - Form of Parent Security Agreement Exhibit H - Form of Subsidiary Security Agreement Exhibit I - Form of Intercreditor Agreement Exhibit J - Specified Indebtedness Exhibit K - Specified Parcels viii INDENTURE, dated as of June 5, 1996, among Argosy Gaming Company, a Delaware corporation (the "Company"), the Guarantors referred to below and First National Bank of Commerce, as Trustee. Each party hereto agrees as follows for the benefit of each other party and for the equal and ratable benefit of the Holders of the Company's 13 1/4% First Mortgage Notes due 2004, whether Original Notes (as defined below) or Series B Notes (as defined below): ARTICLE I DEFINITIONS AND INCORPORATION BY REFERENCE Section 1 DEFINITIONS. "ACCELERATION NOTICE" shall have the meaning specified in Section 7.2. "ACCEPTANCE AMOUNT" shall have the meaning specified in Section 5.14. "ACCUMULATED AMOUNT" shall have the meaning specified in Section 5.14. "ACQUIRED INDEBTEDNESS" means, with respect to any person, (i) Indebtedness or Disqualified Capital Stock of any person existing at the time such person becomes a Subsidiary of the Company or is merged or consolidated into or with the Company or one of its Subsidiaries or (ii) Indebtedness encumbering any asset acquired by such person. Acquired Indebtedness shall be deemed to have been incurred at the time such person becomes a Subsidiary of the Company (including upon the designation of a subsidiary or any other person as a Subsidiary) or is merged or consolidated into or with the Company or one of its Subsidiaries or the time of the Acquisition of such assets. "ACQUISITION" means the purchase or other acquisition of any person or substantially all the assets of any person by any other person, whether by purchase, merger, consolidation, or other transfer, and whether or not for consideration. "AFFILIATE" means (i) any person directly or indirectly controlling or controlled by or under direct or indirect common control with the Company, (ii) any spouse, immediate family member, or other relative who has the same principal residence of any person described in clause (i) above, and (iii) any trust in which any person described in clause (i) or (ii) above has a beneficial interest. For purposes of this definition, the term "control" means (a) the power to direct the management and policies of a person, directly or through one or more intermedi- aries, whether through the ownership of voting securities, by contract, or otherwise, or (b) the beneficial ownership of 10% or more of the voting power of a person (on a fully diluted basis) or of warrants or other rights to acquire shares of such class of Capital Stock (whether or not presently exercisable). "AFFILIATE TRANSACTION" shall have the meaning speci- fied in Section 5.10. "AGENT" means any Registrar, Paying Agent or co-Regis- trar. "ASSET SALE" shall have the meaning specified in Section 5.14. "ASSET SALE OFFER" shall have the meaning specified in Section 5.14. "ASSET SALE OFFER AMOUNT" shall have the meaning specified in Section 5.14. "ASSET SALE OFFER PRICE" shall have the meaning speci- fied in Section 5.14. "ASSET SALE PURCHASE DATE" shall have the meaning specified in Section 5.14. "AVERAGE LIFE TO STATED MATURITY" means, as of the date of determination, with respect to any indebtedness, the quotient obtained by dividing (i) the sum of the products of (a) the number of years from the date of determination to the date or dates of each successive scheduled principal payment of such Indebtedness multiplied by (b) the amount of each such principal payment by (ii) the sum of all such principal payments. "BANKRUPTCY LAW" means Title 11, U.S. Code or any similar Federal, state or foreign law for the relief of debtors. "BENEFICIAL OWNER" for purposes of the definition of Change of Control has the meaning attributed to it in Rules 13d-3 and 13d-5 under the Exchange Act, whether or not applicable, except that a "person" shall be deemed to have "beneficial ownership" of all shares that any such person has the right to acquire, whether such right is exercisable immediately or only after the passage of time. "BOARD OF DIRECTORS" means, with respect to any person, the Board of Directors of such person or any committee of the Board of Directors of such person authorized, with respect to any particular matter, to exercise the power of the Board of Direc- tors of such person. 2 "BOARD RESOLUTION" means, with respect to any person, a duly adopted resolution of the Board of Directors of such person. "BUSINESS DAY" means each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which banking institu- tions in New York, New York are authorized or obligated by law or executive order to close. "CAPITAL STOCK" means, with respect to any person, any and all shares, interests, rights to purchase (other than con- vertible or exchangeable Indebtedness), warrants, options, participations or other equivalents of or interests (however designated) in stock or equity issued by that person. "CAPITALIZED LEASE OBLIGATION" means obligations under a lease, entered into on or after the Issue Date, that are required to be capitalized for financial reporting purposes in accordance with GAAP, and the amount of Indebtedness represented by such obligations shall be the capitalized amount of such obligations, as determined in accordance with GAAP. "CASH" or "CASH" means such coin or currency of the United States of America as at the time of payment shall be legal tender for the payment of public or private debts. "CASH COLLATERAL" means Cash that is Collateral for the Securities under the Security documents. "CASH COLLATERAL ACCOUNT" means any of the separate custodial account or accounts (including the Net Cash Proceeds Account, the Construction Account and Working Capital Account) established and maintained by the Company in the name of the Trustee or the Disbursement Agent for the benefit of the Holders pursuant to Section 4.4 or the terms of the Cash Collateral and Disbursement Agreement, respectively. "CASH COLLATERAL AND DISBURSEMENT AGREEMENT" means the Cash Collateral and Disbursement Agreement, dated as of the Issue Date, among the Company, the Guarantors, the Trustee, and the Disbursement Agent, as the same may be amended from time to time in accordance with the terms thereof. "CASINO IMPROVEMENTS" means the acquisition of, or development and construction of, any addition to or expansion of the Company's Riverside, Alton, Sioux City or Baton Rouge proper- ties in connection with any expansion of casino floor space, and any addition to or expansion of any gaming, hotel, parking, dining, entertainment, retail, promotional, storage, patron services, transportation or similar facilities related thereto, in each case, after the date of this Indenture. 3 "CHANGE OF CONTROL" means (i) any merger or consolida- tion of the Company with or into any person or any sale, transfer or other conveyance, whether direct or indirect, of all or substantially all of the assets of the Company, on a consolidated basis, in one transaction or a series of related transactions, if, immediately after giving effect to such transaction, any "person" or "group" (as such terms are used for purposes of Sections 13(d) and 14(d) of the Exchange Act, whether or not applicable), other than Excluded Persons, is or becomes the "beneficial owner," directly or indirectly, of more than 50% of the total voting power in the aggregate normally entitled to vote in the election of directors, managers, or trustees, as applica- ble, of the transferee or surviving entity, (ii) any "person" or "group" (as such terms are used for purposes of Sections 13(d) and 14(d) of the Exchange Act, whether or not applicable), other than Excluded Persons, is or becomes the "beneficial owner," directly or indirectly, of more than 50% of the total voting power in the aggregate of all classes of Capital Stock of the Company then outstanding normally entitled to vote in elections of directors, or (iii) during any period of 12 consecutive months after the Issue Date, individuals who at the beginning of any such 12-month period constituted the Board of Directors of the Company (together with any new directors whose election by such Board or whose nomination for election by the shareholders of the Company was approved by a vote of a majority of the directors then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the Board of Directors of the Company then in office. For purposes of this definition, (i) the terms "person" and "group" shall have the meaning used for purposes of Rules 13d-3 and 13d-5 of the Exchange Act as in effect on the Issue Date, whether or not applicable; and (ii) the term "beneficial owner" shall have the meaning used in Rules 13d-3 and 13d-5 under the Exchange Act as in effect on the Issue Date, whether or not applicable, except that a "person" shall be deemed to have "beneficial ownership" of all shares that any such person has the right to acquire, whether such right is exercisable immediately or only after the passage of time or upon the occurrence of certain events. "CHANGE OF CONTROL OFFER" shall have the meaning specified in Section 12.1. "CHANGE OF CONTROL PURCHASE PRICE" shall have the meaning specified in Section 12.1. "CHANGE OF CONTROL PURCHASE DATE" shall have the meaning specified in Section 12.1. 4 "COLLATERAL" means the Property and assets of the Company and the Property and assets of the Guarantors which are subject to the Liens created by the Security Documents. "COMPANY" means the party named as such in this Inden- ture until a successor replaces it pursuant to the Indenture and thereafter means such successor. "CONSOLIDATED COVERAGE RATIO" of any person on any date of determination (the "Transaction Date") means the ratio, on a pro forma basis, of (a) the aggregate amount of Consolidated EBITDA of such person attributable to continuing operations and businesses exclusive of amounts attributable to operations and businesses permanently discontinued or disposed of during the Reference Period, to (b) the aggregate Consolidated Fixed Charges of such person (exclusive of amounts attributable to operations and businesses permanently discontinued or disposed of, but only to the extent that the obligations giving rise to such Consoli- dated Fixed Charges would no longer be obligations contributing to such person's Consolidated Fixed Charges subsequent to the Transaction Date) during the Reference Period; provided, that for purposes of such calculation, (i) Acquisitions which occurred during the Reference Period or subsequent to the Reference Period and on or prior to the Transaction Date shall be assumed to have occurred on the first day of the Reference Period, (ii) transac- tions giving rise to the need to calculate the Consolidated Coverage Ratio shall be assumed to have occurred on the first day of the Reference Period, (iii) the incurrence of any Indebtedness or issuance of any Disqualified Capital Stock during the Refer- ence Period or subsequent to the Reference Period and on or prior to the Transaction Date (and the application of the proceeds therefrom to the extent used to refinance or retire other Indebt- edness) shall be assumed to have occurred on the first day of such Reference Period, and (iv) the Consolidated Fixed Charges of such person attributable to interest on any Indebtedness or dividends on any Disqualified Capital Stock bearing a floating interest (or dividend) rate shall be computed on a pro forma basis as if the average rate in effect from the beginning of the Reference Period to the Transaction Date had been the applicable rate for the entire period, unless such Person or any of its Subsidiaries is a party to an Interest Swap and Hedging Obliga- tion (which shall remain in effect for the 12-month period immediately following the Transaction Date) that has the effect of fixing the interest rate on the date of computation, in which case such rate (whether higher or lower) shall be used. "CONSOLIDATED EBITDA" means, with respect to any person, for any period, the Consolidated Net Income of such person for such period adjusted to add thereto (to the extent deducted from net revenues in determining Consolidated Net Income), without duplication, the sum of (i) consolidated income tax expense, (ii) consolidated depreciation and amortization ex- 5 pense, provided that consolidated depreciation and amortization of a Subsidiary that is a less than wholly owned Subsidiary shall only be added to the extent of the equity interest of the Company in such Subsidiary, (iii) Consolidated Fixed Charges, and (iv) with respect to the Company, all cash distributions made by The Indiana Gaming Company to the Company or another Guarantor, except for payments in the nature of management fees, interest income or preferred dividends from Indiana Gaming L.P. "CONSOLIDATED FIXED CHARGES" of any person means, for any period, the aggregate amount (without duplication and deter- mined in each case in accordance with GAAP) of (a) interest expensed or capitalized, paid, accrued, or scheduled to be paid or accrued (including, in accordance with the following sentence, interest attributable to Capitalized Lease Obligations) of such person and its Consolidated Subsidiaries during such period, including (i) original issue discount and non-cash interest pay- ments or accruals on any Indebtedness, (ii) the interest portion of all deferred payment obligations, and (iii) all commissions, discounts and other fees and charges owed with respect to bankers' acceptances and letters of credit financings and currency and Interest Swap and Hedging Obligations, in each case to the extent attributable to such period, and (b) the amount of divi- dends accrued or payable by such person or any of its Consoli- dated Subsidiaries in respect of Preferred Stock (other than by Subsidiaries of such person to such person or such person's whol- ly owned Subsidiaries). For purposes of this definition, (x) interest on a Capitalized Lease Obligation shall be deemed to accrue at an interest rate reasonably determined by the Company to be the rate of interest implicit in such Capitalized Lease Obligation in accordance with GAAP and (y) interest expense at- tributable to any Indebtedness represented by the guaranty by such person or a Subsidiary of such person of an obligation of another person shall be deemed to be the interest expense attrib- utable to the Indebtedness guaranteed. "CONSOLIDATED NET INCOME" means, with respect to any person for any period, the net income (or loss) of such person and its Consolidated Subsidiaries (determined on a consolidated basis in accordance with GAAP) for such period, adjusted to ex- clude (only to the extent included in computing such net income (or loss) and without duplication): (a) all gains (but not losses) which are either extraordinary (as determined in accor- dance with GAAP) or are either unusual or nonrecurring (including any gain from the sale or other disposition of assets outside the ordinary course of business or from the issuance or sale of any capital stock), (b) any gains (but not losses) from currency ex- change transactions, (c) the net income, if positive, of any per- son, other than a wholly owned Consolidated Subsidiary, in which such person or any of its Consolidated Subsidiaries has an in- terest, except to the extent of the amount of any dividends or distributions actually paid in cash to such person or a wholly 6 owned Consolidated Subsidiary of such person during such period, but in any case not in excess of such person's pro rata share of such person's net income for such period, (d) the net income or loss of any person acquired in a pooling of interests transaction for any period prior to the date of such acquisition, (e) cash distributions from Indiana Gaming L.P. and the net income of The Indiana Gaming Company, except for net income in the nature of management fees, interest income or preferred dividends actually paid to the Company or a Guarantor other than The Indiana Gaming Company, so long as Indiana Gaming L.P. is an Unrestricted Subsidiary, (f) the net income, if positive, of any of such person's Consolidated Subsidiaries to the extent that the decla- ration or payment of dividends or similar distributions is not at the time permitted by operation of the terms of its charter or bylaws or any other agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to such Consolidated Subsidiary, PROVIDED, HOWEVER, that statutory or regulatory requirements of Gaming Authority approval prior to distribution shall not be considered such a limitation and (g) any noncash extraordinary charge relating to the repayment of the Existing Bank Credit Facility. "CONSOLIDATED NET WORTH" of any person at any date means the aggregate consolidated stockholders' equity of such person (plus amounts of equity attributable to preferred stock) and its Consolidated Subsidiaries, as would be shown on the consolidated balance sheet of such person prepared in accordance with GAAP, adjusted to exclude (to the extent included in calcu- lating such equity) (a) the amount of any such stockholders' equity attributable to Disqualified Capital Stock or treasury stock of such person and its Consolidated Subsidiaries, (b) all upward revaluations and other write-ups in the book value of any asset of such person or a Consolidated Subsidiary of such person subsequent to the Issue Date, and (c) all investments in Subsid- iaries that are not Consolidated Subsidiaries and in persons that are not Subsidiaries. "CONSOLIDATED SUBSIDIARY" means, for any person, each Subsidiary of such person (whether now existing or hereafter created or acquired) the financial statements of which are consolidated for financial statement reporting purposes with the financial statements of such person in accordance with GAAP. So long as Indiana Gaming L.P. is an Unrestricted Subsidiary, the results of operation of Indiana Gaming L.P. shall not be included in the calculation of Consolidated Net Income of the Company, other than management fees, interest income and preferred divi- dends paid to the Company or a Guarantor other than The Indiana Gaming Company. "CONVERTIBLE NOTES" means the Company's 12% Convertible Subordinated Notes due 2001. 7 "CUSTODIAN" means any receiver, trustee, assignee, liquidator, sequestrator or similar official under any Bankruptcy Law. "DEEDS OF TRUST" means, collectively, (i) that certain Deed of Trust, Assignments of Rents, Leases and Security Agree- ments substantially in the form of Exhibit C-1 dated as of the Issue Date, executed by each of Argosy Gaming Company, and (ii) that certain Mortgage and Fixture Filing of Jazz Enterprises, Inc. to secure present and future indebtedness, Assignment of Leases and Rents and Security Agreement substantially in the form of Exhibit C-2 dated as of the Issue Date, executed by each of Jazz Enterprises, Inc. and Catfish Queen Partnership in Commen- dam, each in favor of the Trustee as Trustee for the Securityholders, as the same may be amended from time to time. "DEFAULT" means any event which is, or after notice or passage of time or both would be, an Event of Default. "DEFINITIVE SECURITIES" means Securities that are in the form of the Note attached hereto as Exhibit A that do not include the information called for by footnotes 1 and 3 thereof. "DEPOSITORY" means, with respect to the Securities issuable or issued in whole or in part in global form, the person specified in Section 2.3 as the Depository with respect to the Securities, until a successor shall have been appointed and become such pursuant to the applicable provision of this Inden- ture, and, thereafter, "Depository" shall mean or include such successor. "DISBURSEMENT AGENT" shall have the meaning specified in Section 4.4. "DISQUALIFIED CAPITAL STOCK" means (a) except as set forth in (b), with respect to any person, Capital Stock of such person, that, by its terms or by the terms of any security into which it is convertible, exercisable or exchangeable, is, or upon the happening of an event or the passage of time would be, required to be redeemed or repurchased (including at the option of the holder thereof) by such person or any of its Subsidiaries, in whole or in part, on or prior to the Stated Maturity of the Notes and (b) with respect to any Subsidiary of such person (including with respect to any Subsidiary of the Company), any Capital Stock other than any common stock with no preference, privileges, or redemption or repayment provisions. "EVENT OF DEFAULT" shall have the meaning specified in Section 7.1. "EVENT OF LOSS" means, with respect to any property or asset or any (i) loss, destruction or damage of such property or 8 asset or (ii) any condemnation, seizure or taking, by exercise of the power of eminent domain or otherwise, of such property or asset, or confiscation or requisition of the use of such property or asset. "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated by the SEC thereunder. "EXCHANGE OFFER" means the offer by the Company and the Guarantors to exchange the Series B Notes and Guarantees thereof for the Original Notes and Guarantees thereof made pursuant to the Registration Rights Agreement. "EXCLUDED PERSONS" means J. Thomas Long and William F. Cellini, each of such person's immediate family or a trust or similar entity existing solely for the benefit of such person or such person's immediate family. "EXISTING BANK CREDIT AGREEMENT" means the Credit Agreement, dated March 8, 1995, among the Company, Bank of America Illinois, as Agent, and the other financial institutions party thereto. "FF&E INDEBTEDNESS" means any Indebtedness of the Company and its Subsidiaries and Indiana Gaming L.P. to any seller or other person incurred to finance any gaming or gaming related fixtures, furniture or equipment which, in the reasonable good faith judgment of the Board of Directors of the Company or the general partner of Indiana Gaming L.P., is incurred for a Material Casino, is directly related to a Related Business and is secured only by the assets so financed. "GAAP" means United States generally accepted account- ing principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other state- ments by such other entity as approved by a significant segment of the accounting profession as in effect on the Issue Date. "GAMING AUTHORITY" means any Governmental Authority with the power to regulate gaming in any Gaming Jurisdiction, and the corresponding Governmental Authorities with responsibility to interpret and enforce the laws and regulations applicable to gaming in any Gaming Jurisdiction. "GAMING JURISDICTION" means any Federal, state or local jurisdiction in which any entity in which the Company has a direct or indirect beneficial, legal or voting interest conducts casino gaming. 9 "GAMING LAW" means any law, rule, regulation or ordi- nance governing gaming activities, any administrative rules or regulations promulgated thereunder, and any of the corresponding statutes, rules and regulations in each Gaming Jurisdiction. "GAMING LICENSES" means every license, material fran- chise or other authorization on the date of the Indenture or thereafter required to own, lease, operate or otherwise conduct or manage riverboat, dockside or land-based gaming in any state or jurisdiction in which the Company or any of the Guarantors conduct business, and any applicable liquor licenses. "GLOBAL SECURITY" means a Security that contains the paragraph referred to in footnote 1 and the additional schedule referred to in footnote 3 to the form of Security attached hereto as Exhibit A. "GOVERNMENTAL AUTHORITY" means any agency, authority, board, bureau, commission, department, office or instrumentality of any nature whatsoever of the United States or a foreign government, any state, province or any city or other political subdivision or otherwise and whether now or hereafter in exis- tence, or any officer or official thereof, and any maritime authority. "GUARANTORS" means Alton Gaming Company, The Missouri Gaming Company, The St. Louis Gaming Company, Iowa Gaming Compa- ny, Jazz Enterprises, Inc., Argosy of Louisiana, Inc., Catfish Queen Partnership in Commendam and The Indiana Gaming Company and any future newly created, acquired or designated Subsidiary of the Company. "GUARANTEE" shall have the meaning provided in Section 13.1(a). "HOLDER" or "SECURITYHOLDER" means the person in whose name a Security is registered on the Registrar's books. "INCUR" shall have the meaning specified in Section 5.11. "INCURRENCE DATE" shall have the meaning specified in Section 5.11. "INDEBTEDNESS" of any person means, without duplica- tion, (a) all liabilities and obligations, contingent or other- wise, of such person, (i) in respect of borrowed money (whether or not the recourse of the lender is to the whole of the assets of such person or only to a portion thereof), (ii) evidenced by bonds, notes, debentures or similar instruments, (iii) represent- ing the balance deferred and unpaid of the purchase price of any property or services, except such as would constitute accrued 10 expenses or trade payables to trade creditors in the ordinary course of business that are not more than ninety (90) days past their original due date unless being contested in good faith, (iv) evidenced by bankers' acceptances or similar instruments issued or accepted by banks, (v) for the payment of money relat- ing to a Capitalized Lease Obligation, or (vi) evidenced by a letter of credit or a reimbursement obligation of such person with respect to any letter of credit; (b) all net obligations of such person under Interest Swap and Hedging Obligations; (c) all liabilities and obligations of others of the kind described in the preceding clause (a) or (b) that such person has guaranteed or that is otherwise its legal liability and all obligations to purchase, redeem or acquire any Capital Stock; and (d) any and all deferrals, renewals, extensions, refinancings and refundings (whether direct or indirect) of, or amendments, modifications or supplements to, any liability of the kind described in any of the preceding clauses (a), (b) or (c) or this clause (d), whether or not between or among the same parties, provided that, in calcu- lating Indebtedness of the Company and its Consolidated Subsid- iaries, Indebtedness of Indiana Gaming L.P. attributable to The Indiana Gaming Company solely because of its legal status as general partner of Indiana Gaming L.P. shall not be deemed such Indebtedness. "INDENTURE" means this Indenture, as amended or supple- mented from time to time in accordance with the terms hereof. "INDENTURE OBLIGATIONS" means the obligations of the Company and the Guarantors pursuant to this Indenture and the Securities (and any other obligor hereunder or under the Securi- ties) now or hereafter existing, to pay principal of and premium, if any, and interest (including Liquidated Damages, if any) on the Securities when due and payable, whether on the Maturity Date or an Interest Payment Date, by acceleration, call for redemp- tion, acceptance of any Asset Sale Offer, Change of Control Offer, License Loss Offer, Lawrenceburg Sale Offer, Project Delay Offer, Lawrenceburg Investment Offer, or otherwise, and interest on the overdue principal and premium, if any, of, and (to the extent lawful) interest (and Liquidated Damages), if any, on, the Securities and all other amounts due or to become due in connec- tion with this Indenture, the Securities and the Security Docu- ments, including any and all extensions, renewals or other modifications thereof, in whole or in part, and the performance of all other obligations of the Company (and any other obligor hereunder or under the Securities) and the Guarantors, including all costs and expenses incurred by the Trustee or the Holders in the collection or enforcement of any such obligations or realiza- tion upon the Collateral or the security of any Security Docu- ment. 11 "INDIANA GAMING L.P." means the Indiana Gaming Company, L.P. or any successor acquired to develop the proposed casino in Lawrenceburg, Indiana. "INITIAL PURCHASERS" means Bear, Stearns & Co. Inc., Donaldson, Lufkin & Jenrette Securities Corporation, BA Securi- ties, Inc. and Deutsche Morgan Grenfell. "INSURANCE PROCEEDS" means the Company's and the Guarantors' interest in and to (a) all proceeds which now or hereafter may be paid under any insurance policies now or hereaf- ter obtained by or on behalf of the Company and the Guarantors in connection with the conversion of the Property subject to the Security Documents into Cash or liquidated claims, together with the interest payable thereon and the right to collect and receive the same, including, but without limiting the generality of the foregoing, proceeds of casualty insurance, title insurance, business interruption insurance and any other insurance now or hereafter maintained with respect to such Property, (b) proceeds of any condemnation proceedings and (c) all amounts attributable to Events of Loss. "INTEREST PAYMENT DATE" means the stated due date of an installment of interest on the Securities. "INTEREST SWAP AND HEDGING OBLIGATION" means any obligation of any person pursuant to any interest rate swap agreement, interest rate cap agreement, interest rate collar agreement, interest rate exchange agreement, currency exchange agreement or any other agreement or arrangement designed to protect against fluctuations in interest rates or currency values, including, without limitation, any arrangement whereby, directly or indirectly, such person is entitled to receive from time to time periodic payments calculated by applying either a fixed or floating rate of interest on a stated notional amount in exchange for periodic payments made by such person calculated by applying a fixed or floating rate of interest on the same notion- al amount. "INVESTMENT" by any person in any other person means (without duplication) (a) the acquisition (whether by purchase, merger, consolidation or otherwise) by such person (whether for cash, property, services, securities or otherwise) of capital stock, bonds, notes, debentures, partnership or other ownership interests or other securities, including any options or warrants, of such other person or any agreement to make any such acquisi- tion; (b) the making by such person of any deposit with, or advance, loan or other extension of credit to, such other person (including the purchase of property from another person subject to an understanding or agreement, contingent or otherwise, to resell such property to such other person) or any commitment to make any such advance, loan or extension (but excluding (a) 12 accounts receivable or deposits arising in the ordinary course of business and (b) advances, loans or other extensions of credit by the Company or any of its Subsidiaries to the Company or any Subsidiary of the Company); (c) other than guarantees of Indebt- edness of the Company to the extent permitted by Section 5.11, the entering into by such person of any guarantee of, or other credit support or contingent obligation with respect to, Indebt- edness or other liability of such other person; (d) the making of any capital contribution by such person to such other person, other than to the Company or a wholly owned Subsidiary of the Company; and (e) the designation by the Board of Directors of the Company of any person to be an Unrestricted Subsidiary. The Company shall be deemed to make an Investment in an amount equal to the fair market value of the net assets of any subsidiary (or, if neither the Company nor any of its Subsidiaries has thereto- fore made an Investment in such subsidiary, in an amount equal to the Investments being made), at the time that such subsidiary is designated an Unrestricted Subsidiary, and any property trans- ferred to an Unrestricted Subsidiary from the Company or a Subsidiary shall be deemed an Investment valued at its fair market value at the time of such transfer. "ISSUE DATE" means the date of first issuance of the Notes under the Indenture. "JUNIOR INDEBTEDNESS" means Indebtedness of the Company or a Guarantor, as applicable, that is subordinated in right of payment to the Notes or such Guarantor's guarantee of the Notes, as applicable, or has a scheduled installment of principal due, by maturity, redemption, sinking fund payment or otherwise after the Stated Maturity of the Notes, except that the amount payable to the former Jazz Enterprises, Inc. shareholders shall not be deemed Junior Indebtedness if repaid in full at a discount for an amount not to exceed $3 million. "LAWRENCEBURG CASINO" means the Company's proposed dockside or riverboat casino and related parking, hotel, restau- rant, bar and other entertainment facilities in Lawrenceburg, Dearborn County, Indiana. "LAWRENCEBURG INVESTMENT" means the total aggregate Investment by the Company and the Guarantors in Indiana Gaming L.P. "LAWRENCEBURG INVESTMENT ACCEPTANCE AMOUNT" shall have the meaning specified in Section 5.18. "LAWRENCEBURG INVESTMENT EVENT" shall have the meaning specified in Section 5.18. "LAWRENCEBURG INVESTMENT OFFER" shall have the meaning specified in Section 5.18. 13 "LAWRENCEBURG INVESTMENT OFFER AMOUNT" shall have the meaning specified in Section 5.18. "LAWRENCEBURG INVESTMENT OFFER PRICE" shall have the meaning specified in Section 5.18. "LAWRENCEBURG INVESTMENT PURCHASE DATE" shall have the meaning specified in Section 5.18. "LAWRENCEBURG INVESTMENT RETURN" means the complete repayment to the Company and the Guarantors (other than The Indiana Gaming Company) of the Lawrenceburg Investment, without credit for management fees, interest income, preferred dividends or provision for taxes. "LAWRENCEBURG SALE" shall have the meaning specified in Section 5.17. "LAWRENCEBURG SALE ACCEPTANCE AMOUNT" shall have the meaning specified in Section 5.17. "LAWRENCEBURG SALE OFFER" shall have the meaning speci- fied in Section 5.17. "LAWRENCEBURG SALE OFFER AMOUNT" shall have the meaning specified in Section 5.17. "LAWRENCEBURG SALE OFFER PRICE" shall have the meaning specified in Section 5.17. "LAWRENCEBURG SALE PURCHASE DATE" shall have the meaning specified in Section 5.17. "LEGAL HOLIDAY" shall have the meaning provided in Section 14.7. "LICENSE LOSS" shall have the meaning specified in Sec- tion 5.19. "LICENSE LOSS OFFER" shall have the meaning specified in Section 5.19. "LICENSE LOSS OFFER AMOUNT" shall have the meaning specified in Section 5.19. "LICENSE LOSS OFFER PRICE" shall have the meaning specified in Section 5.19. "LICENSE LOSS PURCHASE DATE" shall have the meaning specified in Section 5.19. 14 "LIEN" means any mortgage, lien, pledge, charge, security interest, or other encumbrance of any kind, whether or not filed, recorded or otherwise perfected under applicable law (including any conditional sale or other title retention agree- ment and any lease deemed to constitute a security interest, and any option or other agreement to give any security interest). "LIQUIDATED DAMAGES" shall have the meaning specified in the Registration Rights Agreement. "MATERIAL CASINO" means any gaming establishment possessing at least 400 slot machines and at least 20 table games. "MATURITY DATE," when used with respect to any Securi- ty, means the date on which the principal of such Security becomes due and payable as therein or herein provided, whether at Stated Maturity, a Change of Control Purchase Date, an Asset Sale Purchase Date, a License Loss Purchase Date, a Lawrenceburg Sale Purchase Date, the Project Delay Purchase Date or the Lawrenceburg Investment Purchase Date or by declaration of accel- eration, call for redemption or otherwise. "MINIMUM ACCUMULATION DATE" shall have the meaning specified in Section 5.14. "NET CASH PROCEEDS" means the aggregate amount of cash received by the Company in the case of a sale of Qualified Capital Stock, by the Company and its Subsidiaries in respect of an Asset Sale or an Event of Loss (including all Insurance Proceeds with respect thereto), by the Company and its Subsid- iaries in respect of a Lawrenceburg Sale and by Indiana Gaming L.P. in respect of a Property Sale plus, in the case of an issuance of Qualified Capital Stock upon any exercise, exchange or conversion of securities (including options, warrants, rights and convertible or exchangeable debt) of the Company that were issued for cash on or after the Issue Date, the amount of cash originally received by the Company upon the issuance of such securities (including options, warrants, rights and convertible or exchangeable debt) less, in each case, the sum of all pay- ments, fees, commissions and reasonable and customary expenses (including, without limitation, the fees and expenses of legal counsel and investment banking fees and expenses) incurred in connection with such Asset Sale, an Event of Loss, Lawrenceburg Sale, Property Sale or sale of Qualified Capital Stock, and, in the case of an Asset Sale, Lawrenceburg Sale, Property Sale or an Event of Loss only, less the amount (estimated reasonably and in good faith by the Company) of income, franchise, sales and other applicable taxes required to be paid by the Company or any of its respective Subsidiaries in connection with such Asset Sale, Lawrenceburg Sale, Property Sale or an Event of Loss and, in the case of an Asset Sale, Property Sale or Event of Loss only, less 15 the amounts required to be applied to the repayment of Indebted- ness secured by a Lien otherwise permitted herein on the asset or assets that were the subject of such event and which Indebtedness is required by its terms to be repaid on such event, and in the case of any Asset Sale, Property Sale or Lawrenceburg Sale only, less any reserve established by the Company or any of its Subsid- iaries in accordance with GAAP against any liabilities associated with such sale and retained by the Company or any of its Subsid- iaries, as the case may be, after such sale. "NET CASH PROCEEDS ACCOUNT" shall have the meaning as set forth in Section 4.4 hereof. "NOTES" See "SECURITIES." "OFFERING MEMORANDUM" means the Offering Memorandum of the Company dated June 1, 1996 with respect to the Notes. "OFFER TO PURCHASE" means any Change of Control Offer, Asset Sale Offer, License Loss Offer, Lawrenceburg Sale Offer, Project Delay Offer or Lawrenceburg Investment Offer. "OFFER TO PURCHASE PRICE" means any Change of Control Purchase Price, Asset Sale Offer Price (including in connection with an Event of Loss), License Loss Offer Price, Lawrenceburg Sale Offer Price, Project Delay Offer Price or Lawrenceburg Investment Offer Price. "OFFICER" means, with respect to the Company, the Chairman of the Board, the President, any Vice President, the Chief Financial Officer, the Treasurer, the Controller, or the Secretary or Assistant Secretary of the Company. "OFFICERS' CERTIFICATE" means, with respect to the Company or any Guarantor, a certificate signed by two Officers of the Company or such Guarantor and otherwise complying with the requirements of Sections 14.4 and 14.5. "OPINION OF COUNSEL" means a written opinion from legal counsel to the Company complying with the requirements of Sec- tions 14.4 and 14.5. Unless otherwise required by this Inden- ture, the counsel may be in-house counsel to the Company. "ORIGINAL NOTES" means the 13 1/4% First Mortgage Notes due 2004, as amended and supplemented from time to time in accor- dance with the terms hereof, that are issued pursuant to this Indenture. "PARENT PLEDGE AGREEMENT" means the Pledge Agreement, dated the date hereof, from the Company, as Pledgor, to the Trustee for the benefit of Holders, in substantially the form 16 included as Exhibit D hereto, as the same may be amended from time to time in accordance with the terms thereof. "PARENT SECURITY AGREEMENT" means the Security Agree- ment, dated the Issue Date, substantially in the form of Exhibit G, executed by the Company, and the Trustee for the benefit of the Holders, as the same may be amended from time to time in accordance with the terms thereof. "PAYING AGENT" shall have the meaning specified in Section 2.3. "PERMITTED ASSET SALE" shall have the meaning specified in Section 5.14. "PERMITTED INDEBTEDNESS" means any of the following: (a) The Company and the Guarantors may incur Indebtedness solely in respect of bankers acceptances and perfor- mance, appeal or bid bonds (to the extent that such incurrence does not result in the incurrence of any obligation to repay any obligation relating to borrowed money of others) in a principal amount not to exceed $10,000,000, all in the ordinary course of business in accordance with customary industry practices, in amounts and for the purposes customary in the Company's industry; (b) The Company may incur Indebtedness to any Guarantor, and any Guarantor may incur Indebtedness to any other Guarantor or to the Company; provided that, in the case of Indebtedness of the Company, such obligations shall be unsecured and subordinated in all respects to the Company's obligations pursuant to the Notes and any event that causes such Guarantor to no longer be a Subsidiary shall be an incurrence of Indebtedness; and (c) The Company may incur Indebtedness in the form of a guarantee of hotel construction in Baton Rouge in an amount not to exceed $5,000,000 and otherwise permitted under clause (s) of Section 5.3 hereof. "PERMITTED INVESTMENT" means (i) certificates of deposit and bank accounts with final maturities of one year or less issued by United States commercial banks having capital and surplus in excess of $100,000,000; (ii) commercial paper with a grade of no less than A1 or P1; (iii) direct obligations of the United States Government or a United States agency with a matu- rity of one year or less; and (iv) shares of money market mutual or similar funds having assets in excess of $500,000,000. "PERMITTED LIENS" means (i) Liens existing on the date of the Indenture as specifically identified in the Offering Memorandum or securing Indebtedness not to exceed $1,000,000 17 incurred to purchase gaming and/or office equipment; (ii) Liens for taxes, assessments, governmental charges or claims which are being contested in good faith by appropriate proceedings promptly instituted and diligently conducted and if a reserve or other appropriate provision, if any, as shall be required in conformity with GAAP shall have been made therefor; (iii) statutory Liens of landlords and carriers, warehousemen, mechanics, suppliers, mate- rialmen, repairmen, or other like Liens arising in the ordinary course of business and with respect to amounts not yet delinquent or being contested in good faith by appropriate proceedings, and if a reserve or other appropriate provision, if any, as shall be required in conformity with GAAP shall have been made therefor; (iv) Liens incurred or deposits made in the ordinary course of business in connection with workers' compensation, unemployment insurance and other types of social security; (v) Liens incurred or deposits made to secure the performance of tenders, bids, leases, statutory obligations, surety and appeal bonds, govern- ment contracts, performance and return-of-money bonds and other obligations of a like nature incurred in the ordinary course of business (exclusive of obligations for the payment of borrowed money); (vi) easements, rights-of-way, restrictions, minor de- fects or irregularities in title and other similar charges or en- cumbrances not interfering in any material respect with the busi- ness of the Company or any of its Subsidiaries incurred in the ordinary course of business; (vii) Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of customs duties in connection with the importation of goods; (viii) judgment and attachment Liens not giving rise to an Event of Default; (ix) leases or subleases granted to others not inter- fering in any material respect with the business of the Company or any of its Subsidiaries; (x) any interest or title of a lessor in the property subject to any capital lease obligation or oper- ating lease; (xi) Liens arising from filing Uniform Commercial Code financing statements regarding leases; (xii) Liens securing any Indebtedness which became Indebtedness of the Company pur- suant to a transaction subject to the provisions of Section 6.1 hereof or which constitutes Acquired Indebtedness and which Liens were in existence at the time of such transaction (unless such Indebtedness was incurred or such Lien created in connection with, or in contemplation of, such transaction), so long as such Liens do not extend to or cover any property or assets of the Company or any Subsidiary of the Company other than property or assets acquired in such transaction; (xiii) Liens securing any assumption, guarantee or other liability which constitutes Ac- quired Indebtedness and which Liens were in existence at the time of such transaction (unless such assumption, guarantee or other liability was incurred or such Lien created in connection with, or in contemplation of, such person becoming a Subsidiary of the Company), so long as such Liens do not extend to or cover any property or assets of the Company or any Subsidiary of the Com- pany other than the assets of such person; and (xiv) any renewal of or substitution for any Lien permitted by any of the preceding 18 clauses, PROVIDED, HOWEVER, that the Indebtedness secured is not increased nor the Lien extended to any additional property. Liens described under clauses (xii) and (xiii) above shall not be Permitted Liens in connection with an Acquisition which is funded in whole or in part with Collateral or the proceeds of the sale of Collateral or out of distributions made by Indiana Gaming L.P. up to the amount of the Lawrenceburg Investment. "PERSON" means any individual, limited liability compa- ny, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization or government or other agency or political subdivision thereof. "PRINCIPAL" of any Indebtedness (including the Securi- ties) means the principal of such Indebtedness plus any applica- ble premium, if any, on such Indebtedness. "PROJECT DELAY" means (i) the failure of the Lawrenceburg Casino to commence operations on or prior to June 30, 1997 at either the temporary or the permanent location, (ii) the expiration or suspension of Indiana Gaming L.P.'s certificate of suitability and the failure of the Indiana Gaming Commission to renew such certificate prior to the issuance of a riverboat owner's license, which failure continues for a period of 30 days from the date of such expiration or suspension, (iii) the revocation or cancellation of Indiana Gaming L.P.'s certificate of suitability by the Indiana Gaming Commission, (iv) the denial of Indiana Gaming L.P.'s application for a permanent riverboat owner's license by the Indiana Gaming Commission, (v) a finding of unsuitability of Indiana Gaming L.P. by the Indiana Gaming Commission, (vi) the revocation or suspension of Indiana Gaming L.P.'s riverboat owner's license by the Indiana Gaming Commission which results in the loss of the legal right to operate the Lawrenceburg Casino, which loss continues for a period of 90 days or (vii) a finding of unsuitability of the Company or any of its subsidiaries by the Indiana Gaming Commis- sion. "PROJECT DELAY OFFER" shall have the meaning specified in Section 5.16. "PROJECT DELAY OFFER AMOUNT" shall have the meaning specified in Section 5.16. "PROJECT DELAY OFFER PRICE" shall have the meaning specified in Section 5.16. "PROJECT DELAY PURCHASE DATE" shall have the meaning specified in Section 5.16. "PROPERTY" or "PROPERTY" means any right or interest in or to property or assets of any kind whatsoever, whether real, 19 personal or mixed and whether tangible, intangible, contingent, indirect or direct. "QUALIFIED CAPITAL STOCK" means any Capital Stock of the Company that is not Disqualified Capital Stock. "QUALIFIED EXCHANGE" means (i) any legal defeasance, redemption, retirement, repurchase or other acquisition of Capital Stock or Indebtedness of the Company issued on or after the Issue Date with the Net Cash Proceeds received by the Company from the substantially concurrent sale of Qualified Capital Stock, (ii) any exchange of Qualified Capital Stock for any Capital Stock or Indebtedness issued on or after the Issue Date or (iii) any exchange of Qualified Capital Stock for, or purchase with the Net Cash Proceeds of a concurrent sale of Qualified Capital Stock of, any equity interest in Indiana Gaming L.P. not owned by a Subsidiary of the Company or an Unrestricted Subsid- iary. "QUALIFIED GAMING VENTURE" means any person (other than Indiana Gaming L.P. and The Indiana Gaming Company) in which the Company owns an equity interest (a) which operates a Material Casino and any Related Business, (b) which pursuant to contract or otherwise gives the right to direct or manage the day-to-day operation of such Material Casino to the Company or a Subsidiary of the Company, and (c) which either (i) does not have any con- sensual restriction on its ability to pay dividends or make other distributions to or on behalf of, or to pay any obligations to or on behalf of, or otherwise to transfer assets or property to or on behalf of, or make or pay any loans or advance to or on behalf of the Company or any Subsidiary, except for such exceptions generally contained in Section 5.12 or (ii) is operated pursuant to a management contract with the Company or one of its Subsid- iaries at a management fee of no less than 2% of net win. "RECORD DATE" means a Record Date specified in the Securities whether or not such Record Date is a Business Day. "REDEMPTION DATE," when used with respect to any Security to be redeemed, means the date fixed for such redemption pursuant to Article III of this Indenture and Paragraph 5 in the form of Security. "REDEMPTION PRICE," when used with respect to any Secu- rity to be redeemed, means the redemption price for such redemp- tion set forth in Paragraph 5 in the form of Security, which shall include in each case accrued and unpaid interest with respect to such Security to the applicable Redemption Date. "REFERENCE PERIOD" with regard to any person means the four full fiscal quarters (or such lesser period during which 20 such person has been in existence) ended immediately preceding any date upon which any determination is to be made pursuant to the terms of the Notes or the Indenture. "REFINANCING INDEBTEDNESS" means Indebtedness or Dis- qualified Capital Stock (a) issued in exchange for, or the proceeds from the issuance and sale of which are used substan- tially concurrently to repay, redeem, defease, refund, refinance, discharge or otherwise retire for value, in whole or in part, or (b) constituting an amendment, modification or supplement to, or a deferral or renewal of ((a) and (b) above are, collectively, a "REFINANCING"), any Indebtedness or Disqualified Capital Stock in a principal amount or, in the case of Disqualified Capital Stock, liquidation preference, not to exceed (i) the principal amount or, in the case of Disqualified Capital Stock, liquidation preference, of the Indebtedness or Disqualified Capital Stock so Refinanced plus the amount of any premium paid in connection with such refinancing in accordance with the terms of documents governing the Indebtedness being refinanced and reasonable and customary fees and expenses incurred in connection with the Refinancing or (ii) if such Indebtedness being Refinanced was issued with an original issue discount, the accreted value thereof (as determined in accordance with GAAP) at the time of such Refinancing plus the amount of any premium paid in connec- tion with such refinancing in accordance with the terms of documents governing the Indebtedness being refinanced and reason- able and customary fees and expenses incurred in connection with the Refinancing; provided that (A) any Refinancing Indebtedness incurred by any Subsidiary of the Company shall only be used to refinance outstanding Indebtedness or Disqualified Capital Stock of such Subsidiary, (B) Refinancing Indebtedness shall (x) not have an Average Life shorter than the Indebtedness or Disquali- fied Capital Stock to be so refinanced at the time of such Refinancing (or, if such Refinancing Indebtedness relates to the Convertible Notes, shorter than the Notes) and (y) in all re- spects, be no less subordinated or junior, if applicable, to the rights of the Holders than was the Indebtedness or Disqualified Capital Stock to be refinanced and (C) such Refinancing Indebted- ness shall have a final stated maturity no earlier than the final stated maturity of the Indebtedness or Disqualified Capital Stock to be so refinanced which was scheduled to come due prior to the Stated Maturity (or, if such Refinancing Indebtedness relates to the Convertible Notes, no earlier than the Stated Maturity). "REGISTRAR" shall have the meaning specified in Sec- tion 2.3. "REGISTRATION RIGHTS AGREEMENT" means the Registration Rights Agreement by and among the Company, the Guarantors and the Initial Purchasers, dated as of the Issue Date. 21 "RELATED BUSINESS" means the gaming business and other businesses necessary for, incident to, connected with, arising out of, or developed or operated to permit or facilitate the conduct or pursuit of the gaming business (including developing or operating lodging facilities, sports or entertainment facili- ties, retail facilities, restaurants, night clubs, transportation and communications services or other related activities or enterprises and any additions or improvements thereto) and potential opportunities in the gaming business. "RESTRICTED PAYMENT" means, with respect to any person, (a) the declaration or payment of any dividend or other distribu- tion in respect of Capital Stock of such person or any parent or Subsidiary of such person, (b) any payment on account of the pur- chase, redemption or other acquisition or retirement for value of Capital Stock of such person or any Subsidiary or parent of such person, (c) other than with the proceeds from the substantially concurrent sale of, or in exchange for, Refinancing Indebtedness, any purchase, redemption, or other acquisition or retirement for value of, any payment in respect of any amendment of the terms of or any defeasance of, any Junior Indebtedness, directly or indi- rectly, by such person or a parent or Subsidiary of such person prior to the scheduled maturity, any scheduled repayment of principal, or scheduled sinking fund payment, as the case may be, of such Indebtedness and (d) any Investment by such person, other than a Permitted Investment; provided, however, that the term "RESTRICTED PAYMENT" does not include (i) any dividend, distribu- tion or other payment on or with respect to Capital Stock of an issuer to the extent payable solely in shares of Qualified Capi- tal Stock of such issuer; or (ii) any dividend, distribution or other payment to the Company, or to any of its wholly owned Sub- sidiaries, by any of its Subsidiaries. "SEC" means the Securities and Exchange Commission. "SECURITIES" or "NOTES" means, prior to the Exchange Offer, the Original Notes, and after the Exchange Offer, the Original Notes (if any) and the Series B Notes, in each case as amended or modified from time to time in accordance with the terms hereof, issued under this Indenture. "SECURITIES ACT" means the Securities Act of 1933, as amended, and the rules and regulations of the SEC promulgated thereunder. "SECURITIES CUSTODIAN" means the Trustee, as custodian with respect to the Securities in global form, or any successor entity thereto. "SECURITY DOCUMENTS" mean the Deeds of Trust, the Cash Collateral and Disbursement Agreement, the Ship Mortgages, the Parent Pledge Agreement, the Subsidiary Pledge Agreements, the 22 Parent Security Agreement and the Subsidiary Security Agreements and any other agreement purporting to convey to the Trustee for the benefit of Holders, a security interest in Property pursuant to the requirements of this Indenture executed by the Company and the Guarantors in favor of the Trustee for the benefit of the Securityholders, as the same may be amended from time to time. "SECURITY INTERESTS" means the Lien on the Collateral created by the Security Documents in favor of the Trustee for the benefit of the Holders. "SECURITYHOLDER" See "HOLDER." "SERIES B NOTES" means the Series B 13 1/4% First Mortgage Notes due 2004, in substantially the form set forth on the Form of Note set forth as Exhibit A hereto, to be issued pursuant to this Indenture in connection with the offer to exchange Series B Notes for Original Notes that may be made by the Company pursuant to the Registration Rights Agreement. "SHIP MORTGAGES" means the first preferred ship mort- gages substantially in the form of EXHIBIT F, dated as of the Issue Date, by each of Iowa Gaming Company, Alton Gaming Company, Missouri Gaming Company and Catfish Queen Partnership in Commen- dam, in favor of the Trustee. "SIGNIFICANT SUBSIDIARY" means at the time of determi- nation, any Subsidiary of the Company that (a) accounted for more than 10% of the consolidated net income of the Company for the most recently completed fiscal year of the Company or (b) was the owner of more than 10% of the consolidated assets of the Company as of the end of such fiscal year, all as shown on the consoli- dated financial statements of the Company for such fiscal year. "SPECIFIED PARCELS" means either of the two parcels of real estate at the Riverside or Baton Rouge properties as de- scribed in the legal descriptions attached hereto as EXHIBIT K. "STATED MATURITY," when used with respect to any Note, means June 1, 2004. "SUBORDINATED INDEBTEDNESS" means Indebtedness of the Company or a Guarantor, as applicable, that is subordinated in right of payment to the Notes or such Guarantor's Guarantee, as applicable, in all respects and has no scheduled installment of principal due, by maturity, redemption, sinking fund payment or otherwise, on or prior to the Stated Maturity of the Notes. "SUBSIDIARY," with respect to any person, means (i) a corporation a majority of whose Capital Stock with voting power, under ordinary circumstances, to elect directors is at the time, directly or indirectly, owned by such person, by such person and 23 one or more Subsidiaries of such person or by one or more Subsid- iaries of such person, (ii) any other person (other than a corporation) in which such person, one or more Subsidiaries of such person, or such person and one or more Subsidiaries of such person, directly or indirectly, at the date of determination thereof has at least majority ownership interest or (iii) a part- nership in which such person or a Subsidiary of such person is, at the time, a general partner. Notwithstanding the foregoing, no Unrestricted Subsidiary shall be considered a Subsidiary of the Company or of any Subsidiary of the Company. "SUBSIDIARY PLEDGE AGREEMENTS" means the several Pledge Agreements, dated the date hereof, from the Guarantors, as Pledgors, to the Trustee for the benefit of the Holders, in substantially the form included hereto as EXHIBIT E hereto, as the same may be amended from time to time in accordance with the terms hereof. "SUBSIDIARY SECURITY AGREEMENTS" means the several Security Agreements, dated the date hereof, executed by each of the Guarantors and the Trustee for the benefit of the Holders, in substantially the form included hereto as EXHIBIT H hereto, as the same may be amended from time to time in accordance with the terms hereof. "TIA" means the Trust Indenture Act of 1939 (15 U.S. Code -section--section- 77aaa-77bbbb) as in effect on the date of the execution of this Indenture. "TRANSFER RESTRICTED SECURITIES" means Securities that bear or are required to bear the legend set forth in Section 2.6. "TRUSTEE" means the party named as such in this Inden- ture until a successor replaces it in accordance with the provi- sions of this Indenture and thereafter means such successor. "TRUST OFFICER" means any officer within the corporate trust department (or any successor group) of the Trustee includ- ing any vice president, assistant vice president, secretary, assistant secretary or any other officer or assistant officer of the Trustee customarily performing functions similar to those performed by the persons who at that time shall be such officers, and also means, with respect to a particular corporate trust matter, any other officer of the corporate trust department (or any successor group) of the Trustee to whom such trust matter is referred because of his knowledge of and familiarity with the particular subject. "UNRESTRICTED SUBSIDIARY" means any direct or indirect subsidiary of the Company that does not own any Capital Stock of, or own or hold any Lien on any property of, the Company or any other Subsidiary of the Company and that shall be designated an 24 Unrestricted Subsidiary by the Board of Directors of the Company; PROVIDED that (i) such subsidiary shall not engage, to any substantial extent, in any line or lines of business activity other than a Related Business and (ii) neither immediately prior thereto nor after giving PRO FORMA effect to such designation would there exist a Default or Event of Default. The Board of Directors of the Company may designate any Unrestricted Subsid- iary to be a Subsidiary, PROVIDED that (i) no Default or Event of Default is existing or will occur as a consequence thereof and (ii) immediately after giving effect to such designation, on a PRO FORMA basis, the Company could incur at least $1.00 of In- debtedness pursuant to paragraph (a) of Section 5.11. Each such designation shall be evidenced by filing with the Trustee a cer- tified copy of the resolution giving effect to such designation and an Officers' Certificate certifying that such designation complied with the foregoing conditions. Indiana Gaming L.P. and Iowa Development Corporation shall initially be designated Unre- stricted Subsidiaries. Notwithstanding anything herein to the contrary, no subsidiary of the Company with an interest in Indi- ana Gaming L.P. may become an Unrestricted Subsidiary. "U.S. GOVERNMENT OBLIGATIONS" means direct non-callable obligations of, or noncallable obligations guaranteed by, the United States of America for the payment of which obligation or guarantee the full faith and credit of the United States of America is pledged. "WHOLLY OWNED" with respect to a Subsidiary of any person means (i) with respect to a Subsidiary that is a partner- ship, limited liability company or similar entity, a Subsidiary whose capital stock or other equity interests are 99% or greater beneficially owned by such person and (ii) with respect to a Subsidiary that is other than a partnership, limited liability company or similar entity, a Subsidiary whose capital stock or other equity interests are 100% beneficially owned by such person. Section 2 INCORPORATION BY REFERENCE OF TIA. Whenever this Indenture refers to a provision of the TIA, such provision is incorporated by reference in and made a part of this Indenture. The following TIA terms used in this Indenture have the following meanings: "COMMISSION" means the SEC. "INDENTURE SECURITIES" means the Securities. "INDENTURE SECURITYHOLDER" means a Holder or a Securityholder. "INDENTURE TO BE QUALIFIED" means this Indenture. 25 "INDENTURE TRUSTEE" or "INSTITUTIONAL TRUSTEE" means the Trustee. "OBLIGOR" on the indenture securities means the Company and any other obligor on the Securities. All other TIA terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by SEC rule and not otherwise defined herein have the meanings assigned to them thereby. Section 3 RULES OF CONSTRUCTION. Unless the context otherwise requires: (i) a term has the meaning assigned to it; (ii) an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP; (iii) "OR" is not exclusive; (iv) words in the singular include the plural, and words in the plural include the singular; (v) provisions apply to successive events and transactions; (vi) "HEREIN," "HEREOF" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision; and (vii) references to Sections or Arti- cles means reference to such Section or Article in this Indenture, unless stated otherwise. ARTICLE II THE SECURITIES Section 1 FORM AND DATING. The Securities and the Trustee's certificate of authen- tication, in respect thereof, shall be substantially in the form of EXHIBIT A hereto which Exhibit is part of this Indenture. The Securities may have notations, legends or endorsements required by law, stock exchange rule or usage. The Company shall approve the form of the Securities and any notation, legend or endorse- 26 ment on them. Any such notations, legends or endorsements not contained in the form of Security attached as EXHIBIT A hereto shall be delivered in writing to the Trustee. Each Security shall be dated the date of its authentication. The terms and provisions contained in the form of Securities shall constitute, and are hereby expressly made, a part of this Indenture and, to the extent applicable, the Company and the Trustee, by their execution and delivery of this Inden- ture, expressly agree to such terms and provisions and to be bound thereby. Section 2 EXECUTION AND AUTHENTICATION. Two Officers shall sign, or one Officer shall sign and one Officer shall attest to, the Securities for the Company by manual or facsimile signature. The Company's seal shall be impressed, affixed, imprinted or reproduced on the Securities and may be in facsimile form. If an Officer whose signature is on a Security was an Officer at the time of such execution but no longer holds that office at the time the Trustee authenticates the Security, the Security shall be valid nevertheless and the Company shall nevertheless be bound by the terms of the Securities and this Indenture. A Security shall not be valid until an authorized signatory of the Trustee manually signs the certificate of authentication on the Security, but such signature shall be conclusive evidence that the Security has been authenticated pursuant to the terms of this Indenture. The Trustee shall authenticate Original Notes for original issue in the aggregate principal amount of up to $- 235,000,000 and shall authenticate Series B Notes for original issue in the aggregate principal amount of up to $235,000,000, in each case upon a written order of the Company in the form of an Officers' Certificate; PROVIDED that such Series B Notes shall be issuable only upon the valid surrender for cancellation of Original Notes of a like aggregate principal amount in accordance with the Registration Rights Agreement. The Officers' Certifi- cate shall specify the amount of Securities to be authenticated and the date on which the Securities are to be authenticated. The aggregate principal amount of Securities outstanding at any time may not exceed $235,000,000, except as provided in Section 2.7. Upon the written order of the Company in the form of an Officers' Certificate, the Trustee shall authenticate Securities in substitution of Securities originally issued to reflect any name change of the Company. 27 The Trustee may appoint an authenticating agent accept- able to the Company to authenticate Securities. Unless otherwise provided in the appointment, an authenticating agent may authen- ticate Securities whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. An authenticating agent has the same rights as an Agent to deal with the Company, any Affiliate of the Company or any of their respective Subsidiaries. Securities shall be issuable only in registered form without coupons in denominations of $1,000 and any integral multiple thereof. Section 3 REGISTRAR AND PAYING AGENT. The Company shall maintain an office or agency in the Borough of Manhattan, The City of New York, where Securities may be presented for registration of transfer or for exchange ("Reg- istrar") and an office or agency in the Borough of Manhattan, The City of New York where Securities may be presented for payment ("Paying Agent") and an office or agency where notices and demands to or upon the Company in respect of the Securities may be served. The Company may act as its own Registrar or Paying Agent, except that, for the purposes of Articles III, IX, XII and Sections 5.14, 5.16, 5.17, 5.18 and 5.19 neither the Company nor any Affiliate of the Company shall act as Paying Agent. The Registrar shall keep a register of the Securities and of their transfer and exchange. The Company may have one or more co- Registrars and one or more additional Paying Agents. The term "Paying Agent" includes any additional Paying Agent. The Company hereby initially appoints the Trustee as Registrar and Paying Agent, and the Trustee hereby initially agrees so to act. The Company shall enter into an appropriate written agency agreement with any Agent not a party to this Indenture, which agreement shall implement the provisions of this Indenture that relate to such Agent. The Company shall promptly notify the Trustee in writing of the name and address of any such Agent. If the Company fails to maintain a Registrar or Paying Agent, the Trustee shall act as such. The Company initially appoints The Depository Trust Company ("DTC") to act as Depository with respect to the Global Securities. The Company initially appoints the Trustee to act as Securities Custodian with respect to the Global Securities. Section 4 PAYING AGENT TO HOLD ASSETS IN TRUST. The Company shall require each Paying Agent other than the Trustee to agree in writing that each Paying Agent shall hold 28 in trust for the benefit of Holders or the Trustee all assets held by the Paying Agent for the payment of principal of, or interest (and Liquidated Damages, if any) on, the Securities (whether such assets have been distributed to it by the Company or any other obligor on the Securities), and shall notify the Trustee in writing of any Default by the Company (or any other obligor on the Securities) in making any such payment. If the Company or a Subsidiary of the Company acts as Paying Agent, it shall segregate such assets and hold them as a separate trust fund for the benefit of the Holders or the Trustee. The Company at any time may require a Paying Agent to distribute all assets held by it to the Trustee and account for any assets disbursed and the Trustee may at any time during the continuance of any payment Default, upon written request to a Paying Agent, require such Paying Agent to distribute all assets held by it to the Trustee and to account for any assets distributed. Upon distri- bution to the Trustee of all assets that shall have been deliv- ered by the Company to the Paying Agent, the Paying Agent (if other than the Company) shall have no further liability for such assets. Section 5 SECURITYHOLDER LISTS. The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of Holders. If the Trustee is not the Registrar, the Company shall furnish to the Trustee on or before the third Business Day preceding each Interest Payment Date and at such other times as the Trustee may request in writing a list in such form and as of such date as the Trustee reasonably may require of the names and addresses of Holders. The Trustee, the Registrar and the Company shall provide a current securityholder list to any Gaming Authority upon demand. Section 6 TRANSFER AND EXCHANGE. (a) When Definitive Securities are presented to the Registrar or a co-Registrar with a request (x) to register the transfer of such Definitive Securities or (y) to exchange such Definitive Securities for an equal principal amount of Definitive Securities of other authorized denominations, the Registrar or co-Registrar shall register the transfer or make the exchange as requested if its reasonable requirements for such transaction are met; PROVIDED, HOWEVER, that the Definitive Securities surrendered for transfer or exchange: 29 (i) shall be duly endorsed or accom- panied by a written instrument of transfer in form reasonably satisfactory to the Company and the Regis- trar or co-Registrar, duly executed by the Holder thereof or his attorney duly authorized in writing; and (ii) in the case of Transfer Restricted Securities that are Definitive Securities, shall be ac- companied by the following additional information and documents, as applicable: (A) If such Transfer Re- stricted Securities are being delivered to the Registrar by a Holder for registration in the name of such Holder, without transfer, a certification from such Holder to that effect (in substantially the form set forth on the reverse of the Security); or (B) if such Transfer Re- stricted Security is being transferred to a "qualified institutional buyer" (as defined in Rule 144A under the Securities Act) in accordance with Rule 144A under the Securi- ties Act, a certification to that effect (in the form set forth on the reverse of the Security); or (C) if such Transfer Restricted Security is being transferred (i) pursuant to an exemption from registration in accordance with Rule 144 or Regulation S under the Securities Act, (ii) pursuant to an effective registration statement under the Securities Act, (iii) to an "institutional accredited investor" within the meaning of Rule 501(A)(1), (2), (3) or (7) under the Securities Act that is acquiring the Security for its own account, or for the account of such an institutional accredited investor, in each case in a minimum principal amount of the Securities of $100,000, not with a view to or for offer or sale in connection with any distribution in violation of the Securi- ties Act or (iv) in reliance on another ex- emption from the registration requirements of the Securities Act, a certification to that effect (in the form set forth on the reverse of the Security) and in the case of (iii) above a transferee letter of representation in substantially the form set forth in the 30 Offering Memorandum and in the case of (i), (iii) and (iv) above, if the Company or the Registrar so request, an Opinion of Counsel reasonably acceptable to the Company and to the Registrar to the effect that such trans- fer is in compliance with the Securities Act. (b) RESTRICTIONS ON TRANSFER OF A DEFINITIVE SECURITY FOR A BENEFICIAL INTEREST IN A GLOBAL SECURITY. A Definitive Security may not be exchanged for a beneficial inter- est in a Global Security except upon satisfaction of the require- ments set forth below. Upon receipt by the Registrar of a Definitive Security, duly endorsed or accompanied by appropriate instruments of transfer, in form satisfactory to the Registrar, together with: (i) if such Definitive Security is a Transfer Restricted Security, a certification, substan- tially in the form set forth on the reverse of the Security, that such Definitive Security is being trans- ferred to a "qualified institutional buyer" (as defined in Rule 144A under the Securities Act) in accordance with Rule 144A under the Securities Act; and (ii) whether or not such Definitive Security is a Transfer Restricted Security, written instructions directing the Registrar to make, or to di- rect the Securities Custodian to make, an endorsement on the Global Security to reflect an increase in the aggregate principal amount of the Securities represent- ed by the Global Security, then the Registrar shall cancel such Definitive Security and cause, or direct the Securities Custodian to cause, in accordance with the standing instructions and procedures existing between the Depository and the Securities Custodian, the aggregate principal amount of Securities represented by the Global Security to be increased accordingly. If no Global Securities are then outstanding, the Company shall issue and the Trustee shall authenticate a new Global Security in the appropriate principal amount. (c) TRANSFER AND EXCHANGE OF GLOBAL SECURITIES. The transfer and exchange of Global Securities or beneficial interests therein shall be effected through the Depository, in accordance with this Indenture (including the restrictions on transfer set forth herein) and the procedures of the Depository therefor. 31 (D) TRANSFER OF A BENEFICIAL INTEREST IN A GLOBAL SECURITY FOR A DEFINITIVE SECURITY. (i) Any person having a beneficial interest in a Global Security may upon request exchange such beneficial interest for a Definitive Security. Upon receipt by the Trustee of written instructions or such other form of instructions as is customary for the Depository from the Depository or its nominee on behalf of any Person having a beneficial interest in a Global Security and upon receipt by the Trustee of a written order or such other form of instructions as is custom- ary for the Depository or the Person designated by the Depository as having such a beneficial interest in a Transfer Restricted Security only, the following addi- tional information and documents (all of which may be submitted by facsimile): (A) if such beneficial interest is being transferred to the Person designated by the Depository as being the beneficial owner, a certification from such person to that effect (in substantially the form set forth on the reverse of the Securi- ty); or (B) if such beneficial interest is being transferred to a "qualified institutional buyer" (as defined in Rule 144A under the Securities Act) in accordance with Rule 144A under the Securities Act, a certif- ication to that effect from the transferor (in the form set forth on the reverse of the Security); or (C) if such beneficial interest is being transferred (i) pursuant to an exemption from registration in accordance with Rule 144 or Regulation S under the Secu- rities Act, (ii) pursuant to an effective registration statement under the Securities Act, (iii) to an "institutional accredited investor" within the meaning of Rule 5- 01(A)(1), (2), (3) or (7) under the Securi- ties Act that is acquiring the security for its own account, or for the account of such an institutional accredited investor, in each case in a minimum principal amount of the Securities of $100,000, not with a view to or for offer or sale in connection with distri- bution in violation of the Securities Act or (iv) in reliance on another exemption from 32 the registration requirements of the Securi- ties Act, a certification to that effect from the transferee or transferor (in the form set forth on the reverse of the Security) and in the case of (iii) above a transferee letter of representation in substantially the form set forth in the Offering Memorandum and in the case of (i), (iii) and (iv) above, if the Company or the Registrar so requests, an Opinion of Counsel reasonably acceptable to the Company and to the Registrar to the ef- fect that such transfer is in compliance with the Securities Act, then the Registrar or the Securities Custodian, at the direction of the Trustee, will cause, in accordance with the standing instructions and procedures existing between the Depository and the Securities Custodian, the aggregate principal amount of the Global Security to be reduced and, following such reduction, the Company will execute and, upon receipt of an authentication order in the form of an Officers' Certificate, the Trustee will authen- ticate and deliver to the transferee a Definitive Security in the appropriate principal amount. (ii) Definitive Securities issued in exchange for a beneficial interest in a Global Security pursuant to this Section 2.6(d) shall be registered in such names and in such authorized denominations as the Depository, pursuant to instructions from its direct or indirect participants or otherwise, shall instruct the Trustee. The Registrar shall deliver such Definitive Securities to the persons in whose names such Securi- ties are so registered. (e) RESTRICTIONS ON TRANSFER AND EXCHANGE OF GLOBAL SECURITIES. Notwithstanding any other provisions of this Indenture (other than the provisions set forth in subsection (f) of this Section 2.6), a Global Security may not be transferred as a whole except by the Depository to a nominee of the Depository or by a nominee of the Depository to the Depository or another nominee of the Depository or by the Depository or any such nominee to a successor Depository or a nominee of such successor Depository. (f) AUTHENTICATION OF DEFINITIVE SECURITIES IN ABSENCE OF DEPOSITORY. If at any time: (i) the Depository for the Securities notifies the Company that the Depository is unwilling or unable to continue as Depository for the Global 33 Securities and a successor Depository for the Global Securities is not appointed by the Company within 90 days after delivery of such notice; or (ii) the Company, in its sole discre- tion, notify the Trustee in writing that it elects to cause the issuance of Definitive Securities under this Indenture, then the Company will execute, and the Trustee, upon receipt of an Officers' Certificate requesting the authentication and delivery of Definitive Securities, will authenticate and deliver Definitive Securities, in an aggregate principal amount equal to the principal amount of the Global Securities, in exchange for such Global Securities. (g) LEGENDS. (i) Except as permitted by the follow- ing paragraph (ii), each Security certificate evidenc- ing the Global Securities and the Definitive Securities (and all Securities issued in exchange therefor or substitution thereof) shall bear a legend in substan- tially the following form: THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURI- TIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANS- FERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY PRIOR TO THE DATE (THE "RESALE RE- STRICTION TERMINATION DATE") WHICH IS THREE YEARS AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF SUCH SECURITY) ONLY (A) TO THE COMPANY, (B) PURSUANT TO A REGIS- TRATION STATEMENT WHICH HAS BEEN DECLARED EFFEC- TIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 34 144A UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL ACCREDITED INVESTOR WITHIN THE MEAN- ING OF RULE 501(A)(1),(2),(3) OR (7) UNDER THE SECURITIES ACT THAT IS ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, IN EACH CASE IN A MINIMUM PRINCIPAL AMOUNT OF THE SECURITIES OF $100,000 FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO OR FOR OFFER OR SALE IN CONNECTION WITH ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (F) PURSUANT TO ANOTHER AVAILABLE EXEMP- TION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S AND THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSE (D),(E), OR (F) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTO- RY TO EACH OF THEM, AND IN EACH OF THE FOREGOING CASES, A CERTIFICATE OF TRANSFER IN THE FORM AP- PEARING ON THE OTHER SIDE OF THIS SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE COMPANY AND THE TRUSTEE. THIS LEGEND WILL BE RE- MOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE. THESE SECU- RITIES MAY BE TRANSFERRED ONLY IN COMPLIANCE WITH APPLICABLE GAMING LAWS. (ii) Upon any sale or transfer of a Transfer Restricted Security (including any Transfer Restricted Security represented by a Global Security) pursuant to Rule 144 under the Act or an effective registration statement under the Act: (A) in the case of any Transfer Restricted Security that is a Defin- itive Security, the Registrar shall permit the Holder thereof to exchange such Transfer Restricted Security for a Definitive Security that does not bear the legend set forth above and rescind any restriction on the transfer of such Transfer Restricted Security; and (B) any such Transfer Restricted Security represented by a Global Security shall not be subject to the provi- sions set forth in (i) above (such sales or transfers being subject only to the provi- sions of Section 2.6(c) hereof); provided, however, that with respect to any request for an exchange of a Transfer Restricted Security that is represented by a Global Security for 35 a Definitive Security that does not bear a legend, which request is made in reliance upon Rule 144, the Holder thereof shall cer- tify in writing to the Registrar that such request is being made pursuant to Rule 144 (such certification to be substantially in the form set forth on the reverse of the Security). (h) CANCELLATION AND/OR ADJUSTMENT OF GLOBAL SECURITY. At such time as all beneficial interests in a Global Security have either been exchanged for Definitive Securities, redeemed, repurchased or cancelled, such Global Security shall be returned to or retained and cancelled by the Trustee. At any time prior to such cancellation, if any beneficial interest in a Global Security is exchanged for Definitive Securities, redeemed, repurchased or cancelled, the principal amount of Securities represented by such Global Security shall be reduced and an endorsement shall be made on such Global Security, by the Trustee or the Securities Custodian, at the direction of the Trustee, to reflect such reduction. (i) OBLIGATIONS WITH RESPECT TO TRANSFERS AND EXCHANGES OF DEFINITIVE SECURITIES. (i) To permit registrations of trans- fers and exchanges, the Company shall execute and the Trustee shall authenticate Definitive Securities and Global Securities at the Registrar's or co-Registrar's request. (ii) No service charge shall be made for any registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any transfer tax, assessments, or similar govern- mental charge payable in connection therewith (other than any such transfer taxes, assessments, or similar governmental charge payable upon exchanges or transfers pursuant to Section 2.2, 2.10, 3.6, 5.14, 5.16, 5.17, 5.18, 5.19, 10.5, or 12.1). (iii) Except for a redemption of Secu- rities pursuant to Section 3.2 or upon an order of any Gaming Authority, the Registrar or co-Registrar shall not be required to register the transfer of or exchange of (a) any Definitive Security selected for redemption in whole or in part pursuant to Article III, except the unredeemed portion of any Definitive Security being redeemed in part, or (b) any Security for a period beginning 15 Business Days before the mailing of a notice of an offer to repurchase pursuant to Article 36 XII or Section 5.14, 5.16, 5.17, 5.18 or 5.19 hereof or redeem Securities pursuant to Article III hereof and ending at the close of business on the day of such mailing. Section 7 REPLACEMENT SECURITIES. If a mutilated Security is surrendered to the Trustee or if the Holder of a Security claims and submits an affidavit or other evidence, satisfactory to the Trustee, to the Trustee to the effect that the Security has been lost, destroyed or wrong- fully taken, the Company shall issue and the Trustee shall authenticate a replacement Security if the Trustee's requirements are met. If required by the Trustee or the Company, such Holder must provide an indemnity bond or other indemnity, sufficient in the judgment of both the Company and the Trustee, to protect the Company, the Trustee or any Agent from any loss which any of them may suffer if a Security is replaced. The Company may charge such Holder for its reasonable, out-of-pocket expenses in replac- ing a Security. Every replacement Security is an additional obligation of the Company. Section 8 OUTSTANDING SECURITIES. Securities outstanding at any time are all the Securi- ties that have been authenticated by the Trustee except those cancelled by it, those delivered to it for cancellation, those reductions in the interest in a Global Security effected by the Trustee hereunder and those described in this Section 2.8 as not outstanding. A Security does not cease to be outstanding because the Company or an Affiliate of the Company holds the Security, except as provided in Section 2.9. If a Security is replaced pursuant to Section 2.7 (other than a mutilated Security surrendered for replacement), it ceases to be outstanding unless the Trustee receives proof satisfactory to it that the replaced Security is held by a bona fide purchaser. A mutilated Security ceases to be outstanding upon surrender of such Security and replacement thereof pursuant to Section 2.7. If on a Redemption Date or the Maturity Date the Paying Agent (other than the Company or an Affiliate of the Company) holds cash sufficient to pay all of the principal and interest (and Liquidated Damages, if any) due on the Securities payable on that date and payment of the Securities called for redemption is not otherwise prohibited, then on and after that date such Securities cease to be outstanding and interest on them ceases to accrue. 37 Section 9 TREASURY SECURITIES. In determining whether the Holders of the required principal amount of Securities have concurred in any direction, amendment, supplement, waiver or consent, Securities owned by the Company, any Guarantor and Affiliates of the Company or of any Guarantor shall be disregarded, except that, for the purposes of determining whether the Trustee shall be protected in relying on any such direction, amendment, supplement, waiver or consent, only Securities that the Trustee knows or has reason to know are so owned shall be disregarded. Section 10 TEMPORARY SECURITIES. Until definitive Securities are ready for delivery, the Company may prepare, the Guarantors shall endorse and the Trustee shall authenticate temporary Securities. Temporary Securities shall be substantially in the form of definitive Securities but may have variations that the Company reasonably and in good faith considers appropriate for temporary Securities. Without unrea- sonable delay, the Company shall prepare, the Guarantors shall endorse and the Trustee shall authenticate definitive Securities in exchange for temporary Securities. Until so exchanged, the temporary Securities shall in all respects be entitled to the same benefits under this Indenture as permanent Securities authenticated and delivered hereunder. Section 11 CANCELLATION. The Company at any time may deliver Securities to the Trustee for cancellation. The Registrar and the Paying Agent shall forward to the Trustee any Securities surrendered to them for transfer, exchange or payment. The Trustee, or at the direction of the Trustee, the Registrar or the Paying Agent (other than the Company or an Affiliate of the Company), and no one else, shall cancel and, at the written direction of the Company, shall dispose of all Securities surrendered for trans- fer, exchange, payment or cancellation. Subject to Section 2.7, the Company may not issue new Securities to replace Securities it has paid or delivered to the Trustee for cancellation. No Securities shall be authenticated in lieu of or in exchange for any Securities cancelled as provided in this Section 2.11, except as expressly permitted in the form of Securities and as permitted by this Indenture. Section 12 DEFAULTED INTEREST. If the Company defaults in a payment of interest (and Liquidated Damages, if any) on the Securities, it shall pay the defaulted interest (and Liquidated Damages, if any), plus (to the extent lawful) interest on the defaulted interest (and Liquidated Damages, if any), to the persons who are Holders on a Record Date 38 (or at its option a subsequent special record date) which date shall be the fifteenth day next preceding the date fixed by the Company for the payment of defaulted interest, whether or not such day is a Business Day, unless the Trustee fixes another record date. At least 15 days before the subsequent special record date, the Company shall mail to each Holder with a copy to the Trustee a notice that states the subsequent special record date, the payment date and the amount of defaulted interest (and Liquidated Damages, if any), and interest payable on such de- faulted interest (and Liquidated Damages), if any, to be paid. ARTICLE III REDEMPTION Section 1 RIGHT OF REDEMPTION. Redemption of Securities shall be made only in accor- dance with this Article III. At its election, the Company may redeem the Securities in whole or in part, at any time or from time to time on or after June 1, 2000, at the Redemption Prices specified under the caption "Redemption," in the Form of Note attached as EXHIBIT A hereto, plus accrued but unpaid interest (and Liquidated Damages, if any) to the Redemption Date. Except as provided in this paragraph, Section 3.2 and paragraph 5 of the Notes, the Notes may not otherwise be redeemed at the option of the Company. Section 2 REDEMPTION PURSUANT TO GAMING LAWS. If a Holder or a beneficial owner of a Note is required by any Gaming Authority to be found suitable, the Holder shall apply for a finding of suitability within 30 days after a Gaming Authority request or sooner if so required by such Gaming Author- ity. The applicant for a finding of suitability must pay all costs of the investigation for such finding of suitability. If a Holder or beneficial owner is required to be found suitable and is not found suitable by a Gaming Authority, the Holder shall, to the extent required by applicable law, dispose of his Notes within 30 days or within that time prescribed by a Gaming Au- thority, whichever is earlier. If the Holder fails to dispose of his Notes within such time period, the Company may, at its option, redeem such Holder's Notes at, depending on applicable law, (i) the principal amount thereof, together with accrued and unpaid interest (and Liquidated Damages, if any) to the date of the finding of unsuitability by a Gaming Authority, (ii) the amount that such Holder paid for the Notes, (iii) the fair market value of the Notes, (iv) the lowest of clauses (i), (ii) and (iii), or (v) such other amount as may be determined by the appropriate Gaming Authority. 39 Section 3 NOTICES TO TRUSTEE. If the Company elects to redeem Securities pursuant to this Article III, it shall notify the Trustee in writing of the date on which the Notes are to be redeemed ("Redemption Date") and the principal amount of Securities to be redeemed and whether it wants the Trustee to give notice of redemption to the Holders. If the Company elects to reduce the principal amount of Securities to be redeemed pursuant to Paragraph 5 of the Securi- ties by crediting against any such redemption Securities it has not previously delivered to the Trustee for cancellation, it shall so notify the Trustee of the amount of the reduction and deliver such Securities with such notice. The Company shall give each notice to the Trustee provided for in this Section 3.3 at least 30 days before the Redemption Date (unless a shorter notice shall be required by applicable Gaming Laws or by order of any Gaming Authority). Section 4 SELECTION OF SECURITIES TO BE REDEEMED. If less than all of the Securities are to be redeemed pursuant to Paragraph 5 thereof, the Trustee shall select from among such Securities to be redeemed PRO RATA or by lot or by such other method as the Trustee shall determine to be fair and appropriate and in such manner as complies with any applicable legal and stock exchange requirements. The Trustee shall make the selection from the Securi- ties outstanding and not previously called for redemption and shall promptly notify the Company in writing of the Securities selected for redemption and, in the case of any Security selected for partial redemption, the principal amount thereof to be redeemed. Securities in denominations of $1,000 may be redeemed only in whole. The Trustee may select for redemption portions (equal to $1,000 or any integral multiple thereof) of the princi- pal of Securities that have denominations larger than $1,000. Provisions of this Indenture that apply to Securities called for redemption also apply to portions of Securities called for redemption. Section 5 NOTICE OF REDEMPTION. At least 30 days but not more than 60 days before a Redemption Date, the Company shall mail a notice of redemption by first class mail, postage prepaid, to each Holder whose Securi- ties are to be redeemed (unless a shorter notice shall be re- quired by any Governmental Authority). At the Company's request, the Trustee shall give the notice of redemption in the Company's name and at the Company's expense. Each notice for redemption shall identify the Securities to be redeemed and shall state: 40 (1) the Redemption Date; (2) the Redemption Price, including the amount of accrued but unpaid interest (and Liqui- dated Damages, if any) to be paid upon such redemption; (3) the name, address and telephone number of the Paying Agent; (4) that Securities called for redemption must be surrendered to the Paying Agent at the address specified in such notice to collect the Redemption Price; (5) that, unless (a) the Company defaults in its obligation to deposit cash with the Paying Agent in accordance with Section 3.7 hereof, interest on Securities called for redemption ceases to accrue on and after the Redemption Date and the only remaining right of the Holders of such Securities is to receive payment of the Redemption Price, including accrued but unpaid interest (and Liquidated Damages, if any), upon surrender to the Paying Agent of the Secu- rities called for redemption and to be redeemed; (6) if any Security is being re- deemed in part, the portion of the principal amount, equal to $1,000 or any integral multiple thereof, of such Security to be redeemed and that, after the Re- demption Date, and upon surrender of such Security, a new Security or Securities in aggregate principal amount equal to the unredeemed portion thereof will be issued; (7) if less than all the Securities are to be redeemed, the identification of the particu- lar Securities (or portion thereof) to be redeemed, as well as the aggregate principal amount of such Securi- ties to be redeemed and the aggregate principal amount of Securities to be outstanding after such partial redemption; (8) the CUSIP number of the Secu- rities to be redeemed; and (9) that the notice is being sent pursuant to this Section 3.5 and pursuant to the op- tional redemption provisions of Paragraph 5 of the Securities. 41 Section 6 EFFECT OF NOTICE OF REDEMPTION. Once notice of redemption is mailed in accordance with Section 3.5, Securities called for redemption become due and payable on the Redemption Date and at the Redemption Price, including accrued but unpaid interest (and Liquidated Damages, if any). Upon surrender to the Trustee or Paying Agent, such Securities called for redemption shall be paid at the Redemption Price, including interest (and Liquidated Damages, if any), if any, accrued to and unpaid on the Redemption Date; PROVIDED that if the Redemption Date is after a regular Record Date and on or prior to the Interest Payment Date, the accrued interest (and Liquidated Damages, if any) shall be payable to the Holder of the redeemed Securities registered on the relevant Record Date; and PROVIDED, FURTHER, that if a Redemption Date is a Legal Holiday, payment shall be made on the next succeeding Business Day and no interest shall accrue for the period from such Redemption Date to such succeeding Business Day. Section 7 DEPOSIT OF REDEMPTION PRICE. On or before the Redemption Date, the Company shall deposit with the Paying Agent (other than the Company or an Affiliate of the Company) cash sufficient to pay the Redemption Price of, including accrued but unpaid interest on (and Liquidat- ed Damages, if any), all Securities to be redeemed on such Redemption Date (other than Securities or portions thereof called for redemption on that date that have been delivered by the Company to the Trustee for cancellation). The Paying Agent shall promptly return to the Company any cash so deposited which is not required for that purpose upon the written request of the Compa- ny. If the Company complies with the preceding paragraph and the other provisions of this Article III and payment of the Securities called for redemption is not otherwise prohibited, interest on the Securities to be redeemed will cease to accrue on the applicable Redemption Date, whether or not such Securities are presented for payment. Notwithstanding anything herein to the contrary, if any Security surrendered for redemption in the manner provided in the Securities shall not be so paid upon surrender for redemption because of the failure of the Company to comply with the preceding paragraph and the other provisions of this Article III, interest shall continue to accrue and be paid from the Redemption Date until such payment is made on the unpaid principal, and, to the extent lawful, on any interest not paid on such unpaid principal, in each case at the rate and in the manner provided in Section 5.1 hereof and the Securities. 42 Section 8 SECURITIES REDEEMED IN PART. Upon surrender of a Security that is to be redeemed in part, the Company shall execute and the Trustee shall authenti- cate and deliver to the Holder, without service charge, a new Security or Securities equal in principal amount to the unre- deemed portion of the Security surrendered. ARTICLE IV SECURITY Section 1 SECURITY INTEREST. (a) In order to secure the Indenture Obligations, the Company, the Guarantors and the Trustee have entered into the Security Documents. Each Holder, by accepting a Security, agrees to all of the terms and provisions of the Security Documents and the Trustee agrees to all of the terms and provisions of the Security Documents as the Security Documents may be amended from time to time pursuant to the provisions thereof and hereof. (b) The Collateral as now or hereafter constitut- ed shall be held for the equal and ratable benefit of the Holders without preference, priority or distinction of any thereof over any other by reason of difference in time of issuance, sale or otherwise, as security for the Indenture Obligations. (c) The provisions of TIA -section- 314(d), and the provisions of TIA -section- 314(c)(3) to the extent applicable, are hereby incorporated by reference herein as if set forth in their entirety and to the same extent as if the Indenture were quali- fied under the TIA. Section 2 RECORDING; OPINIONS OF COUNSEL. (a) Each of the Company and the Guarantors repre- sents that it has caused or will promptly cause to be executed and delivered, filed and recorded and covenants that it will promptly cause to be executed and delivered, filed and recorded, all instruments and documents, and have done and will do or will cause to be done all such acts and other things, at the Company's expense, as are necessary to subject the Collateral to valid security interests and to perfect those security interests. Each of the Company and the Guarantors shall, as promptly as practica- ble, cause to be executed and delivered, filed and recorded all instruments and do all acts and other things as may be required by law to perfect, maintain and protect the security interests under the Security Documents and herein. Each of the Company and the Guarantors has obtained endorsements of title insurance from insurance companies of favorable national reputation having 43 capital and surplus greater than $100,000,000, naming the Trustee as insured for the benefit of the Holders in the aggregate amount equal to the estimated fair market value of the Property that is real property subject to the Security Documents, subject only to those exceptions which are reasonably acceptable to the Trustee. (b) The Company shall furnish to the Trustee, promptly after the execution and delivery of this Indenture and the Security Documents and promptly after the execution and delivery of any amendment thereto or any other instrument of further assurance, an Opinion(s) of Counsel stating that, in the opinion of such counsel, subject to customary exclusions and exceptions reasonably acceptable to the Trustee, either (i) this Indenture, the Security Documents, any such amendment and all other instruments of further assurance have been properly record- ed, registered and filed and all such other action has been taken to the extent necessary to make effective valid security inter- ests and to perfect the security interests intended to be created by the Indenture and the Security Documents, and reciting the details of such action or referring to prior Opinions of Counsel in which such details are given, or (ii) no such action is necessary to maintain the validity and perfection of the security interests under the Security Documents and hereunder. (c) The Company shall furnish to the Trustee, on or prior to June 1 of each year (commencing on June 1, 1997) an Opinion(s) of Counsel, dated as of such date, stating that, in the opinion of such counsel, subject to customary exclusions and exceptions, either (A) all such action has been taken with respect to the recording, registering, filing, rerecording and refiling of the Indenture, all supplemental indentures, the Security Documents, financing statements, continuation statements and all other instruments of further assurance as is necessary to maintain the security interests under the Security Documents and hereunder in full force and effect and reciting the details of such action or referring to prior Opinions of Counsel in which such details are given, and stating that all financing statements and continuation statements have been executed and filed and such other actions taken that are necessary fully to preserve and protect the rights of the Holders and the Trustee hereunder and under the Security Documents, or (B) no such action is necessary to maintain the security interests in full force and effect. Section 3 DISPOSITION OF CERTAIN COLLATERAL. (a) The Company and the Guarantors may, without consent of the Trustee, but otherwise subject to the requirements of this Indenture: (i) sell, assign, transfer, license or otherwise dispose of, free from the security interests under the Security Documents and hereunder, any machin- ery, equipment, or other personal Property constituting 44 Collateral that has become worn out, obsolete, or unserviceable or is being upgraded; (ii) (A) sell, assign, transfer, li- cense or otherwise dispose of, free from the security interests under the Security Documents and hereunder, inventory held for resale that is at any time part of the Collateral in the ordinary course of the Company's business, consistent with industry practices, (B) col- lect, liquidate, sell, factor or otherwise dispose of, free from the security interests, accounts receivable or notes receivable that are part of the Collateral in the ordinary course of the Company's business, consis- tent with industry practices, or (C) make Cash payments from Cash that is at any time part of the Collateral pursuant to and in accordance with the terms hereof and of the Cash Collateral and Disbursement Agreement; (iii) abandon, sell, assign, transfer, license or otherwise dispose of any personal Property the use of which is no longer necessary or desirable in the proper conduct of the business of the Company and its Subsidiaries and the maintenance of their earnings and is not material to the conduct of the business of the Company and its Subsidiaries; (iv) sell, assign, transfer, license or otherwise dispose of, free from the security interests under the Security Documents and hereunder any assets or property in accordance with Section 5.14 PROVIDED that the proceeds of such sale, assignment, transfer, license or other disposition are applied in the manner set forth in Section 5.14 and, PROVIDED, FURTHER, that the Net Cash Proceeds from such disposition required to be applied to an Offer to Purchase or invested in a Related Business pursuant to Section 5.14 are held in the Net Cash Proceeds Account, pending such application or investment in accordance with Section 5.14 and, PROVIDED, FURTHER, that the Trustee shall receive an effective and perfected security interest in all net proceeds that are not Net Cash Proceeds from such disposition and in any assets or property acquired with the proceeds from such disposition (other than proceeds for which there is no provision of law, statutory or otherwise, enabling the creation of a perfected securi- ty interest in any such proceeds), in the same priority as such assets or property so disposed of; (v) sell, assign, transfer, license or otherwise dispose of, free from the security interests under the Security Documents and hereunder a partner- 45 ship interest in Indiana Gaming L.P. in accordance with Section 5.17 PROVIDED that the proceeds of such sale, assignment, transfer, license or other disposition are applied in the manner set forth in Section 5.17 and, PROVIDED, FURTHER, that the Net Cash Proceeds from such disposition required to be applied to an Offer to Purchase pursuant to Section 5.17 are held in the Net Cash Proceeds Account, pending such application in accordance with Section 5.17 and, PROVIDED, FURTHER, that the Trustee shall receive an effective and per- fected security interest in all net proceeds that are not Net Cash Proceeds from such disposition and in any assets or property acquired with the proceeds from such disposition (other than proceeds for which there is no provision of law, statutory or otherwise, enabling the creation of a perfected security interest in any such proceeds), in the same priority as such assets or prop- erty so disposed of, except as specifically provided in Section 5.17; and (vi) transfer, free from the security interests under the Security Documents and hereunder, the Specified Parcels in accordance with Section 5.3 hereof. (b) In the event that the Company or any Guaran- tor has sold, exchanged, or otherwise disposed of or proposes to sell, exchange or otherwise dispose of any portion of the Collat- eral which under the provisions of this Section 4.3 may be sold, exchanged or otherwise disposed of by the Company and the Guaran- tors without consent of the Trustee, and the Company and the Guarantors request the Trustee to furnish a written disclaimer, release or quitclaim of any interest in such property under the Security Documents, the Trustee shall execute such an instrument upon delivery to the Trustee of an Officers' Certificate by the Company and the Guarantors reciting the sale, exchange or other disposition made or proposed to be made and describing in reason- able detail the property affected thereby, and stating and demonstrating that such property is property which by the provi- sions of this Section 4.3 may be sold, exchanged or otherwise disposed of or dealt with by the Company and the Guarantors without any consent of the Trustee. (c) Any disposition of Collateral made in compli- ance with the provisions of this Section 4.3 shall be deemed not to impair the Security Interests in contravention of the provi- sions of this Indenture. Section 4 COLLATERAL ACCOUNT. (a) The Company shall establish and maintain in the name of the disbursement agent (the "Disbursement Agent") 46 pursuant to the Cash Collateral and Disbursement Agreement the Construction Account, which shall hold $94,300,000 of the net proceeds of the offering of the Securities, and a Working Capital Account, which will hold certain amounts released from the Construction Account (in which there shall be perfected an exclu- sive security interest in favor of the Trustee for the equal and ratable benefit of the Holders without preference, priority, or distinction of any thereof over any other thereof by reason of difference in time of issuance, sale or otherwise, as security for the Indenture Obligations). The funds from time to time on deposit in the Construction Account may be disbursed from such account only for the purposes and in the manner provided for in the Cash Collateral and Disbursement Agreement. (b) All Cash received by the Company and the Guarantors as Net Cash Proceeds from an Asset Sale (other than a Permitted Asset Sale), an Event of Loss, a Lawrenceburg Sale or a Property Sale shall be deposited in the Net Cash Proceeds Account established and maintained by the Trustee, in which account there shall be perfected an exclusive security interest in favor of the Trustee for the equal and ratable benefit of the Holders, without preference, priority, or distinction of any thereof over any other thereof by reason of difference in time of issuance, sale or otherwise, as security for the Indenture Obligations. The funds from time to time on deposit in the Net Cash Proceeds Account may be disbursed from such account only for the purposes and in the manner provided for in Sections 5.14, 5.17 and 5.18 (with respect to Net Cash Proceeds from a Property Sale) hereof; provided that once disbursed for any purpose other than payment on an Offer to Purchase, such amounts and any assets acquired therewith shall become Collateral for the Notes except to the extent the Net Cash Proceeds from a Property Sale or a L- awrenceburg Sale, taken together with distributions from The Indiana Gaming Company not in the nature of management fees, interest income or preferred dividends, exceed the Lawrenceburg Investment Return. (c) In its discretion, the Company may request the Trustee in writing to, and the Trustee shall, invest any Cash Collateral in the Net Cash Proceeds Account in Permitted Invest- ments; provided that the Company shall take all actions necessary to grant to the Trustee an exclusive, valid and perfected securi- ty interest in the proceeds of the funds so invested. (d) Interest and other amounts earned on Cash Collateral in the Net Cash Proceeds Account shall be held in the Net Cash Proceeds Account. (e) The Company hereby grants a security interest to the Trustee in all of its right, title and interest in amounts held in the Construction Account, the Working Capital Account and the Net Cash Proceeds Account, and the Company hereby grants a 47 security interest to the Trustee in all of its right, title and interest in any other account in which the terms of this Inden- ture require that there shall be perfected in favor of the Trustee for the benefit of holders a security interest in all Property and amounts, from any source whatsoever, now or hereaf- ter transferred to or held in any such account, including, without limitation, all proceeds derived from the sale or other disposition of Collateral paid into or held in any such account, and in any and all interest and dividends or other income derived from any such Property and amounts, and all statements, certifi- cates and instruments in or representing such Property and amounts. Section 5 CERTAIN RELEASES OF COLLATERAL. Subject to applicable law, the release of any Collater- al from the terms of the Security Documents or the release of, in whole or in part, the Liens created by the Security Documents, will not be deemed to impair the Security Documents in contraven- tion of the provisions of this Indenture if and to the extent the Collateral or Liens are released pursuant to, and in accordance with, the terms hereof, which are (i) the release of Collateral that is the subject of an Asset Sale, if the Net Cash Proceeds of such Asset Sale (other than a Permitted Asset Sale) are applied in accordance with Section 5.14 and if the Trustee has a valid and perfected security interest in the proceeds from the disposi- tion of such Collateral in at least the same priority as that of the Collateral so disposed of; provided that there shall concur- rently be created and perfected a valid, exclusive Lien in favor of the Trustee for the benefit of the Holders in the property and assets purchased or otherwise acquired with such funds, if any, (ii) to consummate the purchase of Notes pursuant to and in accordance with the terms of an Offer to Purchase, (iii) in the event the Company or a Guarantor incurs FF&E Indebtedness with respect to any Material Casino in accordance with the provisions of subsection (e) of Section 5.11 then such Material Casino property so secured thereby need no longer constitute Collateral for the Notes, (iv) in the event the Company or a Guarantor incurs Indebtedness for working capital with respect to any Material Casino in accordance with the provisions of subsection (f) of Section 5.11 then any inventory or accounts receivable with respect to such Material Casino need no longer constitute Collateral for the Notes or (v) the release of any cash proceeds that can be traced to a source other than the sale of Collateral or distributions from Indiana Gaming L.P. (excluding distri- butions in the nature of management fees, interest income and preferred dividends) up to the amount of the Lawrenceburg Invest- ment to the extent such cash proceeds are used to make an invest- ment in any Person permitted under Section 5.3 hereof, other than a Guarantor that is, or is required to be, a party to a Subsid- iary Security Agreement pursuant to Section 5.23 hereof. To the extent applicable, without limitation, the Company and each 48 obligor on the Securities shall cause TIA -section- 314(d) relating to the release of property or securities from the Liens of the Security Documents to be complied with. Any certificate or opinion required by TIA -section- 314(d) may be made by one officer prior to the qualification of the Indenture under the TIA and by two officers after such qualification, except in cases which TIA -section- 314(d) requires that such certificate or opinion be made by an independent person. Upon written request of the Company, subject to appli- cable law, and presentation to the Trustee of an Officers' Certificate evidencing compliance with Section 5.14, 5.15 (sub- ject to the last sentence thereof), 5.16, 5.17, 5.18, 5.19 or 5.23 or Article XII, as applicable, the Trustee shall release funds (and the Trustee's Lien with respect thereto) in accordance with the terms hereof; PROVIDED that, as a condition to such release, the Company shall take all necessary actions so that the Lien on the funds so released shall reattach in like manner to the assets and property purchased or otherwise acquired by the Company or such Guarantor with such funds (except to the extent such funds are applied to the repayment of Securities in compli- ance with the requirements of this Indenture and except to the extent that such amounts constitute Net Cash Proceeds from Property Sales or Lawrenceburg Sales which, taken with distri- butions from The Indiana Gaming Company not in the nature of management fees, interest or preferred dividends, exceed the Lawrence Investment Return) to the extent required by this Inden- ture. Section 6 PAYMENT OF EXPENSES. On demand of the Trustee, the Company forthwith shall pay or satisfactorily provide for all reasonable expenditures incurred by the Trustee under this Article IV, including the reasonable fees and expenses of counsel and all such sums shall be a Lien upon the Collateral and shall be secured thereby. Section 7 SUITS TO PROTECT THE COLLATERAL. Subject to Section 4.1 of this Indenture and to the provisions of the Security Documents, the Trustee shall have power to institute and to maintain such suits and proceedings as it may deem expedient to prevent any impairment of the Collateral by any acts which may be unlawful or in violation of the Security Documents or this Indenture, including the power to institute and maintain suits or proceedings to restrain the enforcement of or compliance with any legislative or other governmental enactment, rule or order that may be unconstitutional or otherwise invalid or if the enforcement of, or compliance with, such enactment, rule or order would impair the security interests in contraven- tion of this Indenture or be prejudicial to the interests of the Holders or of the Trustee. The Trustee shall give notice to the 49 Company promptly following the institution of any such suit or proceeding. Section 8 TRUSTEE'S DUTIES. The powers and duties conferred upon the Trustee by this Article IV are solely to protect the Security Interests and shall not impose any duty upon the Trustee to exercise any such powers and duties, except as expressly provided in this Inden- ture. The Trustee shall be under no duty to the Company or any Guarantor whatsoever to make or give any presentment, demand for performance, notice of nonperformance, protest, notice of pro- test, notice of dishonor, or other notice or demand in connection with any Collateral, or to take any steps necessary to preserve any rights against prior parties except as expressly provided in this Indenture. The Trustee shall not be liable to the Company or the Guarantors for failure to collect or realize upon any or all of the Collateral, or for any delay in so doing, nor shall the Trustee be under any duty to the Company or the Guarantors to take any action whatsoever with regard thereto. The Trustee shall have no duty to the Company, the Guarantors or the S- ecurityholders to comply with any recording, filing or other legal requirements necessary to establish or maintain the validi- ty, priority or enforceability of the Security Interests in, or the Trustee's rights in or to, any of the Collateral, all of which obligations are the sole responsibility and liability of the Company. The Trustee shall have no duty to the Company, the Guarantors or the Securityholders with regard to amounts, types or deductibles of insurance to be carried by the Company or the Guarantors, or with the selection of any insurance agent or broker, or whether the amount and type of insurance is "custom- ary" within a particular industry or otherwise complies with any requirement of this Indenture, or to inspect any Collateral. ARTICLE V COVENANTS Section 1 PAYMENT OF SECURITIES. The Company shall pay the principal of and interest (and Liquidated Damages, if any) on the Securities on the dates and in the manner provided in the Securities and this Indenture. An installment of principal of or interest (and Liquidated Damages, if any) on the Securities shall be considered paid on the date it is due if the Trustee or Paying Agent (other than the Company or an Affiliate of the Company) holds for the benefit of the Holders, on or before 10:00 a.m. New York City time on that date, cash deposited and designated for and sufficient to pay the installment. 50 The Company shall pay interest on overdue principal and on overdue installments of interest (and Liquidated Damages, if any) at the rate specified in the Securities compounded semi-annually, to the extent lawful. Section 2 MAINTENANCE OF OFFICE OR AGENCY. The Company and the Guarantors shall maintain in the Borough of Manhattan, The City of New York, an office or agency where Securities may be presented or surrendered for payment, where Securities may be surrendered for registration of transfer or exchange and where notices and demands to or upon the Company and the Guarantors in respect of the Securities and this Inden- ture may be served. The Company and the Guarantors shall give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency. If at any time the Company and the Guarantors shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the address of the Trustee set forth in Section 14.2. The Company and the Guarantors may also from time to time designate one or more other offices or agencies where the Securities may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; PROVIDED, HOWEVER, that no such designation or rescission shall in any manner relieve the Company and the Guarantors of their obligation to maintain an office or agency in the Borough of Manhattan, The City of New York, for such purposes. The Company and the Guarantors shall give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency. The Company and the Guarantors hereby initially designate the Chemical Bank as such office. Section 3 LIMITATION ON RESTRICTED PAYMENTS. The Company and the Guarantors shall not, and shall not permit any of their Subsidiaries to, directly or indirectly, make any Restricted Payment if, after giving effect to such Restricted Payment on a pro forma basis, (1) a Default or an Event of Default shall have occurred and be continuing, (2) the Company is not permitted to incur at least $1.00 of additional Indebtedness pursuant to paragraph (a) of Section 5.11 or (3) the aggregate amount of all Restricted Payments made by the Company and its Subsidiaries, including after giving effect to such proposed Restricted Payment from and after the Issue Date, would exceed the sum, without duplication, of (a) 50% of the aggregate Consol- idated Net Income of the Company and its Consolidated Subsidiar- ies for the period (taken as one accounting period), commencing 51 on the first day of the first full fiscal quarter commencing after the Issue Date, to and including the last day of the fiscal quarter ended immediately prior to the date of each such calcula- tion (or, in the event Consolidated Net Income for such period is a deficit, then minus 100% of such deficit), plus (b) 50% of all cash distributions (excluding management fees, interest income, preferred dividends or provision for taxes received from Indiana Gaming L.P.) made by The Indiana Gaming Company to the Company or another Guarantor after the Lawrenceburg Investment Return and after opening of the permanent Lawrenceburg Casino, plus (c) the aggregate Net Cash Proceeds received by the Company from the sale of its Qualified Capital Stock (other than (i) to a Subsidiary of the Company and (ii) to the extent applied in connection with a Qualified Exchange) after the Issue Date. The immediately preceding paragraph, however, shall not prohibit (s) Investments not to exceed $10,000,000 in the aggre- gate made on or after the Issue Date, (t) Investments in Quali- fied Gaming Ventures, PROVIDED that, after giving PRO FORMA effect to such Investment, the aggregate amount of all such Investments made on or after the Issue Date (after giving effect to 50% of any cash, including management fees, returned without restriction from such Investments to the Company or the wholly owned Subsidiary that made such prior Investment on or prior to the date of any such calculation) at any time does not exceed $15,000,000, (u) Investments in Indiana Gaming L.P. to fund construction and preopening costs until the permanent Lawrenceburg Casino is open, PROVIDED that, after giving PRO FORMA effect to such Investment, the aggregate amount of all such Investments made on or after the Issue Date does not exceed $135,000,000, (v) a Qualified Exchange, (w) Investments received by the Company or its Subsidiaries as consideration for Asset Sales to the extent not otherwise prohibited by the Indenture, (x) Investments by the Company or any of its Subsidiaries in Interest Swap and Hedging Obligations provided that such Interest Swap and Hedging Obligations are related to payment obligations on Indebtedness otherwise permitted under the Indenture; (y) the contribution of a Specified Parcel to an Unrestricted Subsidiary or any other person for the development and operation of a hotel on such Specified Parcel, or (z) the payment of any dividend on Qualified Capital Stock within 60 days after the date of its declaration if such dividend could have been made on the date of such declaration in compliance with the foregoing provisions. The full amount of any Restricted Payments made pursuant to the foregoing clause (z) of the immediately preceding sentence, however, shall be deducted in the calculation of the aggregate amount of Restricted Payments available to be made referred to in clause (c) of the immediately preceding paragraph. Section 4 CORPORATE EXISTENCE. Subject to Article VI, the Company and the Guarantors shall do or cause to be done all things necessary to preserve and 52 keep in full force and effect their corporate existence and the corporate or other existence of each of their Subsidiaries in accordance with the respective organizational documents of each of them and the rights (charter and statutory) and corporate franchises of the Company and their Guarantors and each of their Subsidiaries; PROVIDED, HOWEVER, that neither the Company nor any of the Guarantors shall be required to preserve, with respect to itself, any right or franchise, and with respect to any of their Subsidiaries, any such existence, right or franchise, if (a) the Board of Directors of the Company shall determine reasonably and in good faith that the preservation thereof is no longer desir- able in the conduct of the business of the Company and (b) the loss thereof is not disadvantageous in any material respect to the Holders. Section 5 PAYMENT OF TAXES AND OTHER CLAIMS. The Company and the Guarantors shall, and shall cause each of their Subsidiaries to, pay or discharge or cause to be paid or discharged, before the same shall become delinquent, (i) all taxes, assessments and governmental charges (including withholding taxes and any penalties, interest and additions to taxes) levied or imposed upon the Company, any Guarantor or any of their Subsidiaries or properties and assets of the Company, any Guarantor or any of their Subsidiaries and (ii) all lawful claims, whether for labor, materials, supplies, services or anything else, which have become due and payable and which by law have or may become a Lien upon the property and assets of the Company, any Guarantor or any of their Subsidiaries; PROVIDED, HOWEVER, that neither the Company nor any Guarantor shall be required to pay or discharge or cause to be paid or discharged any such tax, assessment, charge or claim whose amount, applica- bility or validity is being contested in good faith by appropri- ate proceedings and for which disputed amounts adequate reserves have been established in accordance with GAAP. Section 6 MAINTENANCE OF INSURANCE. From and at all times after the Issue Date, the Compa- ny, the Guarantors and each of their respective Subsidiaries shall have in effect customary comprehensive general liability insurance, property insurance and (as applicable) brownwater coverage, and shall cause their material property to maintain builder's risk coverage insurance, in each case on terms and in an amount reasonably sufficient (taking into account, among other factors, the creditworthiness of the insurer) to avoid a material adverse change in the financial condition or results of operation of the Company and the Guarantors, taken as a whole. 53 Section 7 COMPLIANCE CERTIFICATE; NOTICE OF DEFAULT. (a) The Company shall deliver to the Trustee within 120 days after the end of its fiscal year an Officers' Certificate complying (whether or not required) with Section 314(a)(4) of the TIA and stating that a review of its activities and the activities of its Subsidiaries during the preceding fiscal year has been made under the supervision of the signing Officers with a view to determining whether the Company has kept, observed, performed and fulfilled its obligations under this Indenture and further stating, as to each such Officer signing such certificate, whether or not the signer knows of any failure by the Company, any Guarantor or any Subsidiary of the Company or any Guarantor to comply with any conditions or covenants in this Indenture and, if such signer does know of such a failure to comply, the certificate shall describe such failure with particu- larity. The Officers' Certificate shall also notify the Trustee should the relevant fiscal year end on any date other than the current fiscal year end date. (b) So long as not contrary to the then current recommendation of the American Institute of Certified Public Accountants, the Company shall deliver to the Trustee within 120 days after the end of each of its fiscal years a written report of a firm of independent certified public accountants with an established national reputation stating that in conducting their audit for such fiscal year, nothing has come to their attention that caused them to believe that the Company or any Subsidiary of the Company was not in compliance with the provisions set forth in Section 5.3, 5.11, 5.14, 5.16, 5.17, 5.18 or 5.19 or Article XII of this Indenture. (c) The Company shall, so long as any of the Securities are outstanding, deliver to the Trustee, immediately upon becoming aware of any Default or Event of Default under this Indenture, an Officers' Certificate specifying such Default or Event of Default and what action the Company is taking or propos- es to take with respect thereto. The Trustee shall not be deemed to have knowledge of a Default or an Event of Default unless one of its trust officers receives notice of the Default giving rise thereto from the Company or any of the Holders. Section 8 REPORTS. Whether or not the Company is subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, the Company shall deliver to the Trustee and to each Holder, within 15 days after it is or would have been required to file such with the SEC, annual and quarterly consolidated financial statements substantially equivalent to financial statements that would have been included in reports filed with the SEC if the Company were subject to the requirements of Section 13 or 15(d) of the Ex- 54 change Act including, with respect to annual information only, a report thereon by the Company's certified independent public accountants as such would be so required in such reports to the SEC, in each case together with a management's discussion and analysis of financial condition and results of operations which would be so required. The Company shall simultaneously with such delivery deliver to the Trustee annual and quarterly condensed financial statements for Indiana Gaming L.P. Section 9 WAIVER OF STAY, EXTENSION OR USURY LAWS. The Company and each Guarantor covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law or any usury law or other law wherever enacted which would prohibit or forgive the Company or any Guarantor from paying all or any portion of the principal of or interest (and Liquidated Damages, if any) on the Securities as contemplated herein, wherever enacted, now or at any time hereafter in force, or which may affect the covenants or the performance of this Indenture; and (to the extent that they may lawfully do so) the Company and each Guarantor hereby expressly waives all benefit or advantage of any such law insofar as such law applies to the Securities, and covenant that it shall not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted. Section 10 LIMITATION ON TRANSACTIONS WITH AFFILIATES. The Company and the Guarantors shall not, and shall not permit any of their Subsidiaries to, enter into any contract, agreement, arrangement, understanding or transaction with an Affiliate (an "Affiliate Transaction"), or series of related Affiliate Transactions, involving consideration to either party in excess of $1,000,000, except for transactions approved by a majority of the disinterested (as to such transaction) directors of the Company and evidenced by an Officers' Certificate ad- dressed and delivered to the Trustee stating that such Affiliate Transaction has been so approved and is made in good faith and that the terms of such Affiliate Transaction are no less favor- able than could have been obtained in an arm's length transaction with a non-Affiliate and are otherwise fair and reasonable to the Company; PROVIDED that with respect to any Affiliate Transaction (including any series of related transactions) involving consid- eration to either party in excess of $10,000,000 (except as otherwise permitted by Section 5.3 hereof) the Company also must, prior to the consummation thereof, obtain a written favorable opinion as to the fairness of such transaction to the Company from a financial point of view from an independent investment banking firm of national reputation. Transactions solely between or amongst the Company and any wholly owned Subsidiary of the 55 Company and Belle of Sioux City L.P. or between or amongst wholly owned Subsidiaries of the Company and Belle of Sioux City L.P. shall not be deemed to be Affiliate Transactions. Section 11 LIMITATION ON INCURRENCE OF ADDITIONAL INDEBTEDNESS AND DISQUALIFIED CAPITAL STOCK. Except as set forth below in this covenant, the Company and the Guarantors shall not, and shall not permit any of their Subsidiaries to, directly or indirectly, issue, assume, guaranty, incur, become directly or indirectly liable with respect to (including as a result of an Acquisition), or otherwise become responsible for, contingently or otherwise (individually and collectively, to "incur" or, as appropriate, an "incurrence"), any Indebtedness or any Disqualified Capital Stock (including Acquired Indebtedness). Notwithstanding the foregoing: (a) if (i) no Default or Event of Default shall have occurred and be continuing at the time of, or would occur after giving effect on a pro forma basis to, such incurrence of Indebtedness or Disqualified Capital Stock and (ii) on the date of such incurrence (the "Incurrence Date"), the Consolidated Coverage Ratio of the Company for the Reference Period imme- diately preceding the Incurrence Date, after giving effect on a PRO FORMA basis to such incurrence of such Indebtedness or Dis- qualified Capital Stock and, to the extent set forth in the defi- nition of Consolidated Coverage Ratio, the use of proceeds thereof, would be at least 2.0 to 1.0 then the Company or any Guarantor may incur unsecured Subordinated Indebtedness; (b) if (i) no Default or Event of Default shall have occurred and be continuing at the time of, or would occur after giving effect on a PRO FORMA basis to, such incurrence of Indebtedness and (ii) on the Incurrence Date, the Consolidated Coverage Ratio of the Company for the Reference Period immediate- ly preceding the Incurrence Date, after giving effect on a pro forma basis to such incurrence of such Indebtedness and, to the extent set forth in the definition of Consolidated Coverage Ratio, the use of proceeds thereof, would be at least 2.5 to 1.0, (or, in the event the sole use of proceeds of such Indebtedness is to purchase any or all of the partnership interests in Indiana Gaming L.P. not owned by the Company and its Subsidiaries, 2.25 to 1.0) then the Company or any Guarantor may incur Indebtedness secured by Collateral, PROVIDED such Indebtedness (x) is PARI PASSU in right of payment with the Notes or the Guarantee, as applicable, (y) has an Average Life to Stated Maturity greater than or equal to the Average Life to Stated Maturity of the Notes and (z) has a final scheduled maturity later than or equal to the Stated Maturity, and PROVIDED FURTHER that (t) such Indebtedness is incurred to develop or acquire a Material Casino or make a Casino Improvement, (u) not more than 80% of the cost of such acquisition, development or improvement is funded by such Indebt- 56 edness, (v) such Material Casino or Casino Improvements and all its assets become Collateral for the Notes and (w) such Indebted- ness is subject to an intercreditor agreement with the Trustee in the form attached hereto as EXHIBIT I; (c) if (i) no Default or Event of Default shall have occurred and be continuing at the time of, or would occur after giving effect on a PRO FORMA basis to, such incurrence of Indebtedness and (ii) on the Incurrence Date, the Consolidated Coverage Ratio of the Company for the Reference Period immediate- ly preceding the Incurrence Date, after giving effect on a pro FORMA basis to such incurrence of such Indebtedness and, to the extent set forth in the definition of Consolidated Coverage Ratio, the use of proceeds thereof, would be at least 2.5 to 1.0, then the Company or any Guarantor may incur Indebtedness secured by property that is not Collateral, PROVIDED that such Indebtedness (y) has an Average Life to Stated Maturity greater than the Average Life to Stated Maturity of the Notes and (z) has a final scheduled maturity later than the Stated Maturity; (d) the Company may incur Indebtedness evidenced by the Notes and represented by the Indenture up to the amounts specified herein as of the date hereof; (e) the Company and the Guarantors may incur FF&E Indebtedness, PROVIDED that the amount of such Indebtedness in the aggregate outstanding at any time pursuant to this paragraph (e) (including any Indebtedness, whether or not Refinancing Indebtedness, issued to refinance, replace or refund such Indebt- edness) shall not exceed $5,000,000 multiplied by the number of Material Casinos then operated by the Company or the Guarantors; (f) the Company and the Guarantors may incur Indebtedness for working capital purposes, PROVIDED that the amount of such Indebtedness in the aggregate outstanding at any time pursuant to this subsection (f) (including any Indebtedness, whether or not Refinancing Indebtedness, issued to refinance, replace or refund such Indebtedness) may not exceed $4,000,000 multiplied by the number of Material Casinos then operated by the Company or the Guarantors; (g) the Company and the Guarantors, as applica- ble, may incur Refinancing Indebtedness with respect to any In- debtedness or Disqualified Capital Stock, as applicable, de- scribed in clauses (a), (b), (c), (e) and (f) of this Section 5.11 or Indebtedness which is outstanding on the Issue Date so long as, in the case of secured Indebtedness used to refinance, refund, or replace secured Indebtedness, such Refinancing Indebt- edness is secured only by the assets that secured the Indebted- ness so refinanced; and 57 (h) the Company and the Guarantors may incur Per- mitted Indebtedness. Section 12 LIMITATION ON DIVIDENDS AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES. The Company and the Guarantors shall not, and shall not permit any of their Subsidiaries or Indiana Gaming L.P. or its Subsidiaries (as long as The Indiana Gaming Company is the general partner of Indiana Gaming L.P.) to, directly or indirect- ly, create, assume or suffer to exist any consensual restriction on the ability of any Subsidiary of the Company to pay dividends or make other distributions to or on behalf of, or to pay any obligation to or on behalf of, or otherwise to transfer assets or property to or on behalf of, or make or pay loans or advances to or on behalf of, the Company or any Subsidiary of the Company, except (a) restrictions imposed by the Notes or this Indenture, (b) restrictions imposed by applicable law, (c) existing restric- tions under Indebtedness specified on EXHIBIT J hereto outstand- ing on the Issue Date, (d) restrictions under any Acquired Indebtedness not incurred in violation of the Indenture or any agreement relating to any property, asset, or business acquired by the Company or any of its Subsidiaries, which restrictions in each case existed at the time of acquisition, were not put in place in connection with or in anticipation of such acquisition and are not applicable to any person, other than the person acquired, or to any property, asset or business, other than the property, assets and business so acquired and such acquisition was not made, in whole or in part, with any Collateral or from the proceeds of the sale of any Collateral or out of the distri- butions made by Indiana Gaming L.P. not in the nature of manage- ment fees, interest income or preferred dividends up to the amount of the Lawrenceburg Investment, (e) restrictions with respect solely to a Subsidiary of the Company imposed pursuant to a binding agreement which has been entered into for the sale or disposition of all or substantially all of the Capital Stock or assets of such Subsidiary, provided such restrictions apply solely to the Capital Stock or assets of such Subsidiary which are being sold, (f) restrictions on transfer contained in FF&E Indebtedness incurred pursuant to subsection (e) of Section 5.11, provided such restrictions relate only to the transfer of the property acquired with the proceeds of such FF&E Indebtedness, and (g) in connection with and pursuant to any Permitted Refi- nancing, replacements of restrictions imposed pursuant to clauses (c) and (d) of this Section 5.12 that are not more restrictive than those being replaced and do not apply to any other person or assets than those that would have been covered by the restric- tions in the Indebtedness so refinanced. Notwithstanding the foregoing, neither (i) customary provisions restricting sublet- ting or assignment of any lease entered into in the ordinary course of business, consistent with industry practice, (ii) Liens permitted under the terms of the Indenture on assets securing 58 FF&E Indebtedness incurred in accordance with Section 5.11, nor (iii) provisions ordering distributions of cash flow from Indiana Gaming L P. shall in and of themselves be considered a restric- tion on the ability of the applicable Subsidiary to transfer such agreement or assets, as the case may be. Section 13 LIMITATION ON LIENS SECURING INDEBTEDNESS. The Company and the Guarantors shall not, and shall not permit any of their Subsidiaries to, create, incur, assume or suffer to exist any Lien of any kind upon any of their respective assets now owned or acquired on or after the date of the Inden- ture or upon any income or profits therefrom other than (a) Permitted Liens; (b) Liens incurred hereunder to secure the Notes; (c) Liens incurred in support of any FF&E Indebtedness permitted by subsection (e) of Section 5.11, which Liens may be exclusive; (d) Liens incurred in connection with Indebtedness for working capital purposes permitted by subsection (e) of Section 5.11 on accounts receivable and inventory of the property to which such Indebtedness relates, which Liens may be exclusive; (e) Liens incurred in connection with Indebtedness permitted by subsection (b) of Section 5.11, which Liens may be junior or pari passu to the Lien securing the Notes; and (f) Liens incurred in connection with Indebtedness permitted by subsection (c) of Section 5.11, which Liens may be exclusive. Section 14 LIMITATION ON SALE OF ASSETS AND SUBSIDIARY STOCK. (a) The Company and the Guarantors shall not, and shall not permit any of their Subsidiaries to, in one or a series of related transactions, convey, sell, transfer, assign or otherwise dispose of, directly or indirectly, any of its proper- ty, business or assets, including by merger or consolidation (in the case of a Subsidiary of the Company), and including any sale or other transfer or issuance of any Capital Stock of any Subsid- iary of the Company (except any Subsidiary directly or indirectly owning an interest in Indiana Gaming L.P., which transaction is governed by Section 5.17) whether by the Company or a Subsidiary or through the issuance, sale or transfer of Capital Stock by a Subsidiary of the Company (an "Asset Sale"), unless (1)(a) within 210 days after the date of such Asset Sale, the Net Cash Proceeds therefrom, less the pro rata portion of such amount distributed to any lender, or trustee or agent for such lender, holding indebtedness secured by the Collateral on a PARI PASSU basis as permitted by subsection (b) of Section 5.11, (the "Asset Sale Offer Amount") are applied to the repurchase of the Notes pursu- ant to an irrevocable, unconditional cash offer (the "Asset Sale Offer") to repurchase Notes at a purchase price (the "Asset Sale Offer Price") of 100% of principal amount, plus accrued but unpaid interest (and Liquidated Damages, if any) to the date of payment (the "Asset Sale Purchase Date"), made within 180 days of 59 such Asset Sale or (b) within 180 days following such Asset Sale, the Asset Sale Offer Amount is invested in assets and property (other than notes, bonds, obligations and securities, except with respect to an Acquisition of an entity whose business consists solely of Related Businesses) which in the good faith reasonable judgment of the Board of Directors of the Company will immediate- ly constitute or be a part of a Related Business of the Company or such Subsidiary immediately following such transaction and which shall become Collateral if acquired with Collateral or the proceeds of Collateral, (2) at least 85% of the consideration re- ceived for such Asset Sale or series of related Asset Sales consists of cash or cash equivalents, PROVIDED that (x) the amount of any liabilities (as shown on the Company's or such Subsidiary's most recent balance sheet or in the notes thereto) of the Company or any Subsidiary (other than liabilities that are by their terms subordinated to the Notes or any Guarantee there- of) that are assumed by the transferee of any such assets and (y) the amount of any notes or other obligations received by the Company or any such Subsidiary from such transferee that are immediately converted by the Company or such Subsidiary into cash or as to which the Company or such Subsidiary has received at or prior to the consummation of the Asset Sale a commitment from a nationally recognized investment, merchant or commercial bank to convert into cash within 90 days of the consummation of such Asset Sale unless not actually converted into cash within such 90-day period (to the extent of the cash received or receivable pursuant to any such commitment) will be deemed cash or cash equivalents for purposes of this provision, (3) no Default or Event of Default shall have occurred and be continuing at the time of, or would occur after giving effect on a PRO FORMA basis to, such Asset Sale, and (4) the Board of Directors of the Company determines in good faith that the Company or such Subsid- iary, as applicable, receives fair market value for such Asset Sale. Pending the application of Net Cash Proceeds resulting from an Asset Sale, such proceeds shall be maintained by the Trustee in the Net Cash Proceeds Account and invested only in Permitted Investments. Notwithstanding the foregoing provisions of the prior paragraph: (i) the Company and its Subsidiaries may, in the ordinary course of business, convey, sell, transfer, assign or otherwise dispose of inventory ac- quired and held for resale in the ordinary course of business; (ii) the Company and its Subsidiaries may convey, sell, transfer, assign or otherwise dispose of assets pursuant to and in accordance with Article VI; 60 (iii) the Company and its Subsidiaries may sell or dispose of damaged, worn out or other obso- lete property in the ordinary course of business so long as such property is no longer necessary for the proper conduct of the business of the Company or such Subsidiary, as applicable; (iv) the Company and its Subsidiaries may convey, sell, transfer, assign or otherwise dispose of assets to the Company or any of its wholly owned Subsidiaries; (v) the Company and its Subsidiaries may convey, sell, transfer, assign or otherwise dispose of assets with an aggregate fair market value of $- 5,000,000 in any fiscal year; and (vi) the Company may make a like kind exchange for the Company's Alton barge, provided that the Board of Directors of the Company determines in good faith that the Company receives fair market value for such exchange and the Company receives an appraisal valuing the property received as having a value at least as great as the value of the Alton barge. Asset Sales in accordance with clauses (i) and (iii) above shall be "Permitted Asset Sales" for purposes of Article IV hereof. All Net Cash Proceeds from an Event of Loss shall be invested or used to repurchase Notes, all within the period and as otherwise provided above in clause (1) of the first paragraph of this Section 5.14(a). For all purposes of this Section 5.14 Net Cash Proceeds of an Event of Loss shall be treated as Net Cash Proceeds of an Asset Sale. Notwithstanding the foregoing, the Company will not, and will not permit any Subsidiary to, directly or indirectly, make any Asset Sale of any of the Capital Stock of a Subsidiary except (i) pursuant to an Asset Sale of all the Capital Stock of such Subsidiary or (ii) pursuant to an Asset Sale of shares of common stock with no preferences or special rights or privileges and with no redemption or prepayment provisions, PROVIDED that after such sale the Company or its Subsidiaries own at least 50.1% of the voting and economic interests of the Capital Stock of such Subsidiary. The Company shall accumulate all Net Cash Proceeds of Asset Sales and Events of Loss, and the aggregate amount of such accumulated amounts and the interest and other amounts earned thereon not used for the purposes permitted by this Section 61 5.14(a) and within the time provided by this Section 5.14(a) shall be referred to as the "Accumulated Amount." (b) Notwithstanding the foregoing, the Company shall not be obligated to make an Asset Sale Offer until the Accumulated Amount exceeds $5,000,000. For the purposes of this Section 5.14, "Minimum Accumulation Date" means each date on which the Accumulated Amount exceeds $5,000,000. Not later than 10 Business Days after each Minimum Accumulation Date the Company shall commence an Asset Sale Offer to the Holders to purchase, on a pro rata basis, for cash, Securities having a principal amount equal to the Accumulated Amount, at the Asset Sale Offer Price. Notice of an Asset Sale Offer shall be sent, on or prior to the commencement of the Asset Sale Offer, by first-class mail, by the Company to each Holder at its registered address, with a copy to the Trustee. The Asset Sale Offer shall remain open for at least 20 Business Days following its commencement. The notice to the Holders shall contain all information, instructions and materials required by applicable law or otherwise material to such Holders' decision to tender Securities pursuant to the Asset Sale Offer. The notice, which (to the extent consistent with this Indenture) shall govern the terms of an Asset Sale Offer, shall state: (1) that the Asset Sale Offer is being made pursuant to such notice and this Section 5.14; (2) the Asset Sale Offer Amount, the Asset Sale Offer Price (including the amount of accrued but unpaid interest (and Liquidated Damages, if any)), and the Asset Sale Purchase Date, which Asset Sale Purchase Date shall be on or prior to 30 Business Days following the Minimum Accumulation Date; (3) that any Security or portion thereof not tendered or accepted for payment will continue to accrue interest if interest is then accru- ing; (4) that, unless the Company de- faults in depositing cash with the Paying Agent (which may not for purposes of this Section 5.14, notwith- standing anything in this Indenture to the contrary, be the Company or any Affiliate of the Company) in accor- dance with the last paragraph of this clause (b), any Security, or portion thereof, accepted for payment pursuant to the Asset Sale Offer shall cease to accrue interest after the Asset Sale Purchase Date; (5) that Holders electing to have a Security, or portion thereof, purchased pursuant to an Asset Sale Offer will be required to surrender their 62 Security, with the form entitled "Option of Holder to Elect Purchase" on the reverse of the Security complet- ed, to the Paying Agent (which may not for purposes of this Section 5.14, notwithstanding any other provision of this Indenture, be the Company or any Affiliate of the Company) at the address specified in the notice; (6) that Holders will be entitled to withdraw their elections, in whole or in part, if the Paying Agent receives, prior to the expiration of the Asset Sale Offer, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Securities the Holder is withdrawing and a statement containing a fac- simile signature and stating that such Holder is with- drawing his election to have such principal amount of Securities purchased; (7) that if Securities in a prin- cipal amount in excess of the principal amount of Securities to be acquired pursuant to the Asset Sale Offer are tendered and not withdrawn, the Company shall purchase Securities on a PRO RATA basis (with such adjustments as may be deemed appropriate by the Company so that only Securities in denominations of $1,000 or integral multiples of $1,000 shall be acquired); (8) that Holders whose Securities were purchased only in part will be issued new Securi- ties equal in principal amount to the unpurchased portion of the Securities surrendered; and (9) the circumstances and relevant facts regarding such Asset Sales. Any such Asset Sale Offer shall comply with all appli- cable provisions of Federal and state laws, including those regulating tender offers, if applicable, and any provisions of this Indenture that conflict with such laws shall be deemed to be superseded by the provisions of such laws. On or before an Asset Sale Purchase Date, the Company shall (i) accept for payment Securities or portions thereof properly tendered pursuant to the Asset Sale Offer (on a pro rata basis if required pursuant to paragraph (7) above), (ii) deposit with the Paying Agent cash sufficient to pay the Asset Sale Offer Price for all Securities or portions thereof so accepted and (iii) deliver to the Trustee Securities so accepted together with an Officers' Certificate setting forth the Securities or portions thereof being purchased by the Company. The Paying Agent shall promptly mail or deliver to Holders of Securities so accepted payment in an amount equal to the Asset Sale Offer Price for such 63 Securities, and the Trustee shall promptly authenticate and mail or deliver to such Holders a new Security equal in principal amount to any unpurchased portion of the Security surrendered. Any Securities not so accepted shall be promptly mailed or delivered by the Company to the Holder thereof. (c) If the amount required to acquire all Securi- ties tendered by Holders pursuant to an Asset Sale Offer (the "Acceptance Amount") shall be less than the Asset Sale Offer Amount for such Asset Sale Offer, the excess of such Asset Sale Offer Amount over the Acceptance Amount may be used by the Company for general corporate purposes without restriction; PROVIDED that, as reinvested, the assets acquired with Collateral or the proceeds of Collateral shall become Collateral. Upon consummation of any Asset Sale Offer made in accordance with the terms of this Section 5.14, the Accumulated Amount as of the Minimum Accumulation Date shall be reduced to zero and accumula- tions thereof shall be deemed to recommence from the day next following such Minimum Accumulation Date. (d) Promptly on the sale of any real or personal property owned by Iowa Development Corp., the Company shall cause the net proceeds from such sale to be promptly distributed to the Company and, as reinvested, the assets acquired shall become Collateral. The Company shall not permit Iowa Development Corp. to conduct any business other than the sale of its assets. Section 15 LIMITATION ON USE OF PROCEEDS. The Company and the Guarantors shall use the proceeds from the sale of the Securities (net of the Initial Purchasers' discounts and commissions and other transaction expenses) as fol- lows: (a) such amount as is necessary to pay in full all out- standing indebtedness under the Existing Bank Credit Facility, (b) at least $94,000,000 shall be used to make capital contribu- tions and capital loans to Indiana Gaming L.P. for the develop- ment of the Lawrenceburg Casino and (c) any remaining amounts will be available for general corporate purposes; PROVIDED that, as reinvested, the assets acquired shall become Collateral. On the Issue Date, the Company will cause $94,300,000 of the net proceeds of the offering of the Securities to be segregated and held in the Construction Account. No other funds may be held in the Construction Account. The Company may make payments permit- ted under this Section 5.15 from amounts held in the Construction Account in accordance with the terms of the Cash Collateral and Disbursement Agreement. 64 Section 16 REPURCHASE OF NOTES ON CERTAIN PROJECT DELAYS. (a) In the event of a Project Delay Event, each Holder of Notes shall have the right, at such Holder's option, pursuant to an irrevocable and unconditional cash offer by the Company (the "Project Delay Offer"), to require the Company to repurchase all or any part of such Holder's Notes (provided that the principal amount of such Notes must be $1,000 or an integral multiple thereof) on a date (the "Project Delay Purchase Date") that is no later than 40 Business Days after the date a Project Delay occurs, at a cash price equal to 101% of the principal amount thereof, together with accrued interest (and Liquidated Damages, if any) to the Project Delay Purchase Date (the "Project Delay Offer Price") PROVIDED, HOWEVER, that in no event shall the Company be required to purchase more than an aggregate principal amount of Notes equal to the amount remaining in the disbursement account on the date of the Project Delay (the "Project Delay Offer Amount") in connection with such Project Delay Offer. Notwithstanding the foregoing, in the event the Company has received disbursements from the disbursement account to which it is not entitled pursuant to the terms of the Cash Collateral and Disbursement Agreement, the Project Delay Offer Amount shall be increased to include such disbursements. For purposes of the preceding paragraph, commencement of operations shall be deemed to occur at such time as the Lawrenceburg Casino is open to the public for gaming and is operating at least 950 gaming positions. (b) Not later than 15 Business Days after the Project Delay the Company shall commence a Project Delay Offer to the Holders to purchase, on a pro rata basis, for cash Securities having a principal amount equal to the Project Delay Offer Amount, at the Project Delay Offer Price. Notice of a Project Delay Offer shall be sent on or prior to the commencement of any Project Delay Offer, by first-class mail, by the Company to each Holder at its registered address, with a copy to the Trustee. The Project Delay Offer shall remain open for at least 20 Busi- ness Days following its commencement. The notice to the Holders shall contain all information, instructions and materials re- quired by applicable law or otherwise material to such Holders' decision to tender Securities pursuant to the Project Delay Offer. The notice, which (to the extent consistent with this Indenture) shall govern the terms of a Project Delay Offer, shall state: (1) that the Project Delay Offer is being made pursuant to such notice and this Section 5.16; 65 (2) the Project Delay Offer Amount, the Project Delay Offer Price (including the amount of accrued but unpaid interest (and Liquidated Damages, if any)) and the Project Delay Purchase Date; (3) that any Security or portion thereof not tendered or accepted for payment will con- tinue to accrue interest if interest is then accruing; (4) that, unless the Company de- faults in depositing cash with the Paying Agent (which may not for purposes of this Section 5.16, notwith- standing anything in this Indenture to the contrary, be the Company or any Affiliate of the Company) in accor- dance with the last paragraph of this subsection (b), any Security, or portion thereof, accepted for payment pursuant to the Project Delay Offer shall cease to accrue interest after the Project Delay Purchase Date; (5) that Holders electing to have a Security, or portion thereof, purchased pursuant to a Project Delay Offer will be required to surrender their Security, with the form entitled "Option of Holder to Elect Purchase" on the reverse of the Security complet- ed, to the Paying Agent (which may not for purposes of this Section 5.16, notwithstanding any other provision of this Indenture, be the Company or any Affiliate of the Company) at the address specified in the notice; (6) that Holders will be entitled to withdraw their elections, in whole or in part, if the Paying Agent receives, prior to the expiration of the Project Delay Offer, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Securities the Holder is withdrawing and a statement containing a fac- simile signature and stating that such Holder is with- drawing his election to have such principal amount of Securities purchased; (7) that if Securities in a prin- cipal amount in excess of the Project Delay Offer Amount are tendered and not withdrawn, the Company shall purchase Securities on a PRO RATA basis (with such adjustments as may be deemed appropriate by the Company so that only Securities in denominations of $1,000 or integral multiples of $1,000 shall be ac- quired); (8) that Holders whose Securities were purchased only in part will be issued new Securi- 66 ties equal in principal amount to the unpurchased portion of the Securities surrendered; and (9) the circumstances and relevant facts regarding such Project Delay Event. The Project Delay Offer shall comply with all appli- cable provisions of Federal and state laws, including those regulating tender offers, if applicable, and any provisions of this Indenture that conflict with such laws shall be deemed to be superseded by the provisions of such laws. On or before a Project Delay Purchase Date, the Company shall (i) accept for payment Securities or portions thereof properly tendered pursuant to the Project Delay Offer (on a pro rata basis if required pursuant to paragraph (7) above), (ii) deposit with the Paying Agent cash sufficient to pay the Project Delay Offer Price for all Securities or portions thereof so accepted and (iii) deliver to the Trustee Securities so accepted together with an Officers' Certificate setting forth the Securi- ties or portions thereof being purchased by the Company. The Paying Agent shall promptly mail or deliver to Holders of Securi- ties so accepted payment in an amount equal to the Project Delay Offer Price for such Securities, and the Trustee shall promptly authenticate and mail or deliver to such Holders a new Security equal in principal amount to any unpurchased portion of the Security surrendered. Any Securities not so accepted shall be promptly mailed or delivered by the Company to the Holder there- of. In no event shall the Company be required to make more than one offer to purchase pursuant to this provision, assuming all Notes tendered into such offer are purchased by the Company in accordance with the terms thereof. Section 17 REPURCHASE OF NOTES IN CONNECTION WITH SALE OF LAWRENCEBURG INTEREST. (a) The Company and its Subsidiaries shall not, and shall not permit any of their Subsidiaries to, in one or a series of related transactions, sell or otherwise transfer any of the Company's interest in Indiana Gaming L.P., whether directly by a sale of such interest or indirectly by the sale, issuance or transfer of Capital Stock of any Subsidiary of the Company directly or indirectly owning such interest (a "Lawrenceburg Sale"), unless (1) on a date (the "Lawrenceburg Sale Purchase Date") not more than 40 Business Days after the date of such Lawrenceburg Sale, the Net Cash Proceeds therefrom, less the pro rata portion of such amount distributed to any lender, or trustee or agent for such lender, holding indebtedness secured by the Collateral on a PARI PASSU basis as permitted by subsection (c) of Section 5.11 (the "Lawrenceburg Sale Offer Amount") are applied to the repurchase of the Notes pursuant to an irrevoca- ble, unconditional cash offer (the "Lawrenceburg Sale Offer") to 67 repurchase Notes at a purchase price of 101% of the principal amount, plus accrued interest (and Liquidated Damages, if any) to the Lawrenceburg Sale Purchase Date (the "Lawrenceburg Sale Offer Price"), (2) at least 85% of the consideration received for such Lawrenceburg Sale or series of related Lawrenceburg Sales con- sists of cash, (3) no Default or Event of Default shall have occurred and be continuing at the time of, or would occur after giving effect on a PRO FORMA basis to, such Lawrenceburg Sale, (4) the Board of Directors of the Company determines in good faith that the Company or such Subsidiary receives fair market value for such Lawrenceburg Sale and (5) the Board of Directors of the Company receives a favorable written opinion as to the fairness of the transaction to the Company from a financial point of view issued by an investment banking firm of nationally recog- nized standing. Pending the application of Net Cash Proceeds resulting from a Lawrenceburg Sale, such proceeds shall be main- tained by the Trustee in the Net Cash Proceeds Account and invested in Permitted Investments. (b) Not later than 15 Business Days after any Lawrenceburg Sale the Company shall commence a Lawrenceburg Sale Offer to the Holders to purchase, on a PRO RATA basis, for cash Securities having a principal amount equal to the Lawrenceburg Sale Offer Amount, at the Lawrenceburg Sale Offer Price. Notice of a Lawrenceburg Sale Offer shall be sent on or prior to the commencement of any Lawrenceburg Sale Offer, by first-class mail, by the Company to each Holder at its registered address, with a copy to the Trustee. The Lawrenceburg Sale Offer shall remain open for at least 20 Business Days following its commencement. The notice to the Holders shall contain all information, instruc- tions and materials required by applicable law or otherwise material to such Holders' decision to tender Securities pursuant to the Lawrenceburg Sale Offer. The notice, which (to the extent consistent with this Indenture) shall govern the terms of a Lawrenceburg Sale Offer, shall state: (1) that the Lawrenceburg Sale Offer is being made pursuant to such notice and this Section 5.17; (2) the Lawrenceburg Sale Offer Amount, the Lawrenceburg Sale Offer Price (including the amount of accrued but unpaid interest (and Liqui- dated Damages, if any)) and the Lawrenceburg Sale Purchase Date; (3) that any Security or portion thereof not tendered or accepted for payment will continue to accrue interest if interest is then accru- ing; 68 (4) that, unless the Company de- faults in depositing cash with the Paying Agent (which may not for purposes of this Section 5.17, notwith- standing anything in this Indenture to the contrary, be the Company or any Affiliate of the Company) in accor- dance with the last paragraph of this subsection (b), any Security, or portion thereof, accepted for payment pursuant to the Lawrenceburg Sale Offer shall cease to accrue interest after the Lawrenceburg Sale Purchase Date; (5) that Holders electing to have a Security, or portion thereof, purchased pursuant to a Lawrenceburg Sale Offer will be required to surrender their Security, with the form entitled "Option of Holder to Elect Purchase" on the reverse of the Securi- ty completed, to the Paying Agent (which may not for purposes of this Section 5.17, notwithstanding any other provision of this Indenture, be the Company or any Affiliate of the Company) at the address specified in the notice; (6) that Holders will be entitled to withdraw their elections, in whole or in part, if the Paying Agent receives, prior to the expiration of the Lawrenceburg Sale Offer, a telegram, telex, facsim- ile transmission or letter setting forth the name of the Holder, the principal amount of the Securities the Holder is withdrawing and a statement containing a fac- simile signature and stating that such Holder is with- drawing his election to have such principal amount of Securities purchased; (7) that if Securities in a prin- cipal amount in excess of the principal amount of Securities to be acquired pursuant to the Lawrenceburg Sale Offer are tendered and not withdrawn, the Company shall purchase Securities on a PRO RATA basis (with such adjustments as may be deemed appropriate by the Company so that only Securities in denominations of $1,000 or integral multiples of $1,000 shall be ac- quired); (8) that Holders whose Securities were purchased only in part will be issued new Securi- ties equal in principal amount to the unpurchased portion of the Securities surrendered; and (9) the circumstances and relevant facts regarding such Lawrenceburg Sales. 69 Any such Lawrenceburg Sale Offer shall comply with all applicable provisions of Federal and state laws, including those regulating tender offers, if applicable, and any provisions of this Indenture that conflict with such laws shall be deemed to be superseded by the provisions of such laws. On or before a Lawrenceburg Sale Purchase Date, the Company shall (i) accept for payment Securities or portions thereof properly tendered pursuant to the Lawrenceburg Sale Offer (on a pro rata basis if required pursuant to paragraph (7) above), (ii) deposit with the Paying Agent cash sufficient to pay the Lawrenceburg Sale Offer Price for all Securities or portions thereof so accepted and (iii) deliver to the Trustee Securities so accepted together with an Officers' Certificate setting forth the Securities or portions thereof being purchased by the Compa-ny. The Paying Agent shall promptly mail or deliver to Holders of Securities so accepted payment in an amount equal to the Lawrenceburg Sale Offer Price for such Securities, and the Trustee shall promptly authenticate and mail or deliver to such Holders a new Security equal in principal amount to any unpurchased portion of the Security surrendered. Any Securities not so accepted shall be promptly mailed or delivered by the Company to the Holder thereof. (c) If the amount required to acquire all Securi- ties tendered by Holders pursuant to a Lawrenceburg Sale Offer (the "Lawrenceburg Sale Acceptance Amount") shall be less than the Lawrenceburg Sale Offer Amount for such Lawrenceburg Sale Offer, the excess of such Lawrenceburg Sale Offer Amount over the Lawrenceburg Sale Acceptance Amount may be used by the Company for general corporate purposes; PROVIDED that, as reinvested, the assets acquired shall become Collateral except to the extent that the Net Cash Proceeds from Lawrenceburg Sales or Property Sales, taken together with distributions from The Indiana Gaming Company not in the nature of management fees, interest income or pre- ferred dividends, exceed the Lawrenceburg Investment Return. Section 18 REPURCHASE OF NOTES IN CONNECTION WITH REPAYMENT OF LAWRENCEBURG INVESTMENT. (a) The Company shall cause distributions from Indiana Gaming L.P. to The Indiana Gaming Company to be promptly distributed to the Company. At least once in every twelve-month period commencing on the first anniversary of the Issue Date (each such anniversary date, or each Property Sale (as defined below), the "Lawrenceburg Investment Event"), the Company shall, on a date (the "Lawrenceburg Investment Purchase Date") that is not later than 40 Business Days after such Lawrenceburg Invest- ment Event, apply 50% of any distributions from Indiana Gaming L.P. (excluding management fees, interest income, preferred dividends or provision for taxes) up to the total amount of the Lawrenceburg Investment, less the pro rata portion of such amount 70 distributed to any lender, or trustee or agent acting for such lender, holding indebtedness secured by Collateral on a PARI PASSU basis as permitted by subsection (b) of Section 5.11, or 100% of the Company's PRO RATA share of the Net Cash Proceeds of a Property Sale (the "Lawrenceburg Investment Offer Amount") to the optional redemption of the Notes in accordance with the terms of Article III of the Indenture or to the repurchase of the Notes pursuant to an irrevocable, unconditional cash offer (the "- Lawrenceburg Investment Offer") to repurchase Notes at a purchase price of 101% of the principal amount, plus accrued interest (and Liquidated Damages, if any) to the Lawrenceburg Investment Pur- chase Date (the "Lawrenceburg Investment Offer Price"). Notwithstanding anything in this Section 5.18 to the contrary, except in the case of a Property Sale, a Lawrenceburg Investment Offer need not be made in any year in which the Lawrenceburg Investment Offer Amount (together with any L- awrenceburg Investment Offer Amount which was not previously subject to a Lawrenceburg Investment Offer based on this para- graph) is less than $10,000,000; PROVIDED that in such event, such Lawrenceburg Investment Offer Amount shall be aggregated with subsequent years' Lawrenceburg Investment Offer Amounts for purposes of this Section 5.18. In no event shall the Company be required to make Lawrenceburg Investment Offers in an aggregate amount in excess of the Lawrenceburg Investment, except in the case of a Property Sale. (b) Not later than 15 Business Days after any Lawrenceburg Investment Event the Company shall commence a Law- renceburg Investment Offer to the Holders to purchase, on a pro rata basis, for cash Securities having a principal amount equal to the Lawrenceburg Investment Offer Amount, at the Lawrenceburg Investment Offer Price. Notice of a Lawrenceburg Investment Offer shall be sent on or prior to the commencement of any Lawrenceburg Investment Offer, by first-class mail, by the Compa- ny to each Holder at its registered address, with a copy to the Trustee. The Lawrenceburg Investment Offer shall remain open for at least 20 Business Days following its commencement. The notice to the Holders shall contain all information, instructions and materials required by applicable law or otherwise material to such Holders' decision to tender Securities pursuant to the Lawrenceburg Investment Offer. The notice, which (to the extent consistent with this Indenture) shall govern the terms of a Lawrenceburg Investment Offer, shall state: (1) that the Lawrenceburg Invest- ment Offer is being made pursuant to such notice and this Section 5.18; (2) the Lawrenceburg Investment Offer Amount, the Lawrenceburg Investment Offer Price (including the amount of accrued but unpaid interest 71 (and Liquidated Damages, if any)) and the Lawrenceburg Investment Purchase Date; (3) that any Security or portion thereof not tendered or accepted for payment will con- tinue to accrue interest if interest is then accruing; (4) that, unless the Company de- faults in depositing cash with the Paying Agent (which may not for purposes of this Section 5.18, notwith- standing anything in this Indenture to the contrary, be the Company or any Affiliate of the Company) in accor- dance with the last paragraph of this subsection (b), any Security, or portion thereof, accepted for payment pursuant to the Lawrenceburg Investment Offer shall cease to accrue interest after the Lawrenceburg Invest- ment Purchase Date; (5) that Holders electing to have a Security, or portion thereof, purchased pursuant to a Lawrenceburg Investment Offer will be required to sur- render their Security, with the form entitled "Option of Holder to Elect Purchase" on the reverse of the Security completed, to the Paying Agent (which may not for purposes of this Section 5.18, notwithstanding any other provision of this Indenture, be the Company or any Affiliate of the Company) at the address specified in the notice; (6) that Holders will be entitled to withdraw their elections, in whole or in part, if the Paying Agent receives, prior to the expiration of the Lawrenceburg Investment Offer, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Securities the Holder is withdrawing and a statement containing a facsimile signature and stating that such Holder is withdrawing his election to have such principal amount of Securities purchased; (7) that if Securities in a prin- cipal amount in excess of the principal amount of Securities to be acquired pursuant to the Lawrenceburg Investment Offer are tendered and not withdrawn, the Company shall purchase Securities on a PRO RATA basis (with such adjustments as may be deemed appropriate by the Company so that only Securities in denominations of $1,000 or integral multiples of $1,000 shall be ac- quired); (8) that Holders whose Securities were purchased only in part will be issued new Securi- 72 ties equal in principal amount to the unpurchased portion of the Securities surrendered; and (9) the circumstances and relevant facts regarding such Lawrenceburg Investment Event. Any such Lawrenceburg Investment Offer shall comply with all applicable provisions of Federal and state laws, includ- ing those regulating tender offers, if applicable, and any provisions of this Indenture that conflict with such laws shall be deemed to be superseded by the provisions of such laws. On or before a Lawrenceburg Investment Purchase Date, the Company shall (i) accept for payment Securities or portions thereof properly tendered pursuant to the Lawrenceburg Investment Offer (on a pro rata basis if required pursuant to paragraph (7) above), (ii) deposit with the Paying Agent cash sufficient to pay the Lawrenceburg Investment Offer Price for all Securities or portions thereof so accepted and (iii) deliver to the Trustee Securities so accepted together with an Officers' Certificate setting forth the Securities or portions thereof being purchased by the Company. The Paying Agent shall promptly mail or deliver to Holders of Securities so accepted payment in an amount equal to the Lawrenceburg Investment Offer Price for such Securities, and the Trustee shall promptly authenticate and mail or deliver to such Holders a new Security equal in principal amount to any unpurchased portion of the Security surrendered. Any Securities not so accepted shall be promptly mailed or delivered by the Company to the Holder thereof. (c) If the amount required to acquire all Securi- ties tendered by Holders pursuant to a Lawrenceburg Investment Offer (the "Lawrenceburg Investment Acceptance Amount") shall be less than the Lawrenceburg Investment Offer Amount for such Lawrenceburg Investment Offer, the excess of such Lawrenceburg Investment Offer Amount over the Lawrenceburg Investment Accep- tance Amount may be used by the Company for general corporate purposes; PROVIDED that, as reinvested, the assets acquired shall become Collateral. (d) As long as The Indiana Gaming Company serves as general partner of Indiana Gaming L.P., Indiana Gaming L.P. will not engage in a sale of all or substantially all its assets, by way of merger, consolidation or otherwise (a "Property Sale") unless (i) at least 85% of the consideration received consists of cash, (ii) the Board of Directors of the Company determines in good faith that Indiana Gaming L.P. receives fair market value therefor, (iii) the Board of Directors of the Company receives a favorable written opinion as to the fairness of the transaction to Indiana Gaming L.P. from a financial point of view issued by an investment bank of nationally recognized standing and (iv) the Company's pro rata share of the Net Cash Proceeds, less the pro 73 rata portion of such amount distributed to any lender, or trustee or agent for such lender, holding indebtedness secured by the Collateral on a PARI PASSU basis as permitted by subsection (b) of Section 5.11, are distributed to the Company and held by the Trustee in the Net Cash Proceeds Account in Permitted Investments pending application in accordance with this Section 5.18. (e) The Company may make additional Lawrenceburg Investment Offers within any twelve-month period that substan- tially comply with the terms of this Section 5.18. Section 19 REPURCHASE OF NOTES ON LOSS OF MATERIAL CASINO. (a) In the event of the loss of the legal right to operate a Material Casino, which Material Casino represented more than 10% of the Consolidated EBITDA of the Company for and as of the end of the Reference Period immediately preceding such loss, and such loss continues for more than 90 days (such event, a "License Loss"), the Company shall, on a date (the "License Loss Purchase Date") that is no later than 40 Business Days after such ninetieth day, apply an amount (the "License Loss Offer Amount") equal to four times the contribution of such Material Casino to such Consolidated EBITDA during the Reference Period to the repurchase of Notes having a principal amount equal to the License Loss Offer Amount in accordance with an irrevocable, unconditional cash offer (the "License Loss Offer") to purchase Notes at a purchase price of 101% of the principal amount, plus accrued interest (and Liquidated Damages, if any) to the License Loss Purchase Date (the "License Loss Offer Price"). The Company need not make a License Loss Offer if, giving effect to the License Loss on a PRO FORMA basis, the Company's Consolidated Coverage Ratio would be at least 2.25 to 1. (b) Not later than 15 Business Days after any License Loss the Company shall commence a License Loss Offer to the Holders to purchase, on a PRO RATA basis, for cash Securities having a principal amount equal to the License Loss Offer Amount, at the License Loss Offer Price. Notice of a License Loss Offer shall be sent on or prior to the commencement of any License Loss Offer, by first-class mail, by the Company to each Holder at its registered address, with a copy to the Trustee. The License Loss Offer shall remain open for at least 20 Business Days following its commencement. The notice to the Holders shall contain all information, instructions and materials required by applicable law or otherwise material to such Holders' decision to tender Securities pursuant to the License Loss Offer. The notice, which (to the extent consistent with this Indenture) shall govern the terms of a License Loss Offer, shall state: 74 (1) that the License Loss Offer is being made pursuant to such notice and this Section 5.19; (2) the License Loss Offer Amount, the License Loss Offer Price (including the amount of accrued but unpaid interest (and Liquidated Damages, if any)) and the License Loss Purchase Date; (3) that any Security or portion thereof not tendered or accepted for payment will con- tinue to accrue interest if interest is then accruing; (4) that, unless the Company de- faults in depositing cash with the Paying Agent (which may not for purposes of this Section 5.19, notwith- standing anything in this Indenture to the contrary, be the Company or any Affiliate of the Company) in accor- dance with the last paragraph of this subsection (b), any Security, or portion thereof, accepted for payment pursuant to the License Loss Offer shall cease to accrue interest after the License Loss Purchase Date; (5) that Holders electing to have a Security, or portion thereof, purchased pursuant to a License Loss Offer will be required to surrender their Security, with the form entitled "Option of Holder to Elect Purchase" on the reverse of the Security complet- ed, to the Paying Agent (which may not for purposes of this Section 5.19, notwithstanding any other provision of this Indenture, be the Company or any Affiliate of the Company) at the address specified in the notice; (6) that Holders will be entitled to withdraw their elections, in whole or in part, if the Paying Agent receives, prior to the expiration of the License Loss Offer, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Securities the Holder is withdrawing and a statement containing a fac- simile signature and stating that such Holder is with- drawing his election to have such principal amount of Securities purchased; (7) that if Securities in a prin- cipal amount in excess of the License Loss Offer Amount are tendered and not withdrawn, the Company shall pur- chase Securities on a PRO RATA basis (with such adjust- ments as may be deemed appropriate by the Company so that only Securities in denominations of $1,000 or integral multiples of $1,000 shall be acquired); 75 (8) that Holders whose Securities were purchased only in part will be issued new Securi- ties equal in principal amount to the unpurchased portion of the Securities surrendered; and (9) the circumstances and relevant facts regarding such License Loss. Any such License Loss Offer shall comply with all applicable provisions of Federal and state laws, including those regulating tender offers, if applicable, and any provisions of this Indenture that conflict with such laws shall be deemed to be superseded by the provisions of such laws. On or before a License Loss Purchase Date, the Company shall (i) accept for payment Securities or portions thereof properly tendered pursuant to the License Loss Offer (on a pro RATA basis if required pursuant to paragraph (7) above), (ii) deposit with the Paying Agent cash sufficient to pay the License Loss Offer Price for all Securities or portions thereof so accepted and (iii) deliver to the Trustee Securities so accepted together with an Officers' Certificate setting forth the Securi- ties or portions thereof being purchased by the Company. The Paying Agent shall promptly mail or deliver to Holders of Securi- ties so accepted payment in an amount equal to the License Loss Offer Price for such Securities, and the Trustee shall promptly authenticate and mail or deliver to such Holders a new Security equal in principal amount to any unpurchased portion of the Security surrendered. Any Securities not so accepted shall be promptly mailed or delivered by the Company to the Holder there- of. Section 20 LIMITATION ON ACTIVITIES OF THE INDIANA GAMING COMPANY AND INDIANA GAMING L.P. (a) The Indiana Gaming Company shall not conduct any business whatsoever other than (i) investing in and serving as general partner of Indiana Gaming Company L.P., including executing agreements on behalf of Indiana Gaming L.P., (ii) if removed as general partner of Indiana Gaming L.P. pursuant to the terms of such partnership's partnership agreement, serving as a limited partner thereof and (iii) complying with its obligations under this Indenture and the Notes and acting as a Guarantor of the Notes. The Indiana Gaming Company shall not transfer any of its interest in Indiana Gaming L.P. to the Company or any of its Subsidiaries, unless such Subsidiary is a direct wholly owned Subsidiary of the Company and is bound by this provision and all other provisions of the Indenture and the Notes specifically relating to The Indiana Gaming Company. (b) As long as The Indiana Gaming Company is the general partner of Indiana Gaming L.P., the Company will not 76 permit Indiana Gaming L.P. to incur any Indebtedness other than Indebtedness under the terms of which (a) no recourse shall be had against any other person (other than The Indiana Gaming Company solely in its capacity as general partner of Indiana Gaming L.P.) for the payment of the principal of or interest or premium on such Indebtedness or for any claim based on such Indebtedness and (b) no restrictions of the type prohibited by Section 5.12 shall be permitted. As long as the Indiana Gaming Company is the general partner of Indiana Gaming L.P., the Company will not permit Indiana Gaming L.P. to amend the provi- sion of its partnership agreement dealing with distributions in a manner which is adverse to the Holders or the provision with respect to partnership purpose, which is limited to the operation of the Lawrenceburg Casino. Section 21 LIMITATION ON LINES OF BUSINESS. Neither the Company nor any of its Subsidiaries or Unrestricted Subsidiaries shall directly or indirectly engage to any substantial extent in any line or lines of business activity other than that which, in the reasonable good faith judgment of the Board of Directors of the Company, is a Related Business, including, in the case of an Acquisition, immediately upon such Acquisition. Section 22 LIMITATION ON STATUS AS INVESTMENT COMPANY. None of the Company, any Guarantor or any of their respective Subsidiaries shall become required to be registered as an "investment company" (as that term is defined in the Invest- ment Company Act of 1940, as amended), or otherwise become subject to regulation under the Investment Company Act. Section 23 FUTURE SUBSIDIARY GUARANTORS. The Company and the Guarantors covenant and agree that they shall cause each person that becomes a Subsidiary of the Company or any Guarantor to execute a Guarantee in the form of EXHIBIT B hereto and shall cause such Subsidiary to enter into a supplemental indenture for the purpose of jointly and severally guaranteeing, on a senior basis, the Company's obligations to pay principal, premium and interest (and Liquidated Damages, if any) on the Notes, and the capital stock of such Subsidiary owned by the Company or any Guarantors shall be pledged, pursuant to an agreement substantially in the form of the Parent Pledge Agree- ment or Subsidiary Pledge Agreement attached hereto as EXHIBIT D or EXHIBIT E, respectively, in favor of the Trustee for the benefit of the Holders, and, if any assets of such Subsidiary are acquired with Collateral or the proceeds of Collateral, or from distributions from Indiana Gaming L.P. (other than in the nature of management fees, interest or preferred dividends) up to the amount of the Lawrenceburg Investment Return, all assets shall be 77 pledged under a Deed of Trust, Subsidiary Security Agreement and Ship Mortgage, as applicable, substantially in the forms attached hereto as EXHIBIT C-1, EXHIBIT F and EXHIBIT H, respectively. Section 24 RULE 144A INFORMATION REQUIREMENT. The Company shall furnish to the Holders of the Secu- rities and prospective purchasers of Securities designated by the Holders of Transfer Restricted Securities, upon their request, the information required to be delivered pursuant to Rule 1- 44A(d)(4) under the Securities Act until such time as the Company either concludes an offer to exchange the Series B Notes for the Original Notes or a registration statement relating to resales of the Securities has become effective under the Securities Act. The Company shall also furnish such information during the pendency of any suspension of effectiveness of the resale regis- tration statement. ARTICLE VI SUCCESSOR CORPORATION Section 1 LIMITATION ON MERGER, SALE OR CONSOLIDATION. Neither the Company nor any of the Guarantors (to the extent not permitted by the sale provisions set forth in Article XIII) will directly or indirectly consolidate with or merge with or into another person or sell, lease, convey or transfer all or substantially all of its assets (computed on a consolidated basis), whether in a single transaction or a series of related transactions, to another Person or group of affiliated Persons, unless: (1) either (a) in the case of a merger or consolidation, the Company or such Guarantor, as the case may be, is the continuing entity or (b) the resulting, surviving or transferee entity is a corpora- tion organized under the laws of the United States, any state thereof or the District of Columbia and expressly assumes by supplemental indenture all of the obliga- tions of the Company or such Guarantor, as applicable, in connection with the Notes and the Indenture; (2) no Default or Event of Default shall exist or shall occur immediately after giving effect on a PRO FORMA basis to such transaction; (3) immediately after giving effect to such transaction, on a PRO FORMA basis, the Consoli- dated Net Worth of the consolidated surviving or trans- feree entity is at least equal to the Consolidated Net 78 Worth of the Company or the Guarantor, as applicable, immediately prior to such transaction; (4) other than in the case of a transaction solely between the Company and a wholly owned Guarantor or solely between wholly owned Guaran- tors, immediately after giving effect to such transac- tion, on a PRO FORMA basis, the consolidated resulting, surviving or transferee entity would immediately there- after be permitted to incur at least $1.00 of addition- al Indebtedness pursuant to subsection (a) of Section 5.11; (5) such transaction will not result in the loss of any material Gaming License; and (6) the Company has delivered to the Trustee an Officers' Certificate stating that such consolidation, merger, assignment, or transfer and such supplemental indenture comply with this Article VI and that all conditions precedent herein provided relating to such transaction have been satisfied. For purposes of the first sentence of this Section 6.1, the sale, lease or conveyance of all or substantially all of the properties and assets of one or more Subsidiaries of the Company or a Guarantor, which properties and assets, if held by the Company or a Guarantor instead of such Subsidiaries, would constitute all or substantially all of the properties and assets of the Company or such Guarantor, as the case may be, on a consolidated basis, shall be deemed to be the transfer of all or substantially all of the properties and assets of the Company or such Guarantor, as the case may be. Section 2 SUCCESSOR CORPORATION SUBSTITUTED. Upon any consolidation or merger or any transfer of all or substantially all of the assets of the Company or a Guarantor in accordance with Section 6.1, the successor corporation formed by such consolidation or into which the Company or such Guaran- tor, as the case may be, is merged or to which such transfer is made, shall succeed to, and be substituted for, and may exercise every right and power of, the Company or such Guarantor, as the case may be, under the Indenture and the Notes with the same effect as if such successor corporation had been named therein as the Company or such Guarantor, as the case may be, and, except in the case of a lease, the Company or such Guarantor, as the case may be, will be released from the obligations under the Notes and the Indenture except with respect to any obligations that arise from, or are related to, such transaction. 79 ARTICLE VII EVENTS OF DEFAULT AND REMEDIES Section 1 EVENTS OF DEFAULT. "Event of Default," wherever used herein, means any one of the following events (whatever the reason for such Event of Default and whether it shall be caused voluntarily or involun- tarily or effected, without limitation, by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body): (1) the failure by the Company to pay any installment of interest (or Liquidated Damages, if any) on the Notes as and when due and payable and the continuance of any such failure for 30 days; (2) the failure by the Company to pay all or any part of the principal, or premium, if any, on the Notes when and as the same become due and payable at maturity, redemption, by acceleration or otherwise, including, without limitation, failure to make a required redemption or pay any Offer to Purchase Price, or otherwise; (3) except as otherwise provided herein, the failure by the Company or any Guarantor to observe or perform any other covenant or agreement contained in the Notes or the Indenture and the contin- uance of such failure for a period of 30 days after written notice is given to the Company by the Trustee or to the Company and the Trustee by the Holders of at least 25% in aggregate principal amount of the Notes outstanding; (4) a decree, judgment, or order by a court of competent jurisdiction shall have been entered adjudging the Company or any of its Significant Subsidiaries as bankrupt or insolvent, or approving as properly filed a petition seeking reorganization of the Company or such Significant Subsidiary under any bank- ruptcy or similar law, and such decree or order shall have continued undischarged and unstayed for a period of 60 days; or a decree or order of a court of compe- tent jurisdiction over the appointment of a receiver, liquidator, trustee, or assignee in bankruptcy or insolvency of the Company or such Significant Subsid- iary, or of the property of any such person, or for the winding up or liquidation of the affairs of any such person, shall have been entered, and such decree, 80 judgment, or order shall have remained in force undis- charged and unstayed for a period of 60 days; (5) the Company or any of its Significant Subsidiaries shall institute proceedings to be adjudicated a voluntary bankrupt, or shall consent to the filing of a bankruptcy proceeding against it, or shall file a petition or answer or consent seeking reorganization under any bankruptcy or similar law or similar statute, or shall consent to the filing of any such petition, or shall consent to the appointment of a Custodian, receiver, liquidator, trustee, or assignee in bankruptcy or insolvency of it or any of its assets or property, or shall make a general assignment for the benefit of creditors, or shall admit in writing its inability to pay its debts generally as they become due, or shall, within the meaning of any Bankruptcy Law, become insolvent or fail generally to pay its debts as they become due; (6) a default in the payment of principal, premium or interest when due which extends beyond any stated period of grace applicable thereto or an acceleration for any other reason of maturity of any Indebtedness of the Company or one or more of the Guar- antors with an aggregate principal amount in excess of $5,000,000; (7) final unsatisfied judgments not covered by insurance aggregating in excess of $- 5,000,000, at any one time rendered against the Company or one or more of its Subsidiaries and not stayed, bonded or discharged within 45 days; (8) an event of default specified in the Security Documents, not cured within the appli- cable grace period; or (9) a default in the payment of principal, premium or interest on the Convertible Notes at the final maturity on June 1, 2001, regardless of any consent or waiver to such nonpayment given by any holder thereof. If a Default occurs and is continuing, the Trustee must, within 90 days after the occurrence of such default, give to the Holders notice of such default. 81 Section 2 ACCELERATION OF MATURITY DATE; RESCISSION AND ANNULMENT. If an Event of Default (other than an Event of Default specified in Section 7.1(4) or (5)) occurs and is continuing, then, and in every such case, unless the principal of all of the Securities shall have already become due and payable, either the Trustee or the Holders of not less then 25% in aggregate princi- pal amount of then outstanding Securities, by a notice in writing to the Company (and to the Trustee if given by Holders) (an "Acceleration Notice"), may declare all of the principal of the Securities (and premium, if applicable), determined as set forth below, together with accrued interest (and Liquidated Damages, if any) thereon, to be due and payable immediately. If an Event of Default specified in Section 7.1(4) or (5) occurs, all principal of, premium applicable to, and accrued interest (and Liquidated Damages, if any) on, the Securities shall be immediately due and payable on all outstanding Securities without any declaration or other act on the part of the Trustee or the Holders. At any time after such a declaration of acceleration being made and before a judgment or decree for payment of the money due has been obtained by the Trustee as hereinafter provid- ed in this Article VII, the Holders of a majority in aggregate principal amount of then outstanding Securities, by written notice to the Company and the Trustee, may waive, on behalf of all Holders, an Event of Default or an event which with notice or lapse of time or both would become an Event of Default if: (1) the Company has paid or depos- ited with the Trustee a sum sufficient to pay (A) all overdue interest (and Liquidated Damages, if any) on all Secu- rities, (B) the principal of (and premium, if any, applicable to) any Securities which would become due otherwise than by such declaration of acceleration, and interest thereon at the rate borne by the Securities, (C) to the extent that payment of such interest is lawful, interest upon overdue interest (and Liquidated Damag- es, if any) at the rate borne by the Securi- ties, (D) all sums paid or advanced by the Trustee hereunder and the compensation, expenses, disbursements and 82 advances of the Trustee, its agents and coun- sel, and (2) all Events of Default, other than the non-payment of amounts which have become due solely by such declaration of acceleration, have been cured or waived as provided in Section 7.12. Notwithstanding the previous sentence of this Section 7.2, no waiver shall be effective for any Event of Default or event which with notice or lapse of time or both would be an Event of Default with respect to any covenant or provision which cannot be modi- fied or amended (i) without the consent of the Holder of each outstanding Security, unless all such affected Holders agree, in writing, to waive such Event of Default or event or (ii) without the consent of Holders of a supermajority in aggregate principal amount of then outstanding Securities, unless such Holders agree, in writing, to waive such Event of Default or event. No such waiver shall cure or waive any subsequent default or impair any right consequent thereon. Section 3 COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY TRUSTEE. The Company covenants that if an Event of Default in payment of principal, premium, or interest (and Liquidated Damages, if any) specified in Section 7.1(1) or (2) occurs and is continuing, the Company shall, upon demand of the Trustee, pay to it, for the benefit of the Holders of such Securities, the whole amount then due and payable on such Securities for principal, premium (if any) and interest (and Liquidated Damages, if any), and, to the extent that payment of such interest shall be legally enforceable, interest on any overdue principal (and premium, if any) and on any overdue interest (and Liquidated Damages, if any), at the rate borne by the Securities, and, in addition thereto, such further amount as shall be sufficient to cover the costs and expenses of collection, including compensation to, and expenses, disbursements and advances of the Trustee, its agents and counsel. If the Company fails to pay such amounts forthwith upon such demand, the Trustee, in its own name and as trustee of an express trust in favor of the Holders, may institute a judicial proceeding for the collection of the sums so due and unpaid, may prosecute such proceeding to judgment or final decree and may enforce the same against the Company or any other obligor upon the Securities and collect the moneys adjudged or decreed to be payable in the manner provided by law out of the property of the Company or any other obligor upon the Securities, wherever situated. 83 If an Event of Default occurs and is continuing, the Trustee may in its discretion proceed to protect and enforce its rights and the rights of the Holders by such appropriate judicial proceedings as the Trustee shall deem most effective to protect and enforce any such rights, whether for the specific enforcement of any covenant or agreement in this Indenture or in aid of the exercise of any power granted herein, or to enforce any other proper remedy. Section 4 TRUSTEE MAY FILE PROOFS OF CLAIM. In case of the pendency of any receivership, insolven- cy, liquidation, bankruptcy, reorganization, arrangement, adjust- ment, composition or other judicial proceeding relative to the Company or any other obligor upon the Securities or the property of the Company or of such other obligor or their creditors, the Trustee (irrespective of whether the principal of the Securities shall then be due and payable as therein expressed or by declara- tion or otherwise and irrespective of whether the Trustee shall have made any demand on the Company for the payment of overdue principal or interest) shall be entitled and empowered, by intervention in such proceeding or otherwise to take any and all actions under the TIA, including (i) to file and prove a claim for the whole amount of principal (and premium, if any) and interest (and Liquidated Damages, if any) owing and unpaid in respect of the Securities and to file such other papers or documents as may be necessary or advis- able in order to have the claims of the Trustee (in- cluding any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agent and counsel) and of the Holders allowed in such judicial proceeding, and (ii) to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute the same; and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due it for the reasonable compensation, expenses, disbursements and advances of the Trust- ee, its agents and counsel, and any other amounts due the Trustee under Section 8.7. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, 84 adjustment, or composition affecting the Securities or the rights of any Holder thereof or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding. Section 5 TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSES- SION OF SECURITIES. All rights of action and claims under this Indenture or the Securities may be prosecuted and enforced by the Trustee without the possession of any of the Securities or the production thereof in any proceeding relating thereto, and any such proceed- ing instituted by the Trustee shall be brought in its own name as trustee of an express trust in favor of the Holders, and any recovery of judgment shall, after provision for the payment of compensation to, and expenses, disbursements and advances of the Trustee, its agents and counsel, be for the ratable benefit of the Holders of the Securities in respect of which such judgment has been recovered. Section 6 PRIORITIES. Any money collected by the Trustee pursuant to this Article VII shall be applied in the following order, at the date or dates fixed by the Trustee and, in case of the distribution of such money on account of principal, premium (if any) or interest (and Liquidated Damages, if any), upon presentation of the Securities and the notation thereon of the payment if only partially paid and upon surrender thereof if fully paid: FIRST: To the Trustee in payment of all amounts due pursuant to Section 8.7; SECOND: To the Holders in payment of the amounts then due and unpaid for principal of, premium (if any) and interest (and Liquidated Damages, if any) on, the Securities in respect of which or for the benefit of which such money has been collected, ratably, without preference or priority of any kind, according to the amounts due and payable on such Securities for principal, premium (if any) and interest (and Liquidated Damages, if any), respectively; and THIRD: To whomsoever may be lawfully entitled thereto, the remainder, if any. Section 7 LIMITATION ON SUITS. No Holder of any Security shall have any right to order or direct the Trustee to institute any proceeding, judicial or otherwise, with respect to this Indenture, or for the appointment of a receiver or trustee, or for any other remedy hereunder, unless 85 (A) such Holder has previously given written notice to the Trust- ee of a continuing Event of Default; (B) the Holders of not less than 25% in principal amount of then outstanding Securities shall have made writ- ten request to the Trustee to institute pro- ceedings in respect of such Event of Default in its own name as Trustee hereunder; (C) such Holder or Hold- ers have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities to be incurred or reasonably probable to be incurred in compli- ance with such request; (D) the Trustee for 60 days after its receipt of such notice, re- quest and offer of indemnity has failed to institute any such proceeding; and (E) no direction incon- sistent with such written request has been given to the Trustee during such 60-day peri- od by the Holders of a majority in principal amount of the outstanding Securities; it being understood and intended that no one or more Holders shall have any right in any manner whatever by virtue of, or by availing of, any provision of this Indenture to affect, disturb or prejudice the rights of any other Holders, or to obtain or to seek to obtain priority or preference over any other Holders or to enforce any right under this Indenture, except in the manner herein provided and for the equal and ratable benefit of all the Holders. Section 8 UNCONDITIONAL RIGHT OF HOLDERS TO RECEIVE PRINCIPAL, PREMIUM AND INTEREST. Notwithstanding any other provision of this Indenture, the Holder of any Security shall have the right, which is abso- lute and unconditional, to receive payment of the principal of, and premium (if any) and interest (and Liquidated Damages, if any) on, such Security on the Maturity Dates or Interest Payment Dates, as applicable, of such payments as expressed in such Security (in the case of redemption, the Redemption Price on the Redemption Date; in the case of a Change of Control, the Change of Control Purchase Price, on the Change of Control Purchase Date; in the case of an Asset Sale, the Asset Sale Offer Price on the Asset Sale Purchase Date; in the case of a License Loss, the 86 License Loss Offer Price on the License Loss Purchase Date; in the case of a Lawrenceburg Sale, the Lawrenceburg Sale Offer Price on the Lawrenceburg Sale Purchase Date; in the case of a Project Delay Event, the Project Delay Offer Price on the Project Delay Purchase Date; and in the case of a Lawrenceburg Investment Offer, the Lawrenceburg Investment Offer Price on the L- awrenceburg Investment Purchase Date; and to institute suit for the enforcement of any such payment, and such rights shall not be impaired without the consent of such Holder. Section 9 RIGHTS AND REMEDIES CUMULATIVE. Except as otherwise provided with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities in Section 2.7, no right or remedy herein conferred upon or reserved to the Trustee or to the Holders is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employ- ment of any other appropriate right or remedy. Section 10 Delay or Omission Not Waiver. No delay or omission by the Trustee or by any Holder of any Security to exercise any right or remedy arising upon any Event of Default shall impair the exercise of any such right or remedy or constitute a waiver of any such Event of Default. Every right and remedy given by this Article VII or by law to the Trustee or to the Holders may be exercised from time to time, and as often as may be deemed expedient, by the Trustee or by the Holders, as the case may be. Section 11 Control by Holders. The Holder or Holders of a majority in aggregate principal amount of then outstanding Securities shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred upon the Trustee, PROVIDED, that (1) such direction shall not be in conflict with any rule of law or with this Indenture, (2) the Trustee shall not determine that the action so directed would be unjustly prejudi- cial to the Holders not taking part in such direction, and 87 (3) the Trustee may take any other action deemed proper by the Trustee which is not incon- sistent with such direction. Section 12 WAIVER OF PAST DEFAULT. Subject to Section 7.8, the Holder or Holders of not less than a majority in aggregate principal amount of the out- standing Securities may, by written notice to the Trustee on behalf of all Holders, prior to the declaration of the maturity of the Securities, waive any past default hereunder and its consequences, except a default (A) in the payment of the principal of, premium, if any, or inter- est (and Liquidated Damages, if any) on, any Security as specified in clauses (1) and (2) of Section 7.1, (B) in respect of a covenant or provision hereof which, under Article X, cannot be modified or amended without the consent of the Holder of each outstanding Security affected, or (C) in respect of a covenant or provision hereof which, under Article X, cannot be modified or amended without the consent of Holders of a s- upermajority in aggregate principal amount of the then outstanding Securities, in which case such waiver shall require the consent of such Holders. Upon any such waiver, such default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other default or impair the exercise of any right arising therefrom. Section 13 UNDERTAKING FOR COSTS. All parties to this Indenture agree, and each Holder of any Security by his acceptance thereof shall be deemed to have agreed, that any court may in its discretion require, in any suit for the enforcement of any right or remedy under this Indenture, or in any suit against the Trustee for any action taken, suffered or omitted to be taken by it as Trustee, the filing by any party litigant in such suit of an undertaking to pay the costs of such suit, and that such court may in its discretion assess reasonable costs, including reasonable attorneys' fees, against any party litigant in such suit, having due regard to the merits and good 88 faith of the claims or defenses made by such party litigant; but the provisions of this Section 7.13 shall not apply to any suit instituted by the Company, to any suit instituted by the Trustee, to any suit instituted by any Holder, or group of Holders, holding in the aggregate more than 10% in aggregate principal amount of the outstanding Securities, or to any suit instituted by any Holder for enforcement of the payment of principal of, or premium (if any) or interest (and Liquidated Damages, if any) on, any Security on or after the Maturity Date of such Security. Section 14 RESTORATION OF RIGHTS AND REMEDIES. If the Trustee or any Holder has instituted any pro- ceeding to enforce any right or remedy under this Indenture and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee or to such Holder, then and in every case, subject to any determination in such proceeding, the Company, the Guarantors, the Trustee and the Holders shall be restored severally and respectively to their former positions hereunder and thereafter all rights and remedies of the Trustee and the Holders shall continue as though no such proceeding had been instituted. ARTICLE VIII TRUSTEE The Trustee hereby accepts the trust imposed upon it by this Indenture and covenants and agrees to perform the same, as herein expressed. Section 1 DUTIES OF TRUSTEE. (a) If a Default or an Event of Default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture and use the same degree of care and skill in their exercise as a prudent person would exercise or use under the circumstances in the conduct of his own affairs. (b) Except during the continuance of a Default or an Event of Default: (1) The Trustee need perform only those duties as are specifically set forth in this Indenture and no others, and no covenants or obliga- tions shall be implied in or read into this Indenture which are adverse to the Trustee. (2) In the absence of bad faith on its part, the Trustee may conclusively rely, as to the 89 truth of the statements and the correctness of the opinions expressed therein, upon certificates or opin- ions furnished to the Trustee and conforming to the requirements of this Indenture. However, the Trustee shall examine the certificates and opinions to deter- mine whether or not they conform to the requirements of this Indenture. (i) The Trustee may not be relieved from liability for its own grossly negligent ac- tion, its own grossly negligent failure to act, or its own willful misconduct, except that: (ii) This paragraph does not limit the effect of subsection (b) of this Section 8.1. (3) The Trustee shall comply with any order or directive of a Gaming Authority that the Trustee submit an application for any license, finding of suitability or other approval pursuant to any Gaming Law and will cooperate fully and completely in any pro- ceeding related to such application; provided, however, that in the event the Trustee in its reasonable judg- ment determines that complying with such order or directive would subject it or its officers or directors to unreasonable or onerous requirements, the Trustee may, at its option, resign as Trustee in lieu of com- plying with such order or directive; and provided, further, that no resignation shall become effective until a successor Trustee is appointed and delivers a written acceptance in accordance with Section 8.8 hereof. (4) The Trustee shall not be liable for any error of judgment made in good faith by a Trust Officer, unless it is proved that the Trustee was grossly negligent in ascertaining the pertinent facts. (5) The Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 7.12. (c) No provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder or to take or omit to take any action under this Indenture or at the request, order or direction of the Holders or in the exercise of any of its rights or powers if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reason- ably assured to it. 90 (d) Every provision of this Indenture that in any way relates to the Trustee is subject to subsections (a), (b), (c) and (d) of this Section 8.1. (e) The Trustee shall not be liable for interest on any assets received by it except as the Trustee may agree in writing with the Company. Assets held in trust by the Trustee need not be segregated from other assets except to the extent required by law. Section 2 RIGHTS OF TRUSTEE. Subject to Section 8.1: (a) The Trustee may rely on any document believed by it to be genuine and to have been signed or presented by the proper person. The Trustee need not investigate any fact or matter stated in the document. (b) Before the Trustee acts or refrains from acting, it may consult with counsel and may require an Officers' Certificate or an Opinion of Counsel, which shall conform to Sections 14.4 and 14.5. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on such certificate or opinion. (c) The Trustee may act through its attorneys and agents and shall not be responsible for the misconduct or negli- gence of any agent appointed with due care. (d) The Trustee shall not be liable for any action it takes or omits to take in good faith which it believes to be authorized or within its rights or powers. (e) The Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, notice, request, direction, consent, order, bond, debenture, or other paper or document, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit. (f) The Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Inden- ture at the request, order or direction of any of the Holders, pursuant to the provisions of this Indenture, unless such Holders shall have offered to the Trustee reasonable security or indemni- ty against the costs, expenses and liabilities which may be incurred therein or thereby. 91 (g) Except with respect to Section 5.1, the Trustee shall have no duty to inquire as to the performance of the Company's covenants in Article V hereof. In addition, the Trustee shall not be deemed to have knowledge of any Default or Event of Default except (i) any Event of Default occurring pursuant to Sections 7.1(1), 7.1(2) and 5.1, or (ii) any Default or Event of Default of which the Trustee shall have received written notification or obtained actual knowledge. Section 3 INDIVIDUAL RIGHTS OF TRUSTEE. The Trustee in its individual or any other capacity may become the owner or pledgee of Securities and may otherwise deal with the Company, any Guarantor, any of their respective Subsid- iaries, or their respective Affiliates with the same rights it would have if it were not Trustee. Any Agent may do the same with like rights. However, the Trustee must comply with Sections 8.10 and 8.11. Section 4 TRUSTEE'S DISCLAIMER. The Trustee makes no representation as to the validity or adequacy of this Indenture or the Securities or as to the creation, perfection, priority or continuation of perfection of any lien or security interest and it shall not be accountable for the Company's use of the proceeds from the Securities following the release of such proceeds from the Net Cash Proceeds Account in accordance with the terms of this Indenture, and it shall not be responsible for any statement in the Securities, other than the Trustee's certificate of authentication, or the use or application of any funds received by a Paying Agent other than the Trustee. Section 5 NOTICE OF DEFAULT. If a Default or an Event of Default occurs and is continuing and if it is known to the Trustee, the Trustee shall mail to each Securityholder notice of the uncured Default or Event of Default within 90 days after such Default or Event of Default occurs. Except in the case of a Default or an Event of Default in payment of principal (or premium, if any) of, or interest (and Liquidated Damages, if any) on, any Security (in- cluding the payment of the Change of Control Purchase Price on the Change of Control Purchase Date, the Redemption Price on the Redemption Date, the Asset Sale Offer Price on the Asset Sale Purchase Date, the License Loss Offer Price on the License Loss Purchase Date, the Lawrenceburg Sale Offer Price on the L- awrenceburg Sale Purchase Date, the Project Delay Offer Price on the Project Delay Purchase Date and the Lawrenceburg Investment Offer Price on the Lawrenceburg Investment Purchase Date), the Trustee may withhold the notice if and so long as a Trust Officer 92 in good faith determines that withholding the notice is in the interest of the Securityholders. Section 6 REPORTS BY TRUSTEE TO HOLDERS. If required by law, within 60 days after each March 1 beginning with the March 1 following the date of this Indenture, the Trustee shall mail to each Securityholder a brief report dated as of such March 1 that complies with TIA -section- 313(a). If re- quired by law, the Trustee also shall comply with TIA -section--section- 313(b) and 313(c). The Company shall promptly notify the Trustee in writing if the Securities become listed on any stock exchange or automatic quotation system. A copy of each report at the time of its mailing to Securityholders shall be mailed to the Company and filed with the SEC and each stock exchange, if any, on which the Securities are listed. Section 7 COMPENSATION AND INDEMNITY. The Company shall pay to the Trustee from time to time reasonable compensation for its services. The Trustee's compen- sation shall not be limited by any law on compensation of a trustee of an express trust. The Company shall reimburse the Trustee upon request for all reasonable disbursements, expenses and advances incurred or made by it. Such expenses shall include the reasonable compensation, disbursements and expenses of the Trustee's agents, accountants, experts and counsel. The Company shall indemnify the Trustee (in its capaci-ty as Trustee) and each of its officers, directors, attorneys-in-fact and agents for, and hold it harmless against, any claim, demand, expense (including but not limited to reasonable compen-sation, disbursements and expenses of the Trustee's agents and counsel), loss or liability incurred by them without gross negligence or bad faith on its part, arising out of or in connec-tion with the administration of this trust and their rights or duties hereunder including the reasonable costs and expenses of defending themselves against any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder. The Trustee shall notify the Company promptly of any claim asserted against the Trustee for which it may seek indemni-ty. The Company shall defend the claim and the Trustee shall provide reasonable cooperation at the Company's expense in the defense. The Trustee may have separate counsel and the Company shall pay the reasonable fees and expenses of such counsel; PROVIDED, that the Company will not be required to pay such fees and expenses if it assumes the Trustee's defense and there is no conflict of interest between the Company and the Trustee in 93 connection with such defense. The Company need not pay for any settlement made without its written consent. The Company need not reimburse any expense or indemnify against any loss or liability to the extent incurred by the Trustee through its gross negligence, bad faith or willful misconduct. To secure the Company's payment obligations in this Section 8.7, the Trustee shall have a lien prior to the Securi- ties on all assets held or collected by the Trustee, in its capacity as Trustee, except assets held in trust to pay principal and premium, if any, of or interest (and Liquidated Damages, if any) on particular Securities. When the Trustee incurs expenses or renders services after an Event of Default specified in Section 7.1(4) or (5) occurs, the expenses and the compensation for the services are intended to constitute expenses of administration under any Bankruptcy Law. The Company's obligations under this Section 8.7 and any lien arising hereunder shall survive the resignation or removal of the Trustee, the discharge of the Company's obliga- tions pursuant to Article IX of this Indenture and any rejection or termination of this Indenture under any Bankruptcy Law. Section 8 REPLACEMENT OF TRUSTEE. The Trustee may resign by so notifying the Company in writing. The Holder or Holders of a majority in principal amount of the outstanding Securities may remove the Trustee by so notifying the Company and the Trustee in writing and may appoint a successor trustee with the Company's consent. The Company may remove the Trustee if: (1) the Trustee fails to comply with Section 8.1(d) or 8.10; (2) the Trustee is adjudged bank- rupt or insolvent; (3) a receiver, Custodian, or other public officer takes charge of the Trustee or its property; or (4) the Trustee becomes incapable of acting. If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason, the Company shall promptly appoint a successor Trustee. Within one year after the successor Trustee takes office, the Holder or Holders of a majority in principal amount of the Securities may appoint a 94 successor Trustee to replace the successor Trustee appointed by the Company. A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company. Immediately after that and provided that all sums owing to the Trustee provided for in Section 8.7 have been paid, the retiring Trustee shall transfer all property held by it as Trustee to the successor Trustee, subject to the lien provided in Section 8.7, the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. A succes- sor Trustee shall mail notice of its succession to each Holder. If a successor Trustee does not take office within 60 days after the retiring Trustee resigns or is removed, the retiring Trustee, the Company or the Holder or Holders of at least 10% in principal amount of the outstanding Securities may petition any court of competent jurisdiction for the appointment of a successor Trustee. If the Trustee fails to comply with Section 8.10, any Securityholder may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. Notwithstanding replacement of the Trustee pursuant to this Section 8.8, the Company's obligations under Section 8.7 shall continue for the benefit of the retiring Trustee. Section 9 SUCCESSOR TRUSTEE BY MERGER, ETC. If the Trustee consolidates with, merges or converts into, or transfers all or substantially all of its corporate trust business to, another corporation, the resulting, surviving or transferee corporation without any further act shall, if such resulting, surviving or transferee corporation is otherwise eligible hereunder, be the successor Trustee. Section 10 ELIGIBILITY; DISQUALIFICATION. The Trustee shall at all times satisfy the requirements of TIA - -section- 310(a)(1) and TIA -section- 310(a)(5). The Trustee shall have a combined capital and surplus of at least $25,000,000 as set forth in its most recent published annual report of condition. The Trustee shall comply with TIA -section- 310(b). Section 11 PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY. The Trustee shall comply with TIA -section- 311(a), excluding any creditor relationship listed in TIA -section- 311(b). A Trustee who 95 has resigned or been removed shall be subject to TIA -section- 311(a) to the extent indicated. ARTICLE IX LEGAL DEFEASANCE AND COVENANT DEFEASANCE Section 1 OPTION TO EFFECT LEGAL DEFEASANCE OR COVE- NANT DEFEASANCE. The Company may, at its option at any time, elect to have Section 9.2 or Section 9.3 applied to all outstanding Securities upon compliance with the conditions set forth below in this Article IX. Section 2 LEGAL DEFEASANCE AND DISCHARGE. Upon the Company's exercise under Section 9.1 of the option applicable to this Section 9.2, the Company shall be deemed to have been discharged from its obligations with respect to all outstanding Securities on the date the conditions set forth below are satisfied (hereinafter, "Legal Defeasance"). For this purpose, such Legal Defeasance means that the Company shall be deemed to have paid and discharged the entire Indebtedness represented by the outstanding Securities, which shall thereafter be deemed to be "outstanding" only for the purposes of Section 9.5 and the other Sections of this Indenture referred to in (a) and (b) below, and to have satisfied all its other obligations under such Securities and this Indenture (and the Trustee, on demand of and at the expense of the Company, shall execute proper instruments acknowledging the same), except for the following which shall survive until otherwise terminated or discharged hereunder: (a) the rights of Holders of outstanding Securities to receive solely from the trust fund described in Section 9.4, and as more fully set forth in such section, payments in respect of the principal of, premium, if any, and interest (and Liquidat- ed Damages, if any) on such Securities when such payments are due, (b) the Company's obligations with respect to such Securi- ties under Sections 2.4, 2.6, 2.7, 2.10 and 5.2, (c) the rights, powers, trusts, duties and immunities of the Trustee hereunder and the Company's obligations in connection therewith and (d) this Article IX. Subject to compliance with this Article IX, the Company may exercise its option under this Section 9.2 notwith- standing the prior exercise of its option under Section 9.3 with respect to the Securities. Section 3 COVENANT DEFEASANCE. Upon the Company's exercise under Section 9.1 of the option applicable to this Section 9.3, the Company shall be re- leased from its obligations under the covenants contained in 96 Sections 5.3, 5.6, 5.7, 5.8, 5.10, 5.11, 5.12, 5.13, 5.14, 5.15, 5.16, 5.17, 5.18, 5.19, 5.20, 5.21, 5.22 5.23 and 5.24 and Arti- cle VI with respect to the outstanding Securities on and after the date the conditions set forth below are satisfied (hereinaf- ter, "Covenant Defeasance"), and the Securities shall thereafter be deemed not "outstanding" for the purposes of any direction, waiver, consent or declaration or act of Holders (and the conse- quences of any thereof) in connection with such covenants, but shall continue to be deemed "outstanding" for all other purposes hereunder. For this purpose, such Covenant Defeasance means that, with respect to the outstanding Securities, the Company need not comply with and shall have no liability in respect of any term, condition or limitation set forth in any such covenant, whether directly or indirectly, by reason of any reference elsewhere herein to any such covenant or by reason of any refer- ence in any such covenant to any other provision herein or in any other document, but, except as specified above, the remainder of this Indenture and such Securities shall be unaffected thereby. In addition, upon the Company's exercise under Section 9.1 of the option applicable to this Section 9.3, Sections 7.1(3) through 7.1(8) shall not constitute Events of Default. Section 4 CONDITIONS TO LEGAL OR COVENANT DEFEASANCE. The following shall be the conditions to the applica- tion of either Section 9.2 or Section 9.3 to the outstanding Securities: (a) The Company shall irrevocably have deposited or caused to be deposited with the Trustee (or another trustee satisfying the requirements of Section 8.10 who shall agree to comply with the provisions of this Article IX applicable to it) as trust funds in trust for the purpose of making the following payments, specifically pledged as security for, and dedicated solely to, the benefit of the Holders of such Securities, (a) cash in an amount, or (b) U.S. Government Obligations which through the scheduled payment of principal and interest in re- spect thereof in accordance with their terms will provide, not later than one day before the due date of any payment, cash in an amount, or (c) a combination thereof, in such amounts, as in each case will be sufficient, in the opinion of a nationally recog- nized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, to pay and discharge and which shall be applied by the Trustee (or other qualifying trustee) to pay and discharge (i) the principal of, premium, if any, and interest (and Liquidated Damages, if any) on the outstanding Securities on the stated maturity or on the applicable redemption date, as the case may be, of such principal or installment of principal, premium, if any, or interest (and Liquidated Damages, if any); PROVIDED that the Trustee shall have been irrevocably instructed to apply such cash and the proceeds 97 of such U.S. Government Obligations to said payments with respect to the Securities. (b) In the case of an election under Section 9.2, the Company shall have delivered to the Trustee an Opinion of Counsel in the United States reasonably satisfactory to the Trustee confirming that (i) the Company has received from, or there has been published by, the Internal Revenue Service a ruling or (ii) since the date hereof, there has been a change in the applicable Federal income tax law, in either case to the effect that, and based thereon such opinion shall confirm that, the Holders of the outstanding Securities will not recognize income, gain or loss for Federal income tax purposes as a result of such Legal Defeasance and will be subject to Federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance has not occurred; (c) In the case of an election under Section 9.3, the Company shall have delivered to the Trustee an Opinion of Counsel in the United States to the effect that the Holders of the outstanding Securities will not recognize income, gain or loss for Federal income tax purposes as a result of such Covenant Defeasance and will be subject to Federal income tax in the same amount, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred; (d) No Default or Event of Default with respect to the Securities shall have occurred and be continuing on the date of such deposit or, in so far as Section 7.1(4) or 7.1(5) is concerned, at any time in the period ending on the 91st day after the date of such deposit (it being understood that this condition shall not be deemed satisfied until the expiration of such period); (e) Such Legal Defeasance or Covenant Defeasance shall not result in a breach or violation of, or constitute a default under, this Indenture or any other material agreement or instrument to which the Company, the Guarantors, or any of their Subsidiaries is a party or by which either of the Issuers is bound; (f) In the case of an election under either Section 9.2 or 9.3, the Company shall have delivered to the Trustee an Officers' Certificate stating that the deposit made by the Company pursuant to its election under Section 9.2 or 9.3 was not made by the Company with the intent of preferring the Holders over other creditors of the Company or with the intent of defeat- ing, hindering, delaying or defrauding creditors of the Company or others; 98 (g) The Company shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel in the United States, each stating that the conditions precedent provid- ed for, in the case of the Officers' Certificate, in subsections (a) through (d) of this Section 9.4 and, in the case of the Opinion of Counsel, subsections (a) (with respect to the validity and perfection of the security interest), (b), (c) and (e) of this Section 9.4 have been complied with as contemplated by this Section 9.4; and (h) (i) The Security Documents shall not be dis-charged as a result of such irrevocable deposit under Section 9.4 unless the Company shall have delivered to the Trustee an Opinion of Counsel, subject to customary exclusions and exceptions reasonably acceptable to the Trustee, to the effect that (i) the Company has authorization to establish such irrevocable trust in favor of the Trustee for the benefit of the Holders under appli-cable law and the action in establishing the irrevocable trust has been duly and properly authorized by the Company and such authorization has not been revoked, (ii) to their knowledge, the Trustee is an independent trustee with respect to the irrevocable trust, (iii) a valid trust is created at the time of such irrevo-cable deposit and (iv) the Holders of the Securities will have the sole beneficial ownership interest under applicable law in the money so deposited in such trust. The Opinion of Counsel so referred to in this paragraph may contain a qualification that in the event that a court of competent jurisdiction were to deter-mine that the trust funds remained owned by the Company after such deposit, the Holders of the Securities will have a non-avoidable first-priority perfected security interest under applicable law in the money so deposited (for the limited purpose of the Opinion of Counsel referred to in this paragraph, such opinion may contain an assumption that the conclusions contained in a customary solvency letter by a nationally recognized ap-praisal firm, dated as of the date of the deposit and taking into account such deposit, or a customary alternative certificate reasonably acceptable to the Trustee, are accurate, provided that such solvency letter or certificate is also addressed and deliv-ered to the Trustee). (ii) It is the intention of the parties hereto that a valid trust for the benefit of the Holders of the Securities be created at the time that the Company makes the deposit pursuant to Section 9.4. The security interest in such deposit that is granted herein to the Trustee for the benefit of the Holders of the Securities is intended solely as protection for the Holders of the Securities in the event that a court of competent juris- diction were to determine either that (i) such trust had not been validly created or (ii) such trust is not enforceable. The Company hereby grants to the Trustee for the benefit of the Holders a security interest in all money, funds, investments or 99 other property deposited with the Trustee pursuant to Section 1302 hereof to secure the Indenture Obligations. (iii) The Company shall take any and all acts necessary to create, perfect and maintain, in favor of the Holders of the Securities, a first-priority security interest in the money and U.S. Government obligations so deposited and shall take any other action and execute and deliver any other documents that may be necessary or that may reasonably be requested by the Trustee to effectuate or evidence such security interest, and shall do all of the above at such appropriate time so that such security interest shall attach to the deposit at the time such deposit is made and shall at all times be perfected. (iv) Notwithstanding the foregoing, prior to the end of the 91-day period following the irrevocable deposit referred to above, the Lien of the Security Documents shall not be discharged, unless and until the Company shall have delivered to the trustee an appraisal as of a date no more than 60 days prior to the date of such irrevocable deposit reflecting the appraised fair market value of the Collateral in an amount not less than 120% of the amount of such irrevocable deposit and an Opinion of Counsel, subject to customary exclusions and exceptions, to the effect that based on such appraisal, the irrevocable deposit will not be subject to avoidance as a preferential transfer under 11 U.S.C. -section- 547, as it may be amended from time to time. Section 5 DEPOSITED CASH AND U.S. GOVERNMENT OBLIGA- TIONS TO BE HELD IN TRUST; OTHER MISCELLANEOUS PROVISIONS. Subject to Section 9.6, all cash and U.S. Government Obligations (including the proceeds thereof) deposited with the Trustee (or other qualifying trustee, collectively for purposes of this Section 9.5, the "Trustee") pursuant to Section 9.4 in respect of the outstanding Securities shall be held in trust and applied by the Trustee, in accordance with the provisions of such Securities and this Indenture, to the payment, either directly or through any Paying Agent as the Trustee may determine, to the Holders of such Securities of all sums due and to become due thereon in respect of principal, premium, if any, and interest (and Liquidated Damages, if any), but such money need not be segregated from other funds except to the extent required by law. Anything in this Article IX to the contrary notwith- standing, the Trustee shall deliver or pay to the Company from time to time upon the request of the Company any cash or U.S. Government Obligations held by it as provided in Section 9.4 which, in the opinion of a nationally recognized firm of indepen- dent public accountants expressed in a written certification thereto delivered to the Trustee (which may be the opinion delivered under Section 9.4(a)), are in excess of the amount 100 thereof which would then be required to be deposited to effect an equivalent Legal Defeasance or Covenant Defeasance. Section 6 REPAYMENT TO ISSUERS. Any money deposited with the Trustee or any Paying Agent, or then held by the Company, in trust for the payment of the principal of, premium, if any, or interest (and Liquidated Damages, if any) on any Security and remaining unclaimed for two years after such principal, and premium, if any, or interest (and Liquidated Damages, if any) has become due and payable shall be paid to the Company on its request; and the Holder of such Security shall thereafter look only to the Company for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money shall thereupon cease; provided, HOWEVER, that the Trustee or such Paying Agent, before being required to make any such repayment, may at the expense of the Company cause to be published once, in the New York Times and The Wall Street Journal (national edition), notice that such money re- mains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such notification or publication, any unclaimed balance of such money then remain- ing will be repaid to the Company. Section 7 REINSTATEMENT. If the Trustee or Paying Agent is unable to apply any cash or U.S. Government Obligations in accordance with Section 9.2 or 9.3, as the case may be, by reason of any order or judg- ment of any court or governmental authority enjoining, restrain- ing or otherwise prohibiting such application, then the Company's obligations under this Indenture and the Securities shall be re- vived and reinstated as though no deposit had occurred pursuant to Section 9.2 or 9.3 until such time as the Trustee or Paying Agent is permitted to apply such money in accordance with Section 9.2 and 9.3, as the case may be; PROVIDED, HOWEVER, that, if the Company makes any payment of principal of, premium, if any, or interest (and Liquidated Damages, if any) on any Security follow- ing the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of such Securities to receive such payment from the Cash held by the Trustee or Paying Agent. Section 8 TERMINATION OF OBLIGATIONS UPON CANCELLATION OF THE SECURITIES. In addition to the Company's rights under Sections 9.2 and 9.3, the Company and the Guarantors may terminate all of their obligations under this Indenture (subject to Section 9.7) when: 101 (1) all Securities theretofore authenticated and delivered (other than Securities which have been destroyed, lost or stolen and which have been replaced or paid as provided in Section 2.7) have been delivered to the Trustee for cancellation; (2) the Company or a Guarantor has paid or caused to be paid all sums payable hereunder by the Company; and (3) the Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel (not in-house counsel to the Company or any of its Subsidiaries), each stating that all conditions precedent specified herein relating to the satisfaction and discharge of this Indenture have been complied with and that such satisfaction and discharge will not result in a breach or violation of, or constitute a Default under, this Indenture or any other instrument to which the Company, any Guarantor or any of their Subsidiaries is a party or by which it or their proper- ty is bound. ARTICLE X AMENDMENTS, SUPPLEMENTS AND WAIVERS Section 1 SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF HOLDERS. Without the consent of any Holder, the Company or any Guarantor, when authorized by Board Resolutions, and the Trustee, at any time and from time to time, may enter into one or more indentures supplemental hereto, or may amend, modify or supple- ment the Security Documents, in form satisfactory to the Trustee, for any of the following purposes: (1) to cure any ambiguity, defect, or inconsistency, or to make any other provisions with respect to matters or questions arising under this Indenture which shall not be inconsistent with the provisions of this Indenture, provided such action pursuant to this clause (1) shall not adversely affect the interests of any Holder in any respect; (2) to add to the covenants of the Company for the benefit of the Holders, or to surrender any right or power herein conferred upon the Company or to make any other change that does not adversely affect the rights of any Holder; PROVIDED, that the Company has delivered to the Trustee an Opinion of Counsel 102 stating that such change does not adversely affect the rights of any Holder; (3) to provide for additional collateral for or additional Guarantors of the Securi- ties; (4) to provide for uncertificated Securities in addition to or in place of certificated Securities and to provide for the issuance and authen- tication of Series B Notes in exchange for Original Notes in compliance with this Indenture and the Regis- tration Rights Agreement; (5) to evidence the succession of another person to the Company, and the assumption by any such successor of the obligations of the Company, herein and in the Securities in accordance with Article VI; or (6) to comply with the TIA. Section 2 AMENDMENTS, SUPPLEMENTAL INDENTURES AND WAIVERS WITH CONSENT OF HOLDERS. Subject to Section 7.8 and the last sentence of this paragraph, with the consent of the Holders of a majority in aggregate principal amount of then outstanding Securities, by written act of said Holders delivered to the Company and the Trustee, the Company and any Guarantor, when authorized by Board Resolutions, and the Trustee may amend or supplement the Security Documents, this Indenture or the Securities or enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of the Security Documents, this Indenture or the Securities or of modifying in any manner the rights of the Holders under the Security Documents, this Indenture or the Securities. Subject to Section 7.8 and the last sentence of this paragraph, the Holder or Holders of a majority, in principal amount of then outstanding Securities may waive compliance by the Company or any Guarantor with any provision of the Security Documents, this Indenture or the Securities. Notwithstanding the foregoing provisions of this Section 10.2, without the consent of the Holders of at least 66 2/3% of the aggregate principal amount of outstanding Securities, no such amendment, supplemental indenture or waiver shall change any provision of Article IV, Article XII, Article XIII, Section 5.14, Section 5.15, Section 5.16, Section 5.17, Section 5.18, or Section 5.19, without the consent of the Holders of at least 85% of the aggregate principal amount of outstanding Securities, no such amendment, supplemental indenture or waiver shall release or grant additional liens on the Collateral, except as otherwise specifically provided herein, 103 and without the consent of the Holder of each outstanding Securi- ty affected thereby, no such amendment, supplemental indenture or waiver shall: (1) change the percentage of prin- cipal amount of Securities whose Holders must consent to an amendment, supplement or waiver of any provision of this Indenture or the Securities; (2) reduce the rate or extend the time for payment of interest (and Liquidated Damages, if any) on any Security; (3) reduce the principal amount of any Security, or reduce any Offer to Purchase Price; (4) change the Stated Maturity of any Security; (5) alter the redemption provisions of Article III in a manner adverse to any Holder; (6) make any changes in the provi- sions concerning waivers of Defaults or Events of Default by Holders of the Securities (except to in- crease any percentage of Securities required to consent to a waiver or to provide that certain other provisions of the Indenture cannot be modified or waived without the consent of the Holder of each outstanding Security affected thereby) or the rights of Holders to recover the principal or premium of, interest (and Liquidated Damages, if any) on, or redemption payment with respect to, any Security; (7) make any changes in Section 7.4, 7.7 or this third sentence of this Section 10.2; (8) make the principal of, or the interest (and Liquidated Damages, if any) on, any Secu- rity payable with anything or at anywhere other than as provided for in this Indenture and the Securities as in effect on the date hereof; or (9) make the Securities or Guaran- tees subordinated in right of payment to any extent or under any circumstances to any other indebtedness. It shall not be necessary for the consent of the Holders under this Section to approve the particular form of any proposed amendment, supplement or waiver, but it shall be suffi- cient if such consent approves the substance thereof. 104 After an amendment, supplement or waiver under this Section becomes effective, the Company shall mail to the Holders affected thereby a notice briefly describing the amendment, supplement or waiver. Any failure of the Company to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such supplemental indenture. After an amendment, supplement or waiver under this Section 10.2 or 10.4 becomes effective, it shall bind each Holder. In connection with any amendment, supplement or waiver under this Article X, the Company may, but shall not be obligated to, offer to any Holder who consents to such amendment, supple- ment or waiver, or to all Holders, consideration for such H- older's consent to such amendment, supplement or waiver. Section 3 COMPLIANCE WITH TIA. Every amendment, waiver or supplement of this Indenture or the Securities shall comply with the TIA as then in effect. Section 4 REVOCATION AND EFFECT OF CONSENTS. Until an amendment, waiver or supplement becomes effective, a consent to it by a Holder is a continuing consent by the Holder and every subsequent Holder of a Security or portion of a Security that evidences the same debt as the consenting Holder's Security, even if notation of the consent is not made on any Security. However, any such Holder or subsequent Holder may revoke the consent as to his Security or portion of his Security by written notice to the Company or the person designated by the Company as the person to whom consents should be sent if such revocation is received by the Company or such person before the date on which the Trustee receives an Officers' Certificate certifying that the Holders of the requisite principal amount of Securities have consented (and not theretofore revoked such consent) to the amendment, supplement or waiver. The Company may, but shall not be obligated to, fix a record date for the purpose of determining the Holders entitled to consent to any amendment, supplement or waiver, which record date shall be the date so fixed by the Company notwithstanding the provisions of the TIA. If a record date is fixed, then notwithstanding the last sentence of the immediately preceding paragraph, those persons who were Holders at such record date, and only those persons (or their duly designated proxies), shall be entitled to revoke any consent previously given, whether or not such persons continue to be Holders after such record date. No such consent shall be valid or effective for more than 90 days after such record date. 105 After an amendment, supplement or waiver becomes effective, it shall bind every Securityholder, unless it makes a change described in any of clauses (1) through (9) of Section 10.2, in which case, the amendment, supplement or waiver shall bind only each Holder of a Security who has consented to it and every subsequent Holder of a Security or portion of a Security that evidences the same debt as the consenting Holder's Security; PROVIDED, that any such waiver shall not impair or affect the right of any Holder to receive payment of principal and premium of and interest (and Liquidated Damages, if any) on a Security, on or after the respective dates set for such amounts to become due and payable expressed in such Security, or to bring suit for the enforcement of any such payment on or after such respective dates. Section 5 NOTATION ON OR EXCHANGE OF SECURITIES. If an amendment, supplement or waiver changes the terms of a Security, the Trustee may require the Holder of the Security to deliver it to the Trustee or require the Holder to put an appropriate notation on the Security. The Trustee may place an appropriate notation on the Security about the changed terms and return it to the Holder. Alternatively, if the Company or the Trustee so determines, the Company in exchange for the Security shall issue, the Guarantors shall endorse and the Trustee shall authenticate a new Security that reflects the changed terms. Any failure to make the appropriate notation or to issue a new Security shall not affect the validity of such amendment, supple- ment or waiver. Section 6 TRUSTEE TO SIGN AMENDMENTS, ETC. The Trustee shall execute any amendment, supplement or waiver authorized pursuant to this Article X, PROVIDED, that the Trustee may, but shall not be obligated to, execute any such amendment, supplement or waiver which affects the Trustee's own rights, duties or immunities under this Indenture. The Trustee shall be entitled to receive, and shall be fully protected in relying upon, an Opinion of Counsel stating that the execution of any amendment, supplement or waiver authorized pursuant to this Article X is authorized or permitted by this Indenture. 106 ARTICLE XI MEETINGS OF SECURITYHOLDERS Section 1 PURPOSES FOR WHICH MEETINGS MAY BE CALLED. A meeting of Securityholders may be called at any time and from time to time pursuant to the provisions of this Article XI for any of the following purposes: (a) to give any notice to the Company, any Guarantor or to the Trustee, or to give any directions to the Trustee, or to waive or to consent to the waiving of any Default or Event of Default hereunder and its consequences, or to take any other action authorized to be taken by Securityholders pursuant to any of the provisions of Article VII; (b) to remove the Trustee or appoint a successor Trustee pursuant to the provisions of Article VIII; (c) to consent to an amendment, supplement or waiver pursuant to the provisions of Section 10.2; or (d) to take any other action (i) authorized to be taken by or on behalf of the Holder or Holders of any specified aggregate principal amount of the Securities under any other provision of this Indenture, or authorized or permitted by law or (ii) which the Trustee deems necessary or appropriate in connec- tion with the administration of this Indenture. Section 2 MANNER OF CALLING MEETINGS. The Trustee may at any time call a meeting of S- ecurityholders to take any action specified in Section 11.1, to be held at such time and at such place in The City of New York, State of New York or elsewhere as the Trustee shall determine. Notice of every meeting of Securityholders, setting forth the time and place of such meeting and in general terms the action proposed to be taken at such meeting, shall be mailed by the Trustee, first-class postage prepaid, to the Company, the Guaran- tors and to the Holders at their last addresses as they shall appear on the registration books of the Registrar, not less than 10 nor more than 60 days prior to the date fixed for a meeting. The Company shall pay the costs and expenses of preparing and mailing such notice. Any meeting of Securityholders shall be valid without notice if the Holders of all Securities then outstanding are present in person or by proxy, or if notice is waived before or after the meeting by the Holders of all Securities outstanding, and if the Company and the Trustee are either present by duly 107 authorized representatives or have, before or after the meeting, waived notice. Section 3 CALL OF MEETINGS BY COMPANY OR HOLDERS. In case at any time the Company, pursuant to a Board Resolution, or the Holders of not less than 25% in aggregate principal amount of the Securities then outstanding, shall have requested the Trustee to call a meeting of Securityholders to take any action specified in Section 11.1, by written request setting forth in reasonable detail the action proposed to be taken at the meeting, and the Trustee shall not have mailed the notice of such meeting within 20 days after receipt of such request, then the Company or the Holders of Securities in the amount above specified may determine the time and place in The City of New York, State of New York or elsewhere for such meeting and may call such meeting for the purpose of taking such action, by mailing or causing to be mailed notice thereof as provided in Section 11.2, or by causing notice thereof to be published at least once in each of two successive calendar weeks (on any Business Day during such week) in a newspaper or newspapers printed in the English language, customarily published at least five days a week of a general circulation in The City of New York, State of New York, the first such publication to be not less than 10 nor more than 60 days prior to the date fixed for the meeting. Section 4 WHO MAY ATTEND AND VOTE AT MEETINGS. To be entitled to vote at any meeting of S- ecurityholders, a person shall (a) be a registered Holder of one or more Securities, or (b) be a person appointed by an instrument in writing as proxy for the registered Holder or Holders of Securities. The only persons who shall be entitled to be present or to speak at any meeting of Securityholders shall be the persons entitled to vote at such meeting and their counsel and any representatives of the Trustee and its counsel and any representatives of the Company, the Guarantors and their counsel. Section 5 REGULATIONS MAY BE MADE BY TRUSTEE; CONDUCT OF THE MEETING; VOTING RIGHTS; ADJOURNMENT. Notwithstanding any other provision of this Indenture, the Trustee may make such reasonable regulations as it may deem advisable for any action by or any meeting of Securityholders, in regard to proof of the holding of Securities and of the appoint- ment of proxies, and in regard to the appointment and duties of inspectors of votes, and submission and examination of proxies, certificates and other evidence of the right to vote, and such other matters concerning the conduct of the meeting as it shall think appropriate. Such regulations may fix a record date and time for determining the Holders of record of Securities entitled 108 to vote at such meeting, in which case those and only those persons who are Holders of Securities at the record date and time so fixed, or their proxies, shall be entitled to vote at such meeting whether or not they shall be such Holders at the time of the meeting. The Trustee shall, by an instrument in writing, appoint a temporary chairman of the meeting, unless the meeting shall have been called by the Company or by Securityholders as provided in Section 11.3, in which case the Company or the Securityholders calling the meeting, as the case may be, shall in like manner appoint a temporary chairman. A permanent chairman and a perma- nent secretary of the meeting shall be elected by vote of the Holders of a majority in principal amount of the Securities represented at the meeting and entitled to vote. At any meeting each Securityholder or proxy shall be entitled to one vote for each $1,000 principal amount of Securi- ties held or represented by him; PROVIDED, HOWEVER, that no vote shall be cast or counted at any meeting in respect of any Securi- ties challenged as not outstanding and ruled by the chairman of the meeting to be not then outstanding. The chairman of the meeting shall have no right to vote other than by virtue of Securities held by him or instruments in writing as aforesaid duly designating him as the proxy to vote on behalf of other Securityholders. Any meeting of Securityholders duly called pursuant to the provisions of Section 11.2 or Section 11.3 may be adjourned from time to time by vote of the Holder or Holders of a majority in aggregate principal amount of the Securities repre- sented at the meeting and entitled to vote, and the meeting may be held as so adjourned without further notice. Section 6 VOTING AT THE MEETING AND RECORD TO BE KEPT. The vote upon any resolution submitted to any meeting of Securityholders shall be by written ballots on which shall be subscribed the signatures of the Holders of Securities or of their representatives by proxy and the principal amount of the Securities voted by the ballot. The permanent chairman of the meeting shall appoint two inspectors of votes, who shall count all votes cast at the meeting for or against any resolution and who shall make and file with the secretary of the meeting their verified written reports in duplicate of all votes cast at the meeting. A record in duplicate of the proceedings of each meeting of Securityholders shall be prepared by the secretary of the meeting and there shall be attached to such record the original reports of the inspectors of votes on any vote by ballot taken thereat and affidavits by one or more persons having knowledge of the facts, setting forth a copy of the notice of the meeting and showing that such notice was mailed as provided in Section 11.2 or published as provided in Section 11.3. The record shall be signed and verified by the affidavits of the 109 permanent chairman and the secretary of the meeting and one of the duplicates shall be delivered to the Company and the other to the Trustee to be preserved by the Trustee, the latter to have attached thereto the ballots voted at the meeting. Any record so signed and verified shall be conclusive evidence of the matters therein stated. Section 7 EXERCISE OF RIGHTS OF TRUSTEE OR SECURITYHOLDERS MAY NOT BE HINDERED OR DELAYED BY CALL OF MEETING. Nothing contained in this Article XI shall be deemed or construed to authorize or permit, by reason of any call of a meeting of Securityholders or any rights expressly or impliedly conferred hereunder to make such call, any hindrance or delay in the exercise of any right or rights conferred upon or reserved to the Trustee or to the Securityholders under any of the provisions of this Indenture or of the Securities. ARTICLE XII RIGHT TO REQUIRE REPURCHASE Section 1 REPURCHASE OF SECURITIES AT OPTION OF THE HOLDER UPON CHANGE OF CONTROL. (a) In the event that a Change of Control occurs, each Holder of Securities shall have the right, at such Holder's option, subject to the terms and conditions of this Indenture, to require the Company to repurchase all or any part of such H- older's Notes (provided, that the principal amount of such Notes at maturity must be $1,000 or an integral multiple thereof) on the date that is no later than 45 Business Days after the occur- rence of such Change of Control (the "Change of Control Purchase Date"), at a cash price (the "Change of Control Purchase Price") equal to 101% of the principal amount thereof, plus accrued but unpaid interest (and Liquidated Damages), if any, to and includ- ing the Change of Control Purchase Date. (b) In the event that, pursuant to this Section 12.1, the Company shall be required to commence an offer to purchase Notes (a "Change of Control Offer"), the Company shall follow the procedures set forth in this Section 12.1 as follows: (1) the Change of Control Offer shall commence within 20 Business Days following the Change of Control; (2) the Change of Control Offer shall remain open for 20 Business Days, except to the 110 extent that a longer period is required by applicable law; (3) within 5 Business Days follow- ing the expiration of a Change of Control Offer, the Company shall purchase all of the tendered Securities at the Change of Control Purchase Price, plus accrued interest (and Liquidated Damages, if any); (4) if the Change of Control Pur- chase Date is on or after an interest payment record date and on or before the related interest payment date, any accrued interest (and Liquidated Damages, if any) will be paid to the Person in whose name a Securi- ty is registered at the close of business on such record date, and no additional interest will be payable to Securityholders who tender Securities pursuant to the Change of Control Offer; (5) the Company shall use its best efforts to provide the Trustee with notice of the Change of Control Offer at least 5 Business Days before the commencement of any Change of Control Offer; and (6) on or before the commencement of any Change of Control Offer, the Company or the Trustee (upon the request and at the expense of the Company) shall send, by first-class mail, a notice to each of the Securityholders, which (to the extent consistent with this Indenture) shall govern the terms of the Change of Control Offer and shall state: (i) that the Change of Control Offer is being made pursuant to this Section 12.1 and that all Securities, or portions thereof, tendered will be accepted for payment; (ii) the Change of Control Purchase Price (including the amount of accrued but unpaid interest (and Liquidated Damages, if any)) and the Change of Control Purchase Date; (iii) that any Security, or portion thereof, not tendered or accepted for payment will continue to accrue interest; (iv) that, unless the Company de- faults in depositing cash with the Paying Agent in accordance with the last paragraph of this subsec- tion (b), or such payment is prevented for any reason, any Security, or portion thereof, accepted for payment pursuant to the Change of Control 111 Offer shall cease to accrue interest after the Change of Control Purchase Date; (v) that Holders electing to have a Security, or portion thereof, purchased pursuant to a Change of Control Offer will be required to surrender the Security, with the form entitled "Option of Holder to Elect Purchase" on the reverse of the Security completed, to the Paying Agent (which may not for purposes of this Section 12.1, notwithstanding anything in this Indenture to the contrary, be the Company or any Affiliate of the Company) at the address specified in the notice prior to the expiration of the Change of Control Offer; (vi) that Holders will be entitled to withdraw their election, in whole or in part, if the Paying Agent receives, prior to the expiration of the Change of Control Offer, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Securities the Holder is withdrawing and a statement containing a facsimile signature and stating that such Holder is withdrawing his election to have such principal amount of Securities purchased; and (vii) a brief description of the events resulting in such Change of Control. Any such Change of Control Offer shall comply with all applicable provisions of Federal and state laws, including those regulating tender offers, if applicable, and any provisions of this Indenture which conflict with such laws shall be deemed to be superseded by the provisions of such laws. On or before the Change of Control Purchase Date, the Company shall (i) accept for payment Securities or portions thereof properly tendered pursuant to the Change of Control Offer prior to the expiration of the Change of Control Offer, (ii) deposit with the Paying Agent cash sufficient to pay the Change of Control Purchase Price (including accrued and unpaid interest (and Liquidated Damages, if any)) of all Securities so tendered and (iii) deliver to the Trustee Securities so accepted together with an Officers' Certificate listing the Securities or portions thereof being purchased by the Company. The Paying Agent shall on the Change of Control Purchase Date mail to the Holders of Securities so accepted payment in an amount equal to the Change of Control Purchase Price (plus accrued and unpaid interest (and Liquidated Damages, if any)), and the Trustee shall promptly authenticate and mail or deliver to such Holders a new Security equal in principal amount to any unpurchased portion of the Security surrendered. Any Securities not so accepted shall be 112 promptly mailed or delivered by the Company to the Holder there- of. ARTICLE XIII GUARANTEE Section 1 GUARANTEE. (a) In consideration of good and valuable consid- eration, the receipt and sufficiency of which is hereby acknowl- edged, each of the Guarantors hereby irrevocably and uncondition- ally guarantees on a joint and several basis (the "Guarantee") to each Holder of a Security authenticated and delivered by the Trustee and to the Trustee and its successors and assigns, irrespective of the validity and enforceability of this Inden- ture, the Securities or the obligations of the Company under this Indenture or the Securities, that: (w) the principal and premium (if any) of and interest (and Liquidated Damages, if any) on the Securities will be paid in full when due, whether at the maturity or interest payment date, by acceleration, call for redemption, upon an Offer to Purchase, or otherwise; (x) all other obliga- tions of the Company to the Holders or the Trustee under this Indenture or the Securities will be promptly paid in full or performed, all in accordance with the terms of this Indenture and the Securities; and (y) in case of any extension of time of payment or renewal of any Securities or any of such other obliga- tions, they will be paid in full when due or performed in accor- dance with the terms of the extension or renewal, whether at maturity, by acceleration, call for redemption, upon an Offer to Purchase or otherwise. Failing payment when due of any amount so guaranteed for whatever reason, each Guarantor shall be obligated to pay the same before failure so to pay becomes an Event of Default. (b) Each Guarantor hereby agrees that its obliga- tions with regard to this Guarantee shall be unconditional, irrespective of the validity, regularity or enforceability of the Securities or this Indenture, the absence of any action to enforce the same, any delays in obtaining or realizing upon or failures to obtain or realize upon collateral, the recovery of any judgment against the Company, any action to enforce the same or any other circumstances that might otherwise constitute a legal or equitable discharge or defense of a guarantor. Each Guarantor hereby waives diligence, presentment, demand of pay- ment, filing of claims with a court in the event of insolvency or bankruptcy of the Company, any right to require a proceeding first against the Company or right to require the prior disposi- tion of the assets of the Company to meet its obligations, protest, notice and all demands whatsoever and covenants that this Guarantee will not be discharged except by complete perfor- 113 mance of the obligations contained in the Securities and this Indenture. (c) If any Holder or the Trustee is required by any court or otherwise to return to either the Company or any Guarantor, or any Custodian, Trustee, or similar official acting in relation to either the Company or such Guarantor, any amount paid by either the Company or such Guarantor to the Trustee or such Holder, this Guarantee, to the extent theretofore discharged, shall be reinstated in full force and effect. Each Guarantor agrees that it will not be entitled to any right of subrogation in relation to the Holders in respect of any obliga-tions guaranteed hereby until payment in full of all obligations guaranteed hereby. Each Guarantor further agrees that, as between such Guarantor, on the one hand, and the Holders and the Trustee, on the other hand, (i) the maturity of the obligations guaranteed hereby may be accelerated as provided in Section 7.2 for the purposes of this Guarantee, notwithstanding any stay, injunction or other prohibition preventing such acceleration as to the Company of the obligations guaranteed hereby, and (ii) in the event of any declaration of acceleration of those obligations as provided in Section 7.2, those obligations (whether or not due and payable) will forthwith become due and payable by each of the Guarantors for the purpose of this Guarantee. (d) Each Guarantor and by its acceptance of a Security issued hereunder each Holder hereby confirms that it is the intention of all such parties that the guarantee by such Guarantor set forth in Section 13.1(a) not constitute a fraudu- lent transfer or conveyance for purpose of any Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any similar Federal or state law. To effectuate the foregoing intention, the Holders and such Guarantor hereby irrevocably agree that the obligations of such Guarantor under its guarantee set forth in Section 13.1(a) shall be limited to the maximum amount as will, after giving effect to all other contingent and fixed liabilities of such Guarantor and after giving effect to any collections from or payments made by or on behalf of any other Guarantor in respect of the obligations of such other Guarantor under its Guarantee or pursuant to the following paragraph of this Section 13.1(d), result in the obligations of such Guarantor under such guarantee not constitut- ing such a fraudulent transfer or conveyance. Each Guarantor that makes any payment or distribution under Section 13.1(a) shall be entitled to a contribution from each other Guarantor equal to its Pro Rata amount of such payment or distribution so long as the exercise of such right does not impair the rights of the Holders under the Guarantees or the Security Documents. For purposes of the foregoing, the "Pro Rata amount" of any Guarantor means the percentage of the net assets 114 of all Guarantors held by such Guarantor, determined in accor- dance with GAAP. Section 2 EXECUTION AND DELIVERY OF GUARANTEE. To evidence its Guarantee set forth in Section 13.1, each Guarantor agrees that a notation of such Guarantee substan- tially in the form annexed hereto as Exhibit B shall be endorsed on each Security authenticated and delivered by the Trustee and that this Indenture shall be executed on behalf of such Guarantor by two Officers or an Officer and an Assistant Secretary by manual or facsimile signature. Each Guarantor agrees that its Guarantee set forth in Section 13.1 shall remain in full force and effect and apply to all the Securities notwithstanding any failure to endorse on each Security a notation of such Guarantee. If an Officer whose signature is on a Security no longer holds that office at the time the Trustee authenticates the Security on which a Guarantee is endorsed, the Guarantee shall be valid nevertheless. The delivery of any Security by the Trustee, after the authentication thereof hereunder, shall constitute due delivery of the Guarantee set forth in this Indenture on behalf of each Guarantor. Section 3 CERTAIN BANKRUPTCY EVENTS. Each Guarantor hereby covenants and agrees that in the event of the insolvency, bankruptcy, dissolution, liquidation or reorganization of the Company, such Guarantor shall not file (or join in any filing of), or otherwise seek to participate in the filing of, any motion or request seeking to stay or to prohibit (even temporarily) execution on the Guarantee and hereby waives and agrees not to take the benefit of any such stay of execution, whether under Section 362 or 105 of the United States Bankruptcy Code or otherwise. Section 4 RELEASE OF GUARANTEE. In the event (a) of a sale or other disposition of all or substantially all of the assets of any Guarantor or the sale of a Guarantor, by way of a merger, consolidation or otherwise, (b) that a Subsidiary is designated an Unrestricted Subsidiary in accordance with Section 1.1 - "Unrestricted Subsidiary", or (c) of a sale or other disposition of all of the Capital Stock of any Guarantor, then such Guarantor or the corporation acquiring the property, as applicable, shall be released and relieved of any obligations under its Guarantee, PROVIDED that (i) immediately after giving effect to such transaction, no Default or Event of 115 Default shall have occurred and be continuing or would occur as a consequence thereof and (ii) the Company complies with the provisions of Section 5.14. Section 5 FUTURE GUARANTORS. Upon the acquisition by the Company or any Guarantor of the Capital Stock of any person, if, as a result of such acquisi- tion, such Person becomes a Subsidiary, such Subsidiary shall fully and unconditionally guarantee the obligations of the Company with respect to payment and performance of the Securities and the other obligations of the Company under this Indenture to the same extent that such obligations are guaranteed by the other Guarantors pursuant to Section 13.1; and, within 60 days of the date of such occurrence, such Subsidiary shall execute and deliv- er to the Trustee a supplemental indenture making such Subsidiary a party to this Indenture. ARTICLE XIV MISCELLANEOUS Section 1 TIA CONTROLS. If any provision of this Indenture limits, qualifies, or conflicts with the duties imposed by operation of the TIA, the imposed duties, upon qualification of this Indenture under the TIA, shall control. Section 2 NOTICES. Any notices or other communications to the Company, the Guarantors or the Trustee required or permitted hereunder shall be in writing, and shall be sufficiently given if made by hand delivery, by telex, by telecopier or registered or certified mail, postage prepaid, return receipt requested, addressed as follows: if to the Company or any Guarantor: Argosy Gaming Company 219 Piasa Street Alton, Illinois 62002 Attention: Chief Financial Officer Telephone: 618-474-7805 Telecopy: 618-474-7420 116 with a copy to: Winston & Strawn 35 West Wacker Chicago, Illinois 60601 Attention: Joseph A. Walsh, Jr. Telephone: 312-558-5600 Telecopy: 312-558-5700 if to the Trustee: First National Bank of Commerce 210 Baronne Street New Orleans, Louisiana 70112 Attention: Corporate Trust Department Telephone: 504-561-1610 Telecopy: 504-561-1432 The Company, the Guarantors or the Trustee by notice to each other party may designate additional or different addresses as shall be furnished in writing by such party. Any notice or communication to the Company, the Guarantors or the Trustee shall be deemed to have been given or made as of the date so delivered, if personally delivered; when answered back, if telexed; when receipt is acknowledged, if telecopied; and 5 Business Days after mailing if sent by registered or certified mail, postage prepaid (except that a notice of change of address shall not be deemed to have been given until actually received by the addressee). Any notice or communication mailed to a Securityholder shall be mailed to him by first class mail or other equivalent means at his address as it appears on the registration books of the Registrar and shall be sufficiently given to him if so mailed within the time prescribed. Failure to mail a notice or communication to a S- ecurityholder or any defect in it shall not affect its suffi- ciency with respect to other Securityholders. If a notice or communication is mailed in the manner provided above, it is duly given, whether or not the addressee receives it. Section 3 COMMUNICATIONS BY HOLDERS WITH OTHER HOLDERS. Securityholders may communicate pursuant to TIA -section- 312(b) with other Securityholders with respect to their rights under this Indenture or the Securities. The Company, the Guaran- tors, the Trustee, the Registrar and any other person shall have the protection of TIA -section- 312(c). 117 Section 4 CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT. Upon any request or application by the Company to the Trustee to take any action under this Indenture, the Company shall furnish to the Trustee: (1) an Officers' Certificate (in form and substance reasonably satisfactory to the Trustee) stating that, in the opinion of the signers, all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with; and (2) an Opinion of Counsel (in form and substance reasonably satisfactory to the Trustee) stating that, in the opinion of such counsel, all such conditions precedent have been complied with. Section 5 STATEMENTS REQUIRED IN CERTIFICATE OR OPINION. Each certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture shall include: (1) a statement that the person making such certificate or opinion has read such cove- nant or condition; (2) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (3) a statement that, in the opin- ion of such person, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and (4) a statement as to whether or not, in the opinion of each such person, such condition or covenant has been complied with; PROVIDED, HOWEVER, that with respect to matters of fact an Opinion of Counsel may rely on an Officers' Certificate or certificates of public officials. 118 Section 6 RULES BY TRUSTEE, PAYING AGENT, REGISTRAR. The Trustee may make reasonable rules for action by or at a meeting of Securityholders. The Paying Agent or Registrar may make reasonable rules for its functions. Section 7 LEGAL HOLIDAYS. A "Legal Holiday" used with respect to a particular place of payment is a Saturday, a Sunday or a day on which banking institutions in New York, New York are not required to be open. If a payment date is a Legal Holiday in New York, New York, payment may be made at such place on the next succeeding day that is not a Legal Holiday, and no interest shall accrue for the intervening period. Section 8 GOVERNING LAW. THIS INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. THE COMPANY AND EACH GUARANTOR HEREBY IRREVOCABLY SUBMIT TO THE JURISDICTION OF ANY NEW YORK STATE COURT SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK OR ANY FEDERAL COURT SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK IN RESPECT OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS INDENTURE AND THE SECURITIES, AND IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, JURISDICTION OF THE AFORESAID COURTS. THE COMPANY AND EACH GUARANTOR IRREVOCABLY WAIVES, TO THE FULLEST EXTENT THEY MAY EFFECTIVELY DO SO UNDER APPLICABLE LAW, TRIAL BY JURY AND ANY OBJECTION WHICH THEY MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT AND ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE TRUSTEE OR ANY SECURITYHOLDER TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE COMPANY IN ANY OTHER JURISDICTION. Section 9 NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS. This Indenture may not be used to interpret another indenture, loan or debt agreement of any of the Company, the Guarantors or any of their Subsidiaries. Any such indenture, loan or debt agreement may not be used to interpret this Inden- ture. 119 Section 10 NO RECOURSE AGAINST OTHERS. A director, officer, employee, stockholder or incorpo- rator, as such, of the Company or the Guarantors shall not have any liability for any obligations of the Company or the Guaran- tors under the Securities or this Indenture. Each Securityholder by accepting a Security waives and releases all such liability. Such waiver and release are part of the consideration for the issuance of the Securities. Section 11 SUCCESSORS. All agreements of the Company and the Guarantors in this Indenture and the Securities shall bind their successors. All agreements of the Trustee in this Indenture shall bind its successor. Section 12 DUPLICATE ORIGINALS. All parties may sign any number of copies or counter- parts of this Indenture. Each signed copy or counterpart shall be an original, but all of them together shall represent the same agreement. Section 13 SEVERABILITY. In case any one or more of the provisions in this Indenture or in the Securities shall be held invalid, illegal or unenforceable, in any respect for any reason, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions shall not in any way be affected or impaired thereby, it being intended that all of the provisions hereof shall be enforceable to the full extent permit- ted by law. Section 14 TABLE OF CONTENTS, HEADINGS, ETC. The Table of Contents, Cross-Reference Table and headings of the Articles and the Sections of this Indenture have been inserted for convenience of reference only, are not to be considered a part hereof and shall in no way modify or restrict any of the terms or provisions hereof. 120 SIGNATURE IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed as of the date first written above. ARGOSY GAMING COMPANY By: --------------------------- Name: Title: Attest: --------------------------- FIRST NATIONAL BANK OF COMMERCE, as Trustee By: --------------------------- Name: Title: GUARANTORS: --------------------------- ALTON GAMING COMPANY By: --------------------------- Name: Title: THE MISSOURI GAMING COMPANY By: --------------------------- Name: Title: THE ST. LOUIS GAMING COMPANY By: --------------------------- Name: Title: IOWA GAMING COMPANY By: --------------------------- Name: Title: JAZZ ENTERPRISES, INC. By: --------------------------- Name: Title: ARGOSY OF LOUISIANA, INC. By: --------------------------- Name: Title: CATFISH QUEEN PARTNERSHIP in COMMENDAM By: Jazz Enterprises, Inc., its General Partner By: --------------------------- Name: Title: THE INDIANA GAMING COMPANY By: --------------------------- Name: Title: EX-4.4 5 EXHIBIT 4.4 - ------------------------------------------------------ REGISTRATION RIGHTS AGREEMENT Dated as of June 5, 1996 by and among ARGOSY GAMING COMPANY, as Issuer, THE GUARANTORS NAMED HEREIN and BEAR, STEARNS & CO. INC. DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION, BA SECURITIES, INC., and DEUTSCHE MORGAN GRENFELL/C.J. LAWRENCE INC. as Purchasers - ------------------------------------------------------- REGISTRATION RIGHTS AGREEMENT THIS REGISTRATION RIGHTS AGREEMENT (the "Agree- ment") is made and entered into as of June 5, 1996, among Argosy Gaming Company, a Delaware corporation (the "Issu- er"), the Guarantors named herein (the "Guarantors") and Bear, Stearns & Co. Inc., Donaldson, Lufkin & Jenrette Securities Corporation, BA Securities, Inc. and Deutsche Morgan Grenfell/C.J. Lawrence Inc. (collectively, the "Purchasers"). This Agreement is made pursuant to the Purchase Agreement, dated June 1, 1996, among the Issuer, the Guarantors named therein and the Purchasers (the "Pur- chase Agreement"), which provides for the sale by the Issuer and the Guarantors to the Purchasers of $235,000,000 aggregate principal amount of 13 1/4% First Mortgage Notes due 2004 (the "Securities"). In order to induce the Purchasers to enter into the Purchase Agree- ment, the Issuer and the Guarantors have agreed to pro- vide to the Purchasers and their respective direct and indirect transferees, among other things, the registra- tion rights for the Securities set forth in this Agree- ment. The execution of this Agreement is a condition to the closing of the transactions contemplated by the Purchase Agreement. The parties hereby agree as follows: 1. DEFINITIONS As used in this Agreement, the following terms shall have the following meanings (and, unless otherwise indicated, capitalized terms used herein without defini- tion shall have the meanings ascribed to them by the Purchase Agreement): ADVICE: See Section 5. APPLICABLE PERIOD: See Section 2. CLOSING DATE: The Closing Date as defined in the Purchase Agreement. EFFECTIVENESS PERIOD: See Section 3. EFFECTIVENESS TARGET DATE: The 120th day fol- lowing the Closing Date. EVENT DATE: See Section 4. EXCHANGE ACT: The Securities Exchange Act of 1934, as amended, and the rules and regulations of the SEC promulgated thereunder. EXCHANGE OFFER: See Section 2. EXCHANGE REGISTRATION STATEMENT: See Section 2. EXCHANGE SECURITIES: See Section 2. FILING DATE: The 30th day after the Closing Date. GUARANTORS: The Guarantors (as defined in the Indenture). HOLDER: Any holder of Transfer Restricted Securities. INDENTURE: The Indenture, dated as of the date hereof, among the Issuer, the Guarantors and First Na- tional Bank of Commerce, as trustee, pursuant to which the Securities are being issued, as amended or supple- mented from time to time in accordance with the terms thereof. ISSUER: See the introductory paragraph of this Agreement. LIQUIDATED DAMAGES: See Section 4. PARTICIPATING BROKER-DEALER: See Section 2. PERSON: An individual, trustee, corporation, partnership, joint stock company, trust, limited liabili- ty company, unincorporated association, union, business association, firm or other legal entity. PROSPECTUS: The prospectus included in any Registration Statement (including, without limitation, any prospectus subject to completion and a prospectus 2 that includes any information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 430A promulgated under the Securities Act), as amended or supplemented by any prospectus supplement, with respect to the terms of the offering of any portion of the Exchange Securities and/or the Transfer Restricted Securities (as applicable) cov- ered by such Registration Statement, and all other amend- ments and supplements to the Prospectus, including post-effective amendments, and all material incorporated by reference or deemed to be incorporated by reference in such Prospectus. PURCHASERS: See the introductory paragraph to this Agreement. REGISTRATION DEFAULT: See Section 4. REGISTRATION STATEMENT: Any registration statement of the Issuer and the Guarantors, including, but not limited to, the Exchange Registration Statement, the Shelf Registration or that otherwise covers any of the Transfer Restricted Securities pursuant to the provi- sions of this Agreement, including the Prospectus, amend- ments and supplements to such registration statement, including post-effective amendments, all exhibits, and all material incorporated by reference or deemed to be incorporated by reference in such registration statement. RULE 144: Rule 144 promulgated pursuant to the Securities Act, as currently in effect, as such rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the SEC. RULE 144A: Rule 144A promulgated pursuant to the Securities Act, as currently in effect, as such rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the SEC. RULE 415: Rule 415 promulgated pursuant to the Securities Act, as currently in effect, as such rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the SEC. SEC: The Securities and Exchange Commission. 3 SECURITIES: See the introductory paragraphs to this Agreement. SECURITIES ACT: The Securities Act of 1933, as amended, and the rules and regulations of the SEC promul- gated thereunder. SHELF NOTICE: See Section 2. SHELF REGISTRATION: See Section 3. TIA: The Trust Indenture Act of 1939, as amended. TRANSFER RESTRICTED SECURITIES: The Securities upon original issuance thereof and at all times subse- quent thereto, until in the case of any such Securities (i) a Registration Statement covering such Securities has been declared effective by the SEC and such Securities have been disposed of in accordance with such effective Registration Statement, (ii) such Securities are sold in compliance with Rule 144, or (iii) such Securities cease to be outstanding. TRUSTEE: The trustee under the Indenture and, if existent, the trustee under any indenture governing the Exchange Securities. UNDERWRITTEN REGISTRATION OR UNDERWRITTEN OFFERING: A registration in which securities of the Issuer are sold to an underwriter for reoffering to the public. 2. EXCHANGE OFFER (a) The Issuer and the Guarantors agree to use their reasonable best efforts to file with the SEC as soon as practicable after the Closing Date, but in no event later than the Filing Date, an offer to exchange (the "Exchange Offer") any and all of the Transfer Re- stricted Securities for a like aggregate principal amount of debt securities of the Issuer and the Guarantors which are substantially identical to the Securities, except that the identity of the Guarantors may be different from the Guarantors that initially guaranteed the Securities pursuant to the Indenture so long as the Securities are at all times guaranteed in compliance with the Indenture 4 (the "Exchange Securities") (and which are entitled to the benefits of the Indenture or a trust indenture which is identical to the Indenture (other than such changes to the Indenture or any such identical trust indenture as are necessary to comply with any requirements of the SEC to effect or maintain the qualification thereof under the TIA) and which, in either case, has been qualified under the TIA), except that the Exchange Securities shall have been registered pursuant to an effective Registration Statement in compliance with the Securities Act. The Ex- change Offer will be registered pursuant to the Securi- ties Act on the appropriate form (the "Exchange Registra- tion Statement") and will comply with all applicable tender offer rules and regulations promulgated pursuant to the Exchange Act and shall be duly registered or qualified pursuant to all applicable state securities or Blue Sky laws. The Exchange Offer shall not be subject to any condition, other than that the Exchange Offer does not violate any applicable law or interpretation of the Staff of the SEC. No securities shall be included in the Registration Statement covering the Exchange Offer other than the Exchange Securities. The Issuer and the Guaran- tors agree to use their reasonable best efforts to (x) cause the Exchange Registration Statement to become effective pursuant to the Securities Act on or before the Effectiveness Target Date; (y) keep the Exchange Offer open for not less than 30 days (or such longer period required by applicable law) after the commencement of the Exchange Offer; and (z) consummate the Exchange Offer within 45 days after the earlier of the effectiveness thereof or the Effectiveness Target Date. Each Holder who participates in the Exchange Offer will be required to represent that any Exchange Securities received by it will be acquired in the ordinary course of its business, that at the time of the consummation of the Exchange Offer such Holder will have no arrangement or understand- ing with any Person to participate in the distribution of the Exchange Securities, and that such Holder is not an affiliate of the Issuer within the meaning of Rule 405 of the Securities Act (or that if it is such an affiliate, it will comply with the registration and prospectus delivery requirements of the Securities Act to the extent applicable). Each Holder that is not a Participating Broker-Dealer will be required to represent that it is not engaged in, and does not intend to engage in, the distribution of the Exchange Securities. Each Holder that is a Participating Broker-Dealer will be required to 5 acknowledge that it will deliver a prospectus as required by law in connection with any resale of such Exchange Securities. Upon consummation of the Exchange Offer in accordance with this Agreement, the Issuer and the Guar- antors shall have no further obligation to register Transfer Restricted Securities pursuant to Section 2(c) and Section 3 of this Agreement. (b) The Issuer and the Guarantors shall include within the Prospectus contained in the Exchange Registration Statement a section entitled "Plan of Dis- tribution," reasonably acceptable to the Purchasers, which shall contain a summary statement of the positions taken or policies made by the Staff of the SEC with respect to the potential "underwriter" status of any broker-dealer that is the beneficial owner (as defined in Rule 13d-3 under the Exchange Act) of Exchange Securities received by such broker-dealer in the Exchange Offer (a "Participating Broker-Dealer"). Such "Plan of Distribu- tion" section shall also allow the use of the Prospectus by all Persons subject to the prospectus delivery re- quirements of the Securities Act, including all Partici- pating Broker-Dealers, and include a statement describing the means by which Participating Broker-Dealers may resell the Exchange Securities. The Issuer and the Guarantors shall use their reasonable best efforts to keep the Exchange Registration Statement effective and to amend and supplement the Prospectus contained therein, in order to permit such Prospectus to be lawfully delivered by all persons sub- ject to the prospectus delivery requirements of the Securities Act, for a period of 180 days after consumma- tion of the Exchange Offer (or such longer period if extended pursuant to the last paragraph of Section 5) (the "Applicable Period"). In connection with the Exchange Offer, the Issuer shall: (a) mail as promptly as practicable to each Holder a copy of the prospectus forming part of the Exchange Registration Statement, together with an appropriate letter of transmittal and related docu- ments; 6 (b) utilize the services of a Depositary for the Exchange Offer with an address in the Borough of Manhattan, The City of New York; and (c) permit Holders to withdraw tendered Secu- rities at any time prior to the close of business, New York time, on the last business day on which the Exchange Offer shall remain open. As soon as practicable after the close of the Exchange Offer, the Issuer and the Guarantors shall: (i) accept for exchange all Securities tendered and not validly withdrawn pursuant to the Exchange Offer; (ii) deliver to the Trustee for cancellation all Securities so accepted for exchange; and (iii) cause the Trustee to authenticate and deliver promptly to each Holder of Securities, Exchange Securities equal in principal amount to the Securities of such Holder so accepted for exchange. (c) If (1) prior to the consummation of the Exchange Offer, applicable interpretations of the staff of the SEC do not permit the Issuer and the Guarantors to effect the Exchange Offer as contemplated herein, or (2) the Exchange Offer is not consummated within 165 days of the Closing Date for any reason, then the Issuer shall promptly deliver to the Holders and the Trustee written notice thereof (the "Shelf Notice") and the Issuer and the Guarantors shall file a Registration Statement pursu- ant to Section 3. Following the delivery of a Shelf Notice to the Holders of Transfer Restricted Securities, the Issuer and the Guarantors shall not have any further obligation to conduct the Exchange Offer pursuant to this Section 2, provided that the Issuer and the Guarantors shall have the right, nonetheless, to proceed to consum- mate the Exchange Offer notwithstanding their obligations pursuant to this Section 2(c) (and, upon such consumma- tion, their obligation to consummate a Shelf Registration shall terminate). 7 3. SHELF REGISTRATION If a Shelf Notice is delivered as contemplated by Section 2(c), then: (a) SHELF REGISTRATION. The Issuer and the Guarantors shall use their reasonable best efforts to prepare and file with the SEC, as promptly as practicable following the delivery of the Shelf Notice, a Registra- tion Statement for an offering to be made on a continuous basis pursuant to Rule 415 covering all of the Transfer Restricted Securities (the "Shelf Registration"). The Shelf Registration shall be on Form S-3 or another appro- priate form permitting registration of such Transfer Restricted Securities for resale by the Holders in the manner or manners reasonably designated by them (includ- ing, without limitation, one or more underwritten offer- ings). The Issuer and the Guarantors shall not permit any securities other than the Transfer Restricted Securi- ties to be included in the Shelf Registration. The Issuer and the Guarantors shall use their reasonable best efforts, as described in Section 5(b), to cause the Shelf Registration to be declared effective pursuant to the Securities Act as promptly as practicable following the filing thereof and to keep the Shelf Registration contin- uously effective under the Securities Act until the date which is 36 months from the Closing Date (the "Effective- ness Period"), or such shorter period ending when either (1) all Transfer Restricted Securities covered by the Shelf Registration have been sold in the manner set forth and as contemplated in the Shelf Registration or (2) there ceases to be outstanding any Transfer Restricted Securities. (b) SUPPLEMENTS AND AMENDMENTS. The Issuer and the Guarantors shall use their reasonable best efforts to keep the Shelf Registration continuously effective by supplementing and amending the Shelf Registration if re- quired by the rules, regulations or instructions applica- ble to the registration form used for such Shelf Regis- tration, if required by the Securities Act, or if reason- ably requested by the holders of a majority in aggregate principal amount of the Transfer Restricted Securities covered by such Registration Statement or by any under- writer of such Transfer Restricted Securities. 8 4. LIQUIDATED DAMAGES (a) The Issuer, the Guarantors and the Purchas- ers agree that the Holders of Transfer Restricted Securi- ties will suffer damages if the Issuer or any Guarantor fails to fulfill its obligations pursuant to Section 2 or Section 3 hereof and that it would not be possible to ascertain the extent of such damages. Accordingly, in the event of such failure by the Issuer or any Guarantor to fulfill such obligations, the Issuer and the Guaran- tors hereby agree to pay liquidated damages ("Liquidated Damages") to each Holder of Transfer Restricted Securi- ties under the circumstances and to the extent set forth below: (i) if neither the Exchange Registration Statement nor the Shelf Registration has been filed with the SEC on or prior to the Filing Date; or (ii) if neither the Exchange Registration Statement nor the Shelf Registration is declared effective by the SEC on or prior to the Effective- ness Target Date; or (iii) if (A) an Exchange Registration Statement is declared effective by the SEC, and (B) the Issuer and the Guarantors have not exchanged Exchange Secu- rities for all Securities validly tendered in accor- dance with the terms of the Exchange Offer on or prior to 45 days following the earlier of (i) the effectiveness thereof or (ii) the Effectiveness Target Date; or (iv) the Shelf Registration has been declared effective by the SEC and such Shelf Registration ceases to be effective or usable at any time during the Effectiveness Period, without being succeeded on the same day immediately by a post-effective amendment to such Registration Statement that cures such failure and that is itself immediately declared effec- tive on the same day; (any of the foregoing, a "Registration Default") then, with respect to the first 90-day period following such 9 Event Date (as defined below), the Issuer and the Guaran- tors jointly and severally shall pay to each Holder of Transfer Restricted Securities Liquidated Damages in an amount equal to $.05 per week per $1,000 principal amount of Transfer Restricted Securities held by such Holder for each week that the Registration Default continues. The amount of such Liquidated Damages will increase by an additional $.05 per week per $1,000 principal amount of Transfer Restricted Securities with respect to each subsequent 90-day period until all Registration Defaults have been cured; provided, however, that Liquidated Damages shall not at any time exceed $.25 per week per $1,000 principal amount of Transfer Restricted Securi- ties. Following the cure of all Registration Defaults relating to any Transfer Restricted Securities, the accrual of Liquidated Damages with respect to such Trans- fer Restricted Securities will cease. A Registration Default under clause (i) above shall be cured on the date that either the Exchange Registration Statement or the Shelf Registration is filed with the SEC; a Registration Default under clause (ii) above shall be cured on the date that either the Exchange Registration Statement or the Shelf Registration is declared effective by the SEC; a Registration Default under clause (iii) above shall be cured on the earlier of the date (A) the Exchange Offer is consummated or (B) a Shelf Registration Statement is declared effective; and a Registration Default under clause (iv) above shall be cured on the earlier of (A) the date that the post-effective amendment curing the deficiency in the Shelf Registration is declared effec- tive or (B) the Effectiveness Period expires. (b) The Issuer shall notify the Trustee within one business day after each and every date on which a Registration Default occurs (an "Event Date"). Liquidat- ed Damages shall be paid by the Issuer and the Guarantors to the Holders by wire transfer of immediately available funds to the accounts specified by them or by mailing checks to their registered addresses if no such accounts have been specified on or before the semi-annual interest payment date provided in the Indenture. Each obligation to pay Liquidated Damages shall be deemed to commence accruing on the applicable Event Date and to cease accru- ing when all Registration Defaults have been cured. In no event shall the Issuer pay Liquidated Damages in excess of the maximum applicable weekly amount set forth 10 above, regardless of whether one or multiple Registration Defaults exist. 5. REGISTRATION PROCEDURES In connection with the registration of any Exchange Securities or Transfer Restricted Securities pursuant to Sections 2 or 3 hereof, the Issuer and the Guarantors shall effect such registration to permit the sale of such Exchange Securities or Transfer Restricted Securities (as applicable) in accordance with the in- tended method or methods of disposition thereof, and pursuant thereto the Issuer and the Guarantors shall: (a) Prepare and file with the SEC, a Registra- tion Statement or Registration Statements as prescribed by Section 2 or 3, and to use their reasonable best efforts to cause such Registration Statement(s) to become effective and remain effective as provided herein; pro- vided that, if (1) such filing is pursuant to Section 3, or (2) a Prospectus contained in an Exchange Registration Statement filed pursuant to Section 2 is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Securities during the Applicable Period, before filing any Registra- tion Statement or Prospectus or any amendments or supple- ments thereto, the Issuer shall, if requested, furnish to and afford the Holders of the Transfer Restricted Securi- ties and each such Participating Broker-Dealer, as the case may be, covered by such Registration Statement, their counsel and the managing underwriters, if any, a reasonable opportunity to review copies of all such documents (including copies of any documents to be incor- porated by reference therein and all exhibits thereto) proposed to be filed (at least 3 business days prior to such filing, or such later date as is reasonable under the circumstances). The Issuer and the Guarantors shall not file any Registration Statement or Prospectus or any amendments or supplements thereto in respect of which the Holders, pursuant to this Agreement, must be afforded an opportunity to review prior to the filing of such docu- ment, if the Holders of a majority in aggregate principal amount of the Transfer Restricted Securities covered by such Registration Statement, or such Participating Bro- ker-Dealer, as the case may be, their counsel, or the managing underwriters, if any, shall reasonably object. 11 (b) Prepare and file with the SEC such amend- ments and post-effective amendments to each Shelf Regis- tration or Exchange Registration Statement, as the case may be, as may be necessary to keep such Registration Statement continuously effective for the periods required by Section 2 or Section 3, as applicable; cause the related Prospectus to be supplemented by any required Prospectus supplement, and as so supplemented to be filed pursuant to Rule 424 (or any similar provisions then in force) under the Securities Act; and comply with the provisions of the Securities Act, the Exchange Act and the rules and regulations of the SEC promulgated thereun- der applicable to it with respect to the disposition of all securities covered by such Registration Statement as so amended or in such Prospectus as so supplemented and with respect to the subsequent resale of any securities being sold by a Participating Broker-Dealer covered by any such Prospectus; the Issuer and the Guarantors shall be deemed not to have used their reasonable best efforts to keep a Registration Statement effective during the Applicable Period if they voluntarily take any action that would result in selling Holders of the Transfer Restricted Securities covered thereby or Participating Broker-Dealers seeking to sell Exchange Securities not being able to sell such Transfer Restricted Securities or such Exchange Securities during that period, unless (i) such action is required by applicable law, or (ii) such action is taken by them in good faith and for valid business reasons (not including avoidance of their obli- gations hereunder), including the acquisition or divesti- ture of assets or a public offering of securities by the Issuer. (c) If (1) a Shelf Registration is filed pursu- ant to Section 3, or (2) a Prospectus contained in an Exchange Registration Statement filed pursuant to Section 2 is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Ex- change Securities during the Applicable Period, notify the selling Holders of Transfer Restricted Securities, or each such Participating Broker-Dealer known to the Issu- er, as the case may be, their counsel and the managing underwriters, if any, promptly and confirm such notice in writing, (i) when a Prospectus or any Prospectus supple- ment or post-effective amendment has been filed, and, with respect to a Registration Statement or any post-effective amendment, when the same has become effective 12 (including in such notice a written statement that any Holder may, upon request, obtain, without charge, one conformed copy of such Registration Statement or post-effective amendment including financial statements and schedules, documents incorporated or deemed to be incor- porated by reference and exhibits), (ii) of the issuance by the SEC of any stop order suspending the effectiveness of a Registration Statement or of any order preventing or suspending the use of any preliminary prospectus or the initiation of any proceedings for that purpose, (iii) if at any time when a prospectus is required by the Securi- ties Act to be delivered in connection with sales of the Transfer Restricted Securities the representations and warranties of the Issuer or the Guarantors contained in any agreement (including any underwriting agreement) contemplated by Section 5(l) below cease to be true and correct, (iv) of the receipt by the Issuer or the Guaran- tors of any notification with respect to the suspension of the qualification or exemption from qualification of a Registration Statement or any of the Transfer Restricted Securities or the Exchange Securities to be sold by any Participating Broker-Dealer for offer or sale in any jurisdiction, or the initiation of any proceeding for such purpose, (v) of the happening of any event or any information becoming known that makes any statement made in such Registration Statement or related Prospectus or any document incorporated or deemed to be incorporated therein by reference untrue in any material respect or that requires the making of any changes in such Registra- tion Statement, Prospectus or documents so that, in the case of the Registration Statement, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or neces- sary to make the statements therein not misleading, and that in the case of the Prospectus, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or neces- sary to make the statements therein, in light of the circumstances under which they were made, not misleading, and (vi) of the Issuer's and the Guarantors' reasonable determination that a post-effective amendment to a Regis- tration Statement would be appropriate. (d) If (1) a Shelf Registration is filed pursu- ant to Section 3, or (2) a Prospectus contained in an Exchange Registration Statement filed pursuant to Section 2 is required to be delivered under the Securities Act by 13 any Participating Broker-Dealer who seeks to sell Ex- change Securities during the Applicable Period, use its best efforts to prevent the issuance of any order sus- pending the effectiveness of a Registration Statement or of any order preventing or suspending the use of a Pro- spectus or suspending the qualification (or exemption from qualification) of any of the Transfer Restricted Securities or the Exchange Securities (as applicable) to be sold by any Participating Broker-Dealer, for sale in any jurisdiction, and, if any such order is issued, to use their reasonable best efforts to obtain the withdraw- al of any such order at the earliest possible moment. (e) If a Shelf Registration is filed pursuant to Section 3 and if requested by the managing underwrit- ers, if any, or the Holders of a majority in aggregate principal amount of the Transfer Restricted Securities being sold in connection with an underwritten offering, (i) promptly incorporate in a prospectus supplement or post-effective amendment such information as the managing underwriters, if any, or such Holders or counsel reason- ably request to be included therein, (ii) make all re- quired filings of such prospectus supplement or such post-effective amendment as soon as practicable after the Issuer has received notification of the matters to be incorporated in such prospectus supplement or post-effec- tive amendment, and (iii) supplement or make amendments to such Registration Statement with such information as the managing underwriter, if any, or such Holders or counsel reasonably request to be included therein. (f) If (1) a Shelf Registration is filed pursu- ant to Section 3, or (2) a Prospectus contained in an Exchange Registration Statement filed pursuant to Section 2 is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Ex- change Securities during the Applicable Period, furnish to each selling Holder of Transfer Restricted Securities and to each such Participating Broker-Dealer who so requests, as the case may be, their counsel and each managing underwriter, if any, without charge, one con- formed copy of the Registration Statement or Registration Statements and each post-effective amendment thereto, including financial statements and schedules, and, if requested, all documents incorporated or deemed to be incorporated therein by reference and all exhibits. 14 (g) If (1) a Shelf Registration is filed pursu- ant to Section 3, or (2) a Prospectus contained in an Exchange Registration Statement filed pursuant to Section 2 is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Ex- change Securities during the Applicable Period, deliver to each selling Holder of Transfer Restricted Securities, or each such Participating Broker-Dealer, as the case may be, their counsel, and the underwriters, if any, without charge, as many copies of the Prospectus or Prospectuses (including each form of preliminary prospectus) and each amendment or supplement thereto and any documents incor- porated by reference therein as such Persons may reason- ably request; and, subject to the last paragraph of this Section 5, the Issuer and the Guarantors hereby consent to the use of such Prospectus and each amendment or supplement thereto by each of the selling Holders of Transfer Restricted Securities or each such Participating Broker-Dealer, as the case may be, and the underwriters or agents, if any, and dealers (if any), in connection with the offering and sale of the Transfer Restricted Securities covered by or the sale by Participating Bro- ker-Dealers of the Exchange Securities pursuant to such Prospectus and any amendment or supplement thereto. (h) Prior to any public offering of Transfer Restricted Securities pursuant to a Shelf Registration or any delivery of a Prospectus contained in the Exchange Registration Statement by any Participating Broker-Dealer who seeks to sell Exchange Securities during the Applica- ble Period, to use its reasonable best efforts to regis- ter or qualify, and to cooperate with the selling Holders of Transfer Restricted Securities or each such Partici- pating Broker-Dealer, as the case may be, the underwrit- ers, if any, and their respective counsel in connection with the registration or qualification (or exemption from such registration or qualification) of such Transfer Restricted Securities for offer and sale under the secu- rities or Blue Sky laws of such jurisdictions as any selling Holder, Participating Broker-Dealer, or the managing underwriters reasonably request in writing, PROVIDED that where Exchange Securities held by Partici- pating Broker-Dealers or Transfer Restricted Securities are offered other than through an underwritten offering, the Issuer and the Guarantors agree to cause their coun- sel to perform Blue Sky investigations and file registra- tions and qualifications required to be filed pursuant to 15 this Section 5(h); keep each such registration or quali- fication (or exemption therefrom) effective during the period such Registration Statement is required to be kept effective and do any and all other acts or things reason- ably necessary or advisable to enable the disposition in such jurisdictions of the Exchange Securities held by Participating Broker-Dealers or the Transfer Restricted Securities covered by the applicable Registration State- ment; PROVIDED that the Issuer and the Guarantors shall not be required to (A) qualify generally to do business in any jurisdiction where they are not then so qualified, (B) take any action that would subject them to general service of process in any such jurisdiction where they are not then so subject or (C) subject themselves to taxation in excess of a nominal dollar amount in any such jurisdiction. (i) If a Shelf Registration is filed pursuant to Section 3, cooperate with the selling Holders of Transfer Restricted Securities and the managing under- writers, if any, to facilitate the timely preparation and delivery of certificates representing Transfer Restricted Securities to be sold, which certificates shall not bear any restrictive legends and shall be in a form eligible for deposit with The Depository Trust Company, and enable such Transfer Restricted Securities to be in such denomi- nations and registered in such names as the managing underwriters, if any, or Holders may reasonably request. (j) If (1) a Shelf Registration is filed pursu- ant to Section 3, or (2) a Prospectus contained in an Exchange Registration Statement filed pursuant to Section 2 is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Ex- change Securities during the Applicable Period, upon the occurrence of any event contemplated by paragraph 5(c)(v) or 5(c)(vi) above, as promptly as practicable prepare and (subject to Section 5(a) above) file with the SEC, at the expense of the Issuer and the Guarantors, a supplement or post-effective amendment to the Registration Statement or a supplement to the related Prospectus or any document incorporated or deemed to be incorporated therein by reference, or file any other required document so that, as thereafter delivered to the purchasers of the Transfer Restricted Securities being sold thereunder or to the purchasers of the Exchange Securities to whom such Pro- spectus will be delivered by a Participating Broker- 16 Dealer, any such Prospectus will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. (k) Prior to the effective date of the first Registration Statement relating to the Transfer Restric- ted Securities, (i) provide the Trustee with certificates for the Transfer Restricted Securities in a form eligible for deposit with The Depository Trust Company and (ii) provide a CUSIP number for the Transfer Restricted Secu- rities. (l) In connection with an underwritten offering of Transfer Restricted Securities pursuant to a Shelf Registration, enter into an underwriting agreement as is customary in underwritten offerings and take all such other actions as are reasonably requested by the managing underwriters in order to expedite or facilitate the registration or the disposition of such Transfer Restricted Securities, and in such connection, (i) make such representations and warranties to the underwriters, with respect to the business of the Issuer, the Guaran- tors and their subsidiaries and the Registration State- ment, Prospectus and documents, if any, incorporated or deemed to be incorporated by reference therein, in each case, as are customarily made by issuers to underwriters in underwritten offerings, and confirm the same if and when requested; (ii) obtain opinions of counsel to the Issuer and the Guarantors and updates thereof in form and substance reasonably satisfactory to the managing under- writers, addressed to the underwriters covering the matters customarily covered in opinions requested in underwritten offerings and such other matters as may be reasonably requested by underwriters; (iii) obtain "cold comfort" letters and updates thereof in form and sub- stance reasonably satisfactory to the managing underwrit- ers from the independent certified public accountants of the Issuer and the Guarantors (and, if necessary, any other independent certified public accountants of any subsidiary of the Issuer or the Guarantors or of any business acquired by either of them for which financial statements and financial data are, or are required to be, included in the Registration Statement), addressed to each of the underwriters, such letters to be in customary form and covering matters of the type customarily covered 17 in "cold comfort" letters in connection with underwritten offerings and such other matters as are reasonably re- quested by underwriters as permitted by Statement on Auditing Standards No. 72; and (iv) if an underwriting agreement is entered into, the same shall contain indem- nification provisions and procedures no less favorable than those set forth in Section 7 hereof (or such other provisions and procedures acceptable to Holders of a majority in aggregate principal amount of Transfer Re- stricted Securities covered by such Registration State- ment and the managing underwriters or agents) with re- spect to all parties to be indemnified pursuant to said Section. The above shall be done at each closing under such underwriting agreement, or as and to the extent required thereunder. (m) If (1) a Shelf Registration is filed pursu- ant to Section 3, or (2) a Prospectus contained in an Exchange Registration Statement filed pursuant to Section 2 is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Ex- change Securities during the Applicable Period, make available for inspection by any selling Holder of such Transfer Restricted Securities being sold, or each such Participating Broker-Dealer, as the case may be, any underwriter participating in any such disposition of Transfer Restricted Securities, if any, and any attorney, accountant or other agent retained by any such selling Holder or each such Participating Broker-Dealer, as the case may be, or underwriter (collectively, the "Inspec- tors"), at the offices where normally kept, during rea- sonable business hours, all financial and other records, pertinent corporate documents and properties of the Issuer, the Guarantors and their subsidiaries (collectively, the "Records") as shall be reasonably necessary to enable them to exercise any applicable due diligence responsibilities, and cause the officers, directors and employees of the Issuer, the Guarantors and their subsidiaries to supply all information in each case reasonably requested by any such Inspector in connection with such Registration Statement. Records which the Issuer determines, in good faith, to be confidential and any Records which it notifies the Inspectors are confidential shall not be disclosed by the Inspectors, unless (i) the disclosure of such Records is necessary to avoid or correct a misstatement or omission in such Registration Statement, (ii) the release of such Records is or- 18 dered pursuant to a subpoena or other order from a court of competent jurisdiction or (iii) the information in such Records has been made generally available to the public. (n) Provide an indenture trustee for the Trans- fer Restricted Securities or the Exchange Securities, as the case may be, and cause the Indenture to be qualified under the TIA not later than the effective date of the Exchange Offer or the first Registration Statement relat- ing to the Transfer Restricted Securities; and in connec- tion therewith, cooperate with the trustee under any such indenture and the holders of the Transfer Restricted Securities, to effect such changes to such indenture as may be required for such indenture to be so qualified in accordance with the terms of the TIA; and execute, and use its best efforts to cause such trustee to execute, all documents as may be required to effect such changes, and all other forms and documents required to be filed with the SEC to enable such indenture to be so qualified in a timely manner. (o) Comply in all material respects with all applicable rules and regulations of the SEC and, as soon as reasonably practicable, make generally available to its securityholders consolidated earnings statements of the Issuer that satisfy the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder. (p) If an Exchange Offer is to be consummated, upon delivery of the Transfer Restricted Securities by Holders to the Issuer (or to such other Person as direct- ed by the Issuer) in exchange for the Exchange Securi- ties, the Issuer and the Guarantors shall mark, or cause to be marked, on such Transfer Restricted Securities that such Transfer Restricted Securities are being cancelled in exchange for the Exchange Securities; in no event shall such Transfer Restricted Securities be marked as paid or otherwise satisfied. (q) Cooperate with each seller of Transfer Restricted Securities covered by any Registration State- ment and each underwriter, if any, participating in the disposition of such Transfer Restricted Securities and their respective counsel in connection with any filings required to be made with the National Association of Securities Dealers, Inc. (the "NASD"). 19 (r) Use their best efforts to take all other steps necessary to effect the registration of the Trans- fer Restricted Securities or Exchange Securities, as applicable, covered by a Registration Statement contem- plated hereby. (s) Use their best efforts to cause the Trans- fer Restricted Securities or the Exchange Securities, as applicable, covered by an effective registration state- ment required by Section 2 or Section 3 hereof to be rated with the appropriate rating agencies, if so re- quested by the Holders of a majority in aggregate princi- pal amount of Transfer Restricted Securities relating to such registration statement or the managing underwriters in connection therewith, if any. The Issuer may require each seller of Transfer Restricted Securities or Participating Broker-Dealer as to which any registration is being effected to furnish to the Issuer such information regarding such seller or Participating Broker-Dealer and the distribution of such Transfer Restricted Securities or Exchange Securities to be sold by such Participating Broker-Dealer, as the case may be, as the Issuer may, from time to time, reasonably request. The Issuer may exclude from such registration the Transfer Restricted Securities of any seller or Participating Broker-Dealer who fails to furnish such information within a reasonable time after receiving such request. Each Holder of Transfer Restricted Securities and each Participating Broker-Dealer agrees by acquisi- tion of such Transfer Restricted Securities or Exchange Securities to be sold by such Participating Broker-Deal- er, as the case may be, that, upon receipt of any notice from the Issuer of the happening of any event of the kind described in Section 5(c)(ii), 5(c)(iv), 5(c)(v) or 5(c)(vi), such Holder will forthwith discontinue disposi- tion of such Transfer Restricted Securities covered by such Registration Statement or Prospectus or Exchange Securities to be sold by such Participating Broker-Deal- er, as the case may be, until such Holder's receipt of the copies of the supplemented or amended Prospectus contemplated by Section 5(j), or until it is advised in writing (the "Advice") by the Issuer that the use of the applicable Prospectus may be resumed, and has received copies of any amendments or supplements thereto. In the 20 event the Issuer gives any notice of the happening of any event of the kind described in Section 5(c)(ii), 5- (c)(iv), 5(c)(v) or 5(c)(vi), the time period for the effectiveness of such Registration Statement set forth in Section 2 or Section 3 hereof, as applicable, shall be extended by the number of days from the date of such notice to the date when each selling Holder covered by such Registration Statement shall have received copies of the supplemental or amended Prospectus contemplated by Section 5(j) or shall have received the Advice that the use of the applicable Prospectus may be resumed. 6. Registration Expenses (a) All fees and expenses incident to the performance of or compliance with this Agreement by the Issuer or the Guarantors shall be borne by the Issuer and the Guarantors, whether or not the Exchange Offer or a Shelf Registration is filed or becomes effective, includ- ing, without limitation, (i) all registration and filing fees (including, without limitation, (A) fees with re- spect to filings required to be made with the NASD in connection with an underwritten offering and (B) fees and expenses of compliance with state securities or Blue Sky laws (including, without limitation, reasonable fees and disbursements of counsel in connection with Blue Sky qualifications of the Transfer Restricted Securities or Exchange Securities (x) where the Holders of Transfer Restricted Securities are located, in the case of the Exchange Securities, or (y) as provided in Section 5(h), in the case of Transfer Restricted Securities or Exchange Securities to be sold by a Participating Broker-Dealer during the Applicable Period)), (ii) printing expenses (including, without limitation, expenses of printing certificates for Transfer Restricted Securities or Ex- change Securities in a form eligible for deposit with The Depository Trust Company and of printing prospectuses if the printing of prospectuses is requested by the managing underwriters, if any, or, in respect of Transfer Restricted Securities or Exchange Securities to be sold by any Participating Broker-Dealer during the Applicable Period, by the Holders of a majority in aggregate princi- pal amount of the Transfer Restricted Securities included in any Registration Statement or of such Exchange Securi- ties, as the case may be), (iii) messenger, telephone and delivery expenses, (iv) fees and disbursements of counsel for the Issuer and the Guarantors, (v) fees and disburse- 21 ments of all independent certified public accountants referred to in Section 5(l)(iii) (including, without limitation, the expenses of any special audit and "cold comfort" letters required by or incident to such perfor- mance), (vi) rating agency fees, (vii) Securities Act liability insurance, if the Issuer and the Guarantors desire such insurance, (viii) fees and expenses of all other Persons retained by the Issuer or the Guarantors, (ix) internal expenses of the Issuer and the Guarantors (including, without limitation, all salaries and expenses of officers and employees of the Issuer and the Guaran- tors performing legal or accounting duties), (x) the expense of any annual audit, (xi) the fees and expenses incurred in connection with the listing of the securities to be registered on any securities exchange and (xii) the expenses relating to printing, word processing and dis- tributing all Registration Statements, underwriting agreements, securities sales agreements, and indentures. Nothing contained in this Section 6 shall create an obligation on the part of the Issuer or any Guarantor to pay or reimburse any Holder for any underwriting commis- sion or discount attributable to any such Holder's Trans- fer Restricted Securities included in an underwritten offering pursuant to a Registration Statement filed in accordance with the terms of this Agreement, or to guar- antee such Holder any profit or proceeds from the sale of such Securities. (b) In connection with any Shelf Registration hereunder, the Issuer and the Guarantors shall reimburse the Holders of the Transfer Restricted Securities being registered in such registration for the reasonable fees and disbursements of not more than one counsel (in addi- tion to appropriate local counsel) chosen by the Holders of a majority in aggregate principal amount of the Trans- fer Restricted Securities to be included in such Regis- tration Statement and other reasonable out-of-pocket ex- penses of the Holders of Transfer Restricted Securities reasonably incurred in connection with the registration of the Transfer Restricted Securities. 7. INDEMNIFICATION The Issuer and each Guarantor agrees, jointly and severally, to indemnify and hold harmless (i) each of the Purchasers, each Holder of Transfer Restricted Secu- rities, each Holder of Exchange Securities, each Partici- 22 pating Broker-Dealer, (ii) each person, if any, who con- trols (within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act) any such Person (any of the persons referred to in this clause (ii) being herein- after referred to as a "controlling person"), and (iii) the respective officers, directors, partners, employees, representatives and agents of any of such Person or any controlling person (any person referred to in clause (i), (ii) or (iii) may hereinafter be referred to as an "In- demnified Person") to the fullest extent lawful, from and against any and all losses, claims, damages, liabilities, judgments, actions and expenses (including, without limi- tation, and as incurred, reimbursement of all reasonable costs of investigating, preparing, pursuing or defending any claim or action, or any investigation or proceeding by any governmental agency or body, commenced or threat- ened, including the reasonable fees and expenses of coun- sel to any Indemnified Person) directly or indirectly caused by, related to, based upon, arising out of or in connection with any untrue statement or alleged untrue statement of a material fact contained in any Registra- tion Statement or Prospectus (as amended or supplemented if the Issuer shall have furnished any amendments or supplements thereto) or any preliminary prospectus, or caused by, arising out of or based upon any omission or alleged omission to state therein a material fact re- quired to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, except insofar as such losses, claims, damages or liabilities are caused by (i) any untrue statement or omission or alleged untrue statement or omission made in reliance upon and in con- formity with information relating to any Indemnified Person furnished to the Issuer or any underwriter in writing by such Indemnified Person expressly for use therein, or (ii) any untrue statement contained in or omission from a preliminary prospectus if a copy of the Prospectus (as then amended or supplemented, if the Issuer shall have furnished to or on behalf of the Holder participating in the distribution relating to the rele- vant Registration Statement any amendments or supplements thereto) was not sent or given by or on behalf of such Holder to the person asserting any such losses, liabili- ties, claims, damages or expenses who purchased Securi- ties, if such is required by law at or prior to the written confirmation of the sale of such Securities to such person and the untrue statement contained in or 23 omission from such preliminary prospectus was corrected in the Prospectus (or the Prospectus as amended or sup- plemented). The Issuer and the Guarantors shall notify the Holders promptly of the institution, threat or asser- tion of any claim, proceeding (including any governmental investigation) or litigation of which it or they shall have become aware in connection with the matters addressed by this Agreement which involves the Issuer, any Guarantor or an Indemnified Person. In connection with any Registration Statement in which a Holder of Transfer Restricted Securities is participating, such Holder of Transfer Restricted Securi- ties agrees, severally and not jointly, to indemnify and hold harmless the Issuer, the Guarantors and their direc- tors and officers and each person who controls the Issuer and the Guarantors within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act to the same extent as the foregoing indemnity from the Issuer and the Guarantors to each Indemnified Person, but only with reference to information relating to such Indemnified Person furnished to the Issuer in writing by such Indemnified Person expressly for use in any Regis- tration Statement or Prospectus, any amendment or supple- ment thereto, or any preliminary prospectus. The liabil- ity of any Indemnified Person pursuant to this paragraph shall in no event exceed the net proceeds received by such Indemnified Person from sales of Transfer Restricted Securities giving rise to such obligations. If any suit, action, proceeding (including any governmental or regulatory investigation), claim or demand shall be brought or asserted against any person in respect of which indemnity may be sought pursuant to either of the two preceding paragraphs, such person (the "indemnified party") shall promptly notify the person against whom such indemnity may be sought (the "indemni- fying person") in writing, and the indemnifying person shall have the right to assume the defense thereof with counsel reasonably satisfactory to the indemnified party to represent the indemnified party and any others the indemnifying person may reasonably designate in such proceeding and shall pay the reasonable fees and expenses actually incurred by such counsel related to such pro- ceeding. In any such proceeding, any indemnified party shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense 24 of such indemnified party, unless (i) the indemnifying person and the indemnified party shall have mutually agreed in writing to the contrary, (ii) the indemnifying person failed to assume the defense within a reasonable time after the commencement of the action and employ counsel reasonably satisfactory to the indemnified party or (iii) the named parties to any such action (including any impleaded parties) include both such indemnified party and the indemnifying person, or any affiliate of the indemnifying person and such indemnified party shall have been reasonably advised by counsel that either (x) there may be one or more legal defenses available to it which are different from or additional to those available to the indemnifying person or such affiliate of the indemnifying person or (y) a conflict may exist between such indemnified party and the indemnifying person or such affiliate of the indemnifying person (in which case the indemnifying person shall not have the right to assume the defense of such action on behalf of such indemnified party, it being understood, however, that the indemnifying person shall not, in connection with any one such action or separate but substantially similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances, be liable for the fees and expenses of more than one separate firm of attorneys (in addition to any local counsel) for all such indemnified parties, which firm shall be designated in writing by indemnified parties who sold a majority in interest of Transfer Restricted Securities sold by all such indemnified parties and any such separate firm for the Issuer and the Guarantors, their directors, their officers and such control persons of the Issuer and the Guarantors shall be designated in writing by the Issuer. The indemnifying person shall not be liable for any settlement of any proceeding effected without its written consent, but if settled with such consent or if there be a final judgment for the plaintiff, the indemnifying person agrees to indemnify any indemnified party from and against any loss or liability by reason of such settle- ment or judgment. No indemnifying person shall, without the prior written consent of the indemnified party, effect any settlement of any pending or threatened pro- ceeding in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party, unless such settlement includes an unconditional release of such 25 indemnified party from all liability on claims that are the subject matter of such proceeding. If the indemnification provided for in the first and second paragraphs of this Section 7 is unavail- able to an indemnified party in respect of any losses, claims, damages, liabilities, or expenses referred to therein (other than by reason of the exceptions provided therein), then each indemnifying person under such para- graphs, in lieu of indemnifying such indemnified party thereunder, shall contribute to the amount paid or pay- able by such indemnified party as a result of such loss- es, claims, damages, liabilities, or expenses (i) in such proportion as is appropriate to reflect the relative benefits of the indemnified party on the one hand and the indemnifying person(s) on the other in connection with the statements or omissions that resulted in such losses, claims, damages, liabilities, or expenses or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the indemnifying person(s) and the indemnified party, as well as any other relevant equitable considerations. The relative fault of the Issuer and the Guarantors, on the one hand, and any Indemnified Persons, on the other, shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Issuer or any Guarantor, on the one hand, or by such Indemnified Persons, on the other, and the parties' rela- tive intent, knowledge, access to information and oppor- tunity to correct or prevent such statement or omission. The parties agree that it would not be just and equitable if contribution pursuant to this Section 7 were determined by PRO RATA allocation (even if such indemni- fied parties were treated as one entity for such purpose) or by any other method of allocation that does not take account of the equitable considerations referred to in the immediately preceding paragraph. The amount paid or payable by an indemnified party as a result of the loss- es, claims, damages and liabilities referred to in the immediately preceding paragraph shall be deemed to in- clude, subject to the limitations set forth above, any reasonable legal or other expenses actually incurred by 26 such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 7, in no event shall an Indemnified Person be required to contribute any amount in excess of the amount by which proceeds received by such Indemnified Person from sales of Transfer Restricted Securities exceeds the amount of any damages that such Indemnified Person has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraud- ulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contri- bution from any person who was not guilty of such fraudu- lent misrepresentation. The indemnity and contribution agreements contained in this Section 7 will be in addition to any liability which the indemnifying persons may otherwise have to the indemnified parties referred to above. The Indemnified Persons' obligations to contribute pursuant to Section 7 are several in proportion to the respective principal amount of Securities sold by each of the Indem- nified Persons hereunder and not joint. 8. RULES 144 AND 144A The Issuer and the Guarantors covenant that they will file the reports required to be filed by them pursuant to the Securities Act and the Exchange Act and the rules and regulations adopted by the SEC thereunder in a timely manner and, if at any time the Issuer and the Guarantors are not required to file such reports, they will, upon the request of any Holder of Transfer Restricted Securities, make available information required by Rules 144 and 144A under the Securities Act in order to permit sales pursuant to Rule 144 and Rule 144A. The Issuer and the Guarantors further covenant that they will take such further action as any Holder of Transfer Re- stricted Securities may reasonably request, all to the extent required from time to time to enable such Holder to sell Transfer Restricted Securities without registra- tion under the Securities Act within the limitation of the exemptions provided by (a) Rule 144 and Rule 144A under the Securities Act, as such Rules may be amended from time to time, or (b) any similar rule or regulation hereafter adopted by the SEC. 27 9. UNDERWRITTEN REGISTRATIONS (a) If any of the Transfer Restricted Securi- ties covered by any Shelf Registration are to be sold in an underwritten offering, the investment banker or in- vestment bankers and manager or managers that will manage the offering will be selected by the Holders of a majori- ty in aggregate principal amount of such Transfer Re- stricted Securities included in such offering and reason- ably acceptable to the Issuer. No Holder of Transfer Restricted Securities may participate in any underwritten registration hereunder, unless such Holder (a) agrees to sell such Holder's Transfer Restricted Securities on the basis provided in any customary underwriting arrangements entered into in connection therewith and (b) completes and executes all questionnaires, powers of attorney, indemnities, under- writing agreements and other documents required under the terms of such underwriting arrangements. (b) Each Holder of Transfer Restricted Securi- ties agrees, if requested (pursuant to a timely written notice) by the managing underwriters in an underwritten offering or placement agent in a private offering of the Company's debt securities, not to effect any private sale or distribution (including a sale pursuant to Rule 144(k) and Rule 144A, but excluding non-public sales to any of its affiliates, officers, directors, employees and con- trolling persons) of any of the Securities except pursu- ant to an Exchange Offer, during the period beginning 10 days prior to, and ending 90 days after, the closing date of the underwritten offering. The foregoing provisions shall not apply to any holder of Transfer Restricted Securities if such holder is prevented by applicable statute or regulation from entering into any such agreement. The Issuer and the Guarantors agree (i) without the written consent of the managing underwriters in an underwritten offering of Transfer Restricted Securities covered by a Registration Statement filed pursuant to Section 3 hereof, not to effect any public or private sale or distribution of their respective debt securities, including a sale pursuant to Regulation D or Rule 144A under the Securities Act, during the period beginning 28 10 days prior to, and ending 90 days after, the closing date of each underwritten offering made pursuant to such Registration Statement (PROVIDED, HOWEVER, that such period shall be extended by the number of days from and including the date of the giving of any notice pursuant to Section 5(c)(v) or (c)(vi) hereof to and including the date when each seller of Transfer Restricted Securities covered by such Registration Statement shall have re- ceived the copies of the supplemented or amended Prospec- tus contemplated by Section 5(j) hereof). 10. MISCELLANEOUS (a) REMEDIES. In the event of a breach by the Issuer of any of its obligations under this Agreement, each Holder of Transfer Restricted Securities, in addi- tion to being entitled to exercise all rights provided herein, in the Indenture or, in the case of the Purchas- ers, in the Purchase Agreement, or granted by law, in- cluding recovery of damages, will be entitled to specific performance of its rights under this Agreement. The Issuer and the Guarantors agree that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by them of any of the provisions of this Agreement and hereby further agree that, in the event of any action for specific performance in respect of such breach, they shall waive the defense that a remedy at law would be adequate. (b) NO INCONSISTENT AGREEMENTS. Neither the Issuer nor any Guarantor has, as of the date hereof, and none of them shall, after the date of this Agreement, enter into any agreement with respect to any of their respective securities that is inconsistent with the rights granted to the Holders of Transfer Restricted Securities in this Agreement or otherwise conflicts with the provisions hereof. Neither the Issuer nor any Guar- antor will enter into any agreement with respect to any of their respective securities which will grant to any Person piggy-back registration rights with respect to a Registration Statement. (c) AMENDMENTS AND WAIVERS. The provisions of this Agreement, including the provisions of this sen- tence, may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, unless the Issuer has obtained 29 the written consent of Holders of at least a majority of the then outstanding aggregate principal amount of Trans- fer Restricted Securities. Notwithstanding the forego- ing, a waiver or consent to depart from the provisions hereof with respect to a matter that relates exclusively to the rights of Holders of Transfer Restricted Securi- ties whose securities are being sold pursuant to a Regis- tration Statement and that does not directly or indirect- ly affect, impair, limit or compromise the rights of other Holders of Transfer Restricted Securities may be given by Holders of at least a majority in aggregate principal amount of the Transfer Restricted Securities being sold by such Holders pursuant to such Registration Statement; PROVIDED that the provisions of this sentence may not be amended, modified or supplemented except in accordance with the provisions of the immediately preced- ing sentence. (d) NOTICES. All notices and other communica- tions (including without limitation any notices or other communications to the Trustee) provided for or permitted hereunder shall be made in writing by hand-delivery, registered first-class mail, next-day air courier or telecopier: (i) if to a Holder of Transfer Restricted Securities, at the most current address given by the Trustee to the Issuer; and (ii) if to the Issuer or the Guarantors, Argosy Gaming Company, 219 Plasa Street, Alton, Illinois 62002, Attention: Chief Financial Officer. All such notices and communications shall be deemed to have been duly given: when delivered by hand, if personally delivered; five business days after being deposited in the mail, postage prepaid, if mailed; one business day after being timely delivered to a next-day air courier; and when receipt is acknowledged by the addressee, if telecopied. Copies of all such notices, demands or other communications shall be concurrently delivered by the Person giving the same to the Trustee under the Indenture at the address specified in such Indenture. 30 (e) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties, including without limitation and without the need for an express assignment, subsequent Holders of Transfer Restricted Securities. The Issuer and the Guarantors agree that the Holders of the Securities shall be third party beneficia- ries to the agreements made hereunder by the Issuer and the Guarantors and each Holder shall have the right to enforce such agreements directly to the extent it deems such enforcement necessary or advisable to protect its rights hereunder. (f) COUNTERPARTS. This Agreement may be exe- cuted in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. (g) HEADINGS. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. (h) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. EACH OF THE PARTIES HERETO AGREES TO SUBMIT TO THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT. (i) SEVERABILITY. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provi- sions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their best efforts to find and employ an alter- native means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such 31 that may be hereafter declared invalid, illegal, void or unenforceable. (j) ENTIRE AGREEMENT. This Agreement, together with the Purchase Agreement, is intended by the parties as a final expression of their agreement, and is intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein and therein. (k) SECURITIES HELD BY THE ISSUER, THE GUARAN- TORS OR THEIR AFFILIATES. Whenever the consent or ap- proval of Holders of a specified percentage of Transfer Restricted Securities is required hereunder, Transfer Restricted Securities held by the Issuer, any Guarantor or any of their affiliates (as such term is defined in Rule 405 under the Securities Act) shall not be counted in determining whether such consent or approval was given by the Holders of such required percentage. 32 IN WITNESS WHEREOF, the parties have executed this Registration Rights Agreement as of the date first written above. ARGOSY GAMING COMPANY By: ---------------------------- Name: Title: GUARANTORS: ALTON GAMING COMPANY By: ---------------------------- Name: Title: THE MISSOURI GAMING COMPANY By: ---------------------------- Name: Title: THE ST. LOUIS GAMING COMPANY By: ---------------------------- Name: Title: IOWA GAMING COMPANY By: ---------------------------- Name: Title: JAZZ ENTERPRISES, INC. By: ----------------------------- Name: Title: ARGOSY OF LOUISIANA, INC. By: ---------------------------- Name: Title: CATFISH QUEEN PARTNERSHIP in COMMENDAM By: Jazz Enterprises, its General Partner By: ---------------------------- Name: Title: THE INDIANA GAMING COMPANY By: ---------------------------- Name: Title: The foregoing Registration Rights Agreement is hereby confirmed and accepted as of the date first above written. BEAR, STEARNS & CO. INC. DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION BA SECURITIES, INC. DEUTSCHE MORGAN GRENFELL/ C.J. LAWRENCE INC. BY: BEAR, STEARNS & CO. INC. By:_________________________ Name: Title: EX-4.5 6 EXHIBIT 4.5 EXHIBIT 4.5 ----------- CASH COLLATERAL AND DISBURSEMENT AGREEMENT Dated June 5, 1996 Among FIRST NATIONAL BANK OF COMMERCE, as Trustee, ----------- LASALLE NATIONAL TRUST, N.A., as Disbursement Agent, ---------------------- and ARGOSY GAMING COMPANY T A B L E O F C O N T E N T S Section Page ------- ---- ARTICLE I DEFINITIONS SECTION 1.1 Certain Defined Terms . . . . . . 2 SECTION 1.2 Computation of Time Periods . . . 6 ARTICLE II ESTABLISHMENT OF ACCOUNTS; INITIAL DEPOSITS; PRIORITY RELEASES SECTION 2.1 Establishment of Accounts . . . . 6 SECTION 2.2 Deposits to Accounts. . . . . . . 6 SECTION 2.3 Priority Releases . . . . . . . . 7 SECTION 2.4 Security Interest . . . . . . . . 7 SECTION 2.5 Appointment of Disbursement Agent 8 SECTION 2.6 Disbursement Agent is Agent of Trustee . . . . . . . . . . . . 8 SECTION 2.7 Instructions and Entitlement Orders of Trustee . . . . . . . 9 ARTICLE III REQUESTING AND MAKING CASH DISBURSEMENTS FROM THE CONSTRUCTION ACCOUNTS SECTION 3.1 Requesting the Cash Disbursement. 9 SECTION 3.2 Certain Cash Disbursements. . . . 9 SECTION 3.3 Making the Cash Disbursement. . . 10 SECTION 3.4 Additional Cash Disbursement Requirements . . . . . . . . . . 10 SECTION 3.5 Completion of the Project . . . . 11 ARTICLE IV CONDITIONS OF CASH DISBURSEMENTS FROM THE CONSTRUCTION ACCOUNT SECTION 4.1 Conditions Precedent to Cash Disbursements. . . . . . . . . . 12 ARTICLE V OTHER DISBURSEMENTS SECTION 5.1 Disbursements from the Working Capital Account. . . . . . . . . 14 i ARTICLE VI COVENANTS SECTION 6.1 Covenants of the Company. . . . . 14 SECTION 6.2 Covenants of the Disbursement Agent . . . . . . . . . . . . . 17 ARTICLE VII EVENTS OF DEFAULT; REMEDIES; RIGHTS UPON DEFAULT SECTION 7.1 Event of Default. . . . . . . . . 19 SECTION 7.2 Rights and Remedies Generally . . 19 SECTION 7.3 Assembly of Collateral. . . . . . 19 SECTION 7.4 Disposition of Collateral . . . . 19 SECTION 7.5 Recourse. . . . . . . . . . . . . 20 SECTION 7.6 Expenses; Attorneys' Fees . . . . 20 SECTION 7.7 Limitation on Duties Regarding Preservation of Cash Collateral. 20 ARTICLE VIII MISCELLANEOUS SECTION 8.1 Amendments, Etc.. . . . . . . . . 21 SECTION 8.2 Notices, Etc. . . . . . . . . . . 21 SECTION 8.3 No Waiver; Remedies . . . . . . . 22 SECTION 8.4 Indemnity and Expenses. . . . . . 22 SECTION 8.5 Execution in Counterparts . . . . 24 SECTION 8.6 Relationship of Trustee . . . . . 24 SECTION 8.7 Governing Law . . . . . . . . . . 24 SECTION 8.8 Gaming Laws . . . . . . . . . . . 24 SECTION 8.9 Waiver of Jury Trial. . . . . . . 24 SECTION 8.10 Termination . . . . . . . . . . . 24 ARTICLE IX ARBITRATION SECTION 9.1 Arbitration . . . . . . . . . . . 25 ii SCHEDULES Schedule 1 Construction Budget. . . . . . . . S-1 Schedule 2 Supplemental Conditions Precedent. S-3 EXHIBITS EXHIBIT A REQUEST FOR A CASH DISBURSEMENT . . . . A-1 EXHIBIT B FORM OF TRUSTEE'S CERTIFICATE . . . . . B-1 EXHIBIT C FORM OF REVIEWING AGENT'S CERTIFICATE. . . . . . . . . . . . C-1 iii CASH COLLATERAL AND DISBURSEMENT AGREEMENT CASH COLLATERAL AND DISBURSEMENT AGREEMENT, dated June 5, 1996, among First National Bank of Com- merce, as trustee for the Holders (in such capacity, to- gether with its successor in trust, if any, appointed pursuant to the Indenture referred to below, the "Trust- ee"), under an Indenture dated the date hereof (such Indenture as amended, supplemented or otherwise modified from time to time in accordance with the terms thereof, the "Indenture"), Argosy Gaming Company, a Delaware corporation (the "Company"), and LaSalle National Trust, N.A., as Disbursement Agent for the Trustee (the "Dis- bursement Agent"). PRELIMINARY STATEMENTS: (1) The Company has entered into the Indenture pursuant to which it will issue $235,000,000 of its 13 1/4% First Mortgage Notes due 2004 (the "Notes"). (2) As security for the prompt and complete payment and performance in full of the Indenture Obliga- tions, the Company intends to grant to the Trustee a security interest in, among other things, the Cash Col- lateral. (3) The Disbursement Agent has agreed to take such action with respect to the Accounts as specified herein. (4) This Cash Collateral and Disbursement Agreement is a condition to the issuance of the Notes under the terms of the Purchase Agreement, dated June 1, 1996 by and among the Company, the guarantors and the initial purchasers named therein. NOW, THEREFORE, in consideration of the forego- ing and of the mutual covenants hereinafter set forth, and for other good and valuable consideration, the re- ceipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows: ARTICLE I DEFINITIONS SECTION 1 CERTAIN DEFINED TERMS. Capitalized terms used but not defined herein and in any schedules and exhibits hereto shall have the meanings set forth in the Indenture. In addition, the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined): "ACCOUNTS" has the meaning specified in Section 2.1. "BUSINESS DAY" means each Monday, Tuesday, Wednesday, Thursday and Friday that is not a day on which banks in Chicago are authorized or obligated by law to close. "CASH COLLATERAL" has the meaning specified in Section 2.4. "CASH DISBURSEMENT" means a disbursement to Indiana Gaming L.P. from the Company in an amount equal to the Project Funding Requirement times the Company Percentage. "CASH DISBURSEMENT DATE" has the meaning speci- fied in Section 3.1. "CLOSING DATE" means June 5, 1996. "COMPANY" means Argosy Gaming Company. "COMPANY PERCENTAGE" means 57.5%, provided that after the Construction Budget has been increased to an amount greater than $225,000,000 and $225,000,000 has been funded through capital calls for Project Funding Requirements, Company Percentage shall mean 100%. "CONSTRUCTION ACCOUNT" has the meaning set forth in Section 2.1 hereof. "CONSTRUCTION BUDGET" means, for each of the Ship Project, the Land Project and the Temporary 2 Project, the budget attached hereto as Schedule 1, as amended from time to time as provided herein. "CONSTRUCTION SCHEDULE" means for each of the Projects the construction schedule proposed by the Company, The Indiana Gaming Company or Indiana Gam- ing L.P., as amended from time to time as provided herein. "CONSTRUCTION SUPERVISOR" means for each Pro- ject the Person responsible for monitoring the rele- vant Construction Budget, Plans and Specifications and changes thereto, cost breakdowns and estimates; the Construction Supervisor shall make periodic in- spections of the appropriate Project, as applicable and monitor the appropriate Project, as applicable. The Construction Supervisor may be either the Pro- ject Architect or an outside contractor not controlled by the Company or any of its affiliates. "CONTRACT" means any contract or subcontracts for work or materials for any Project. "COSTS" means all Hard Costs and all Soft Costs. "DISBURSEMENT AGENT" has the meaning specified in the recital of parties. "HARD COSTS" means the costs and expenses in respect of supplying goods, materials and labor for the construction of the Projects. "INDENTURE" has the meaning specified in the recital of parties. "INDIANA" means The Indiana Gaming Company, a wholly owned subsidiary of the Company and the gen- eral partner of Indiana Gaming L.P. "INDIANA GAMING L.P." means Indiana Gaming Company, L.P., the operator of the casino at Lawrenceburg. "LAND CONTRACTS" means each Contract for the Land Project. 3 "LAND PROJECT" means Indiana Gaming L.P.'s permanent facility at Lawrenceburg, Indiana, excluding the Ship Project. "LINE ITEM" means an item of cost set forth in a Construction Budget for a specific Project. "MAJOR CONTRACT" means any Contract or series of related Contracts for substantially the same work or materials in connection with Hard Costs or Soft Costs for an amount equal to or in excess of $- 2,000,000. "MAJOR CONTRACTOR" means any counterparty under a Major Contract. "MINOR CONTRACT" means any Contract or series of related Contracts for substantially the same work or materials that is not a Major Contract. "NOTES" has the meaning specified in the Preamble hereof. "PERSON" means an individual, partnership, corporation (including a business trust), joint stock company, trust, unincorporated association, joint venture or other entity, or a government or any political subdivision or agency thereof. "PLANS AND SPECIFICATIONS" means for each of the Projects the plans and specifications developed by or for the Company, as amended from time to time as provided herein. "PROJECT ARCHITECT" means, in the case of any Project, any Person acting as an architect for any aspect of the applicable Project selected by the Company, The Indiana Gaming Company or Indiana Gam- ing L.P. "PROJECT DISBURSEMENT DELAY" means the occurrence of any of the following events: (i) Indiana Gaming L.P.'s certificate of suitability has been revoked or cancelled or has expired or been suspended and has not been renewed by the Indiana Gaming Commission prior to the issuance of a riverboat owner's license, (ii) Indiana Gaming L.P.'s applica- 4 tion for a permanent riverboat owner's license is denied a gaming license by the Indiana Gaming Com- mission, (iii) Indiana Gaming L.P. is found unsuit- able by the Indiana Gaming Commission, (iv) Indiana Gaming L.P. has its riverboat owner's license re- voked or suspended by the Indiana Gaming Commission, (v) the Company or any of its subsidiaries is found unsuitable by the Indiana Gaming Commission or (vi) the Company, its subsidiaries or Indiana Gaming L.P. shall have received notice from the Indiana Gaming Commission of the commencement of proceedings by the Indiana Gaming Commission, the stated purpose of which is to formally consider taking any of the foregoing actions. "PROJECT FUNDING REQUIREMENT" means the total funding required by Indiana Gaming L.P. from all of its partners, as directed by the Company, to pay or reimburse construction and other costs directly related to the applicable Project. "PROJECTS" means each of the Ship Project, the Land Project and the Temporary Project. "REQUEST FOR A CASH DISBURSEMENT" has the mean- ing specified in Section 3.1. "RIVERBOAT" shall mean Indiana Gaming L.P.'s permanent riverboat gaming facility in Lawrenceburg, Indiana. "SHIP CONTRACT" means each Contract for the Ship Project. "SHIP PROJECT" means the project for the con- struction and outfitting of the Riverboat. "SHIPYARD" means Service Marine Industries, Inc. or any other shipyard chosen by the Company to construct the Riverboat. "SOFT COSTS" means all costs of the Company other than Hard Costs that are related to the Pro- jects, including, without limitation, pre-opening costs. 5 "TEMPORARY PROJECT" shall mean Indiana Gaming L.P.'s temporary riverboat casino project at Law- renceburg, Indiana. "TRUSTEE" shall have the meaning set forth in the recitals hereof. "WORKING CAPITAL ACCOUNT" has the meaning spec- ified in Section 2.1. SECTION 2 COMPUTATION OF TIME PERIODS. In this Agreement, in the computation of periods of time from a specified date to a later specified date, the word "from" means "from and including" and the words "to" and "until" each means "to but excluding." ARTICLE II ESTABLISHMENT OF ACCOUNTS; INITIAL DEPOSITS; PRIORITY RELEASES SECTION 1 ESTABLISHMENT OF ACCOUNTS. There are hereby established with the Disbursement Agent the following separate custodial accounts (collectively, the "Accounts") under the sole dominion and control of the Disbursement Agent: (a) an account in the name of the Company (the "Construction Account") for the Ship Pro- ject, the Land Project and the Temporary Project; and (b) an account in the name of the Company for working capital and general corporate purposes of the Company (the "Work- ing Capital Account"). Each of the above listed Accounts shall clearly indicate on the title thereof that it is held "subject to the lien of First National Bank of Commerce, as trustee for the holders of 13 1/4% First Mort- gage Notes due 2004 of Argosy Gaming Company." SECTION 2 DEPOSITS TO ACCOUNTS. The initial deposits to the Accounts shall be as follows: Construction Account $94,300,000 Working Capital Account 0.00 TOTAL DEPOSIT TO ACCOUNTS $94,300,000 6 The Company at any time may make contributions to the Construction Account consistent with the terms of the Indenture, which amounts may be added to the Contingency Line Item in Schedule 1. SECTION 3 PRIORITY RELEASES. Funds in the Construction Account and the Working Capital Account shall be released by the Disbursement Agent to any ac- count specified by the Trustee, upon receipt of a T- rustee's Certificate substantially in the form of Exhibit B hereto, certifying that such amounts will promptly be used for the purpose of making any required payment of principal or interest to Noteholders, including without limitation payments to Noteholders accepting any offer to purchase pursuant to the terms of the Indenture, but excluding offers to purchase pursuant to Sections 5.14, 5.18 and 5.19 of the Indenture, provided that the appli- cable notice shall have been given and the applicable cure periods shall have expired, in each case as provided for in the Indenture. SECTION 4 SECURITY INTEREST. As security for the prompt and complete payment and performance in full of all the Indenture Obligations, the Company hereby pledges and assigns to the Trustee for the equal and ratable benefit of the Holders, and grants to the Trustee for the equal and ratable benefit of the Holders an exclusive first priority security interest in all of its right, title and interest in the following collateral (the "Cash Collateral"): (a) the Accounts, all funds, investments and securities held therein or cred- ited thereto, whether by book-entry or other form, and all certificates and instruments, if any, from time to time representing or evidencing the Accounts; (b) all investments from time to time credited to any of the accounts con- stituting the Accounts, and all cer- tificates and instruments, if any, held therein from time to time repre- senting or evidencing the Permitted Investments; 7 (c) all notes, certificates of deposits, deposit amounts, checks and other instruments from time to time hereafter delivered to or otherwise possessed by the Disbursement Agent for or on behalf of the Trustee for the benefit of the Holders; (d) all interest, dividends, cash and in- struments from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of the then existing Cash Col- lateral; and (e) all proceeds of any and all of the foregoing. SECTION 5 APPOINTMENT OF DISBURSEMENT AGENT. The Trustee hereby appoints LaSalle National Trust, N.A. to act as the Disbursement Agent in connection with this Agreement, and to take all actions necessary or appropri- ate on behalf of the Trustee in order to comply with the terms of this Agreement. SECTION 6 DISBURSEMENT AGENT IS AGENT OF TRUSTEE. Solely for purposes of perfecting the security interest set forth in Section 2.4 above, and subject to the limitations as to the duties and liabilities of the Disbursement Agent set forth below, (a) the Trustee hereby appoints the Disbursement Agent as the Trustee's agent and pledgee-in-possession for the Cash Collateral; and (b) the Disbursement Agent by its execution and delivery of this Agreement hereby accepts such appoint- ment and agrees to be bound by the terms of this Agree- ment. The Company hereby agrees to such appointment of the Disbursement Agent and further agrees that the Dis- bursement Agent, on behalf of the Trustee, shall be entitled to act upon the instructions of the Trustee pursuant to Section 2.7 below. The Disbursement Agent agrees to take such action as shall from time to time be specified in writing from the Trustee to enable the Trustee to exercise its rights and remedies with respect to the lien and security interest described in Section 2.4 above. 8 SECTION 7 INSTRUCTIONS AND ENTITLEMENT ORDERS OF TRUSTEE. The Disbursement Agent hereby agrees, and the Company hereby acknowledges, that the Disbursement Agent shall comply with instructions and entitlement orders (including without limitation, instructions as to the investment, transfer, redemption or other disposition of the Cash Collateral) originated by the Trustee without further consent of the Company. This Agreement is in- tended to establish the Trustee's control over the Cash Collateral for purposes of the provisions of Section 8-106 of the Illinois Uniform Commercial Code. Notwith- standing the foregoing, the Trustee agrees with the Company that any such instruction or entitlement order shall be consistent with any and all rights that the Trustee may have under the Indenture and all other agree- ments and instruments executed pursuant thereto, or under applicable law, with respect to the Cash Collateral. ARTICLE III REQUESTING AND MAKING CASH DISBURSEMENTS FROM THE CONSTRUCTION ACCOUNTS SECTION 1 REQUESTING THE CASH DISBURSEMENT. Subject to the provisions of Section 3.2 below, the Company may request that a Cash Disbursement be made from the Construction Account by delivering notice to the Dis- bursement Agent, not later than 11:00 A.M. (New York time) on the second Business Day prior to the date of the proposed Cash Disbursement. Each such request shall be substantially in the form of Exhibit A (a "Request for a Cash Disbursement"), shall be executed by a duly autho- rized officer of the Company and shall specify therein (i) the requested date of such Cash Disbursement (the "Cash Disbursement Date") and (ii) the aggregate amount of such Project Funding Requirements. SECTION 2 CERTAIN CASH DISBURSEMENTS. In the event that Indiana Gaming L.P. funds required costs in connection with the Land Project from funds available to it from time to time from lenders for hotel construction, then to the extent such costs are funded in compliance with the conditions to disbursements from the Construc- tion Account as if such conditions were applicable and that the Company executes a Request for Cash Disbursement substantially in the form of Exhibit A hereto, an amount 9 equal to the Cash Disbursement not necessary as a result of the third party funding will be immediately trans- ferred from the Construction Account to the Working Capital Account. Costs will be deemed funded if paid to Indiana Gaming L.P. in cash or if Indiana Gaming L.P. is made the beneficiary of an escrow agreement or standby letter of credit, each irrevocable for the period set aside for hotel construction in the Construction Sched- ule, in such amount and containing as the only condition for disbursement or draws a certification by Indiana Gaming L.P. that the proceeds thereof are used for hotel construction. SECTION 3 MAKING THE CASH DISBURSEMENT. Upon fulfillment of the terms and conditions set forth herein including, without limitation, the applicable conditions set forth in Article IV hereof, the Disbursement Agent shall make payment of each Cash Disbursement, no later than 3:00 P.M. (New York time) on each Cash Disbursement Date, by deducting the amount of each Cash Disbursement from the Construction Account and depositing such amount in the Indiana Gaming L.P. account maintained with the Disbursement Agent for such purpose or as otherwise di- rected by the Company. At least two Business Days prior to any Cash Disbursement Date, the Company shall instruct the Disbursement Agent to sell such portion of the Permitted Investments, if any, held in the Construction Ac- count as shall be necessary to fund the requested Cash Disbursement. The Disbursement Agent is authorized to disburse funds via electronic funds transfer pursuant to the following wiring instructions as may be amended by an officer of the Company: Bank of America Account# 74-08099 Indiana Gaming Company L.P. ABA# 071000039 SECTION 4 ADDITIONAL CASH DISBURSEMENT RE- QUIREMENTS. (a) LINE ITEM REALLOCATION. Subject to the terms of Section 3.5, in the event that (i) the work to be performed in respect of any Line Item in a particular Construction Budget (either for Hard Costs or Soft Costs) shall be completed without the expenditure of all amounts in the applicable Construction Budget allocated to such Line Item (or the Company certifies in an Officers' Cer- tificate (x) that at least 80% of the work to be per- 10 formed in respect of such Line Item has been completed and (y) that such work is projected to be completed with- out the expenditure of all amounts in the applicable Con- struction Budget allocated to such Line Item) and (ii) Indiana Gaming L.P. has paid all amounts due to contrac- tors under contracts entered into with Indiana Gaming L.P. or any of its subsidiaries and other persons with whom Indiana Gaming L.P. or its subsidiaries have con- tracted and directly entitled to payment for work com- pleted as of the date of request for disbursement in re- spect of such Line Item (except as may be disputed in good faith and as to which appropriate reserves are being maintained), the Company may, subject to the other terms and conditions of this Agreement regarding the making of Cash Disbursements, reallocate the undisbursed portion of the Construction Budget allocable to such Line Item to the general Contingency Line Item or to other uncompleted Line Items within such Construction Budget or, if no uncompleted Line Items remain, to the Construction Bud- gets of one or more other Projects, as selected by the Company. (b) USE OF CONTINGENCY. In the event that the cost of the work performed or projected to be performed in respect of any Line Item shall exceed the amount allocated to such Line Item in the Construction Budget, the Disbursement Agent, subject to the other terms and conditions of this Agreement regarding the making of Cash Disbursements, shall at the request of the Company disburse funds to pay such excess from the undis- bursed portion of any general contingency Line Item con- tained in such Construction Budget. All income on and gains from Permitted Investments in the Construction Account shall be deposited in the Construction Account, and all income and gains on the Working Capital Account shall be added to the Working Capital Account added to the general contingency Line Item. SECTION 5 COMPLETION OF THE PROJECT. Upon the substantial completion of the Ship Project and the Land Project, and the payment of all amounts then due (or to become due by passage of time only) to contractors under contracts entered into with Indiana Gaming L.P. or any of its subsidiaries and other persons with whom Indiana Gaming L.P. or any of its subsidiaries have contracted and directly entitled (or to become entitled by passage of time only) to payment for work completed (except as 11 may be disputed in good faith and as to which appropriate reserves are being maintained), and a delivery to the Trustee and Disbursement Agent of an Officer's Certificate to such effect, any undisbursed, unreleased funds remaining in the Construction Account shall be trans- ferred to the Working Capital Account. ARTICLE IV CONDITIONS OF CASH DISBURSEMENTS FROM THE CONSTRUCTION ACCOUNT SECTION 1 CONDITIONS PRECEDENT TO CASH DIS- BURSEMENTS. The Disbursement Agent shall make Cash Dis- bursements from the Construction Account upon satisfac- tion in connection with each Cash Disbursement of the conditions set forth on Schedule 2 hereto, as applicable, and the following conditions: (a) DOCUMENTS. The Disbursement Agent shall have received the following, in form and substance reasonably satisfactory to the Disbursement Agent: (i) a Request for a Cash Dis- bursement in substantially the form of Exhibit A (including the representations and warranties referred to in Section 4.1(b) herein, which shall be true and correct in all material re- spects); (ii) such other instruments, documents, opinions, and information pertaining to the Cash Disbursement or evidencing compli- ance by the Company with the provisions of this Agreement and the Indenture as the Disbursement Agent may reasonably request; and (iii) within 45 days following the end of each fiscal quarter of the Company during which a Cash Disbursement was made, a copy of a certificate from an independent pub- lic accountant engaged by Company (a "Reviewing Agent") in the form of Exhibit C hereto with respect to all Cash Disbursements and related Project Funding Requirements during such quar- ter. 12 (b) REPRESENTATIONS AND WARRANTIES. The giving of each Request for a Cash Disbursement and the acceptance by the Company of the proceeds of such Cash Disbursement shall constitute a representation and war- ranty by the Company to the Disbursement Agent, the Trustee and the Holders that: (i) The representations and warranties contained in Exhibit A and Schedule 2 hereto are correct, in each case on and as of the date of such Cash Disbursement, before and after giving effect to such Cash Disbursement and to the application of the proceeds there- from, as though made on and as of such date, except to the extent that any such representa- tion or warranty by its terms relates to a specified prior date; (ii) No event has occurred and is continuing, or would result from such Cash Disbursement or from the application of the proceeds thereof, that constitutes an Event of Default under the Indenture or a Project Dis- bursement Delay or would constitute an Event of Default but for the requirement that notice be given or time elapse or both; and (iii) The Company has satisfied all of the conditions herein to the release of such funds. (c) NO NOTICE OF DEFAULT. The Disburse- ment Agent shall not have received written notice from the Trustee that an Event of Default has occurred and is continuing under the Indenture. The Trustee agrees to promptly notify the Disbursement Agent of an Event of Default. (d) LIMITATION ON DISBURSEMENTS. The total amount of disbursements made by the Disbursement Agent shall not exceed $30 million prior to the next time after the date of this Agreement that the certificate of suitability granted by the Indiana Gaming Commission to Indiana Gaming L.P. is formally extended or renewed by the Indiana Gaming Commission for a period of at least 120 consecutive days or, if earlier, the date gaming 13 operations are commenced with at least 950 gaming posi- tions at the Temporary Project. Such extension or renew- al must be made by one order at one time, and two or more orders which cumulatively extend the certificate of suitability for 120 days or more shall not satisfy the foregoing condition. The Company covenants to promptly notify the Disbursement Agent of such extension or renew- al, and the Disbursement Agent may rely on such notifica- tion without independent verification. (e) CESSATION OF DISBURSEMENTS. In the event of an Event of Default or a Project Disbursement Delay, the Disbursement Agent shall not disburse any additional funds until such event is waived or cured. The Company covenants to promptly notify the Disbursement Agent of such event, and the Disbursement Agent may rely on such notification without independent verification. ARTICLE V OTHER DISBURSEMENTS SECTION 1 DISBURSEMENTS FROM THE WORKING CAPITAL ACCOUNT. Notwithstanding Articles III and IV, the Disbursement Agent shall release amounts on deposit in the Working Capital Account to a bank account of the Company or any of its Subsidiaries designated by the Company for working capital, general corporate or other purposes, identified in writing at least 2 Business Days prior thereto by the Company upon receipt of an Officers' Certificate to the effect that: (i) such funds will not be applied in violation of the terms of the Inden- ture; and (ii) no Event of Default under the Indenture shall have occurred or be contin- uing. ARTICLE VI COVENANTS 14 SECTION 1 COVENANTS OF THE COMPANY. For so long as this Agreement shall remain in effect, the Compa- ny shall: (a) CONSTRUCTION SUPERVISOR. Select Con- struction Supervisors for the Ship, Land and Temporary Projects as soon as practicable, and in any event prior to the earlier of (i) 90 days following the Closing Date and (ii) in the case of each of the respective Projects, the date on which construction commences on such Ship, Land or Temporary Project, as applicable. (b) PLANS AND SPECIFICATIONS, ETC. As soon as practicable, prepare (or cause to be prepared) Plans and Specifications and a Construction Schedule for the Ship Project, the Land Project and the Temporary Pro- ject. (c) COPIES OF CONTRACTS, ETC. Deliver to the Disbursement Agent upon the request of the Disburse- ment Agent, (i) copies of all Major and Minor Contracts, (ii) as promptly as practicable, copies of all work per- mits, building permits and other permits required, and (iii) no less frequently than the first Business Day of each month a list of all Major Contractors that have per- formed work on or supplied materials for each of the Pro- jects during the previous month and that are scheduled to perform work or supply materials to one or more of the Projects during the current month; provided that at any time after the delivery of the initial list of such Major Contractors, the Company may fulfill its obligations hereunder by delivering a list of changes from the most recent list delivered to the applicable Construction Supervisor. (d) CHANGES IN BUDGET AND PLANS. (i) Cause the proceeds from the Offerings to be utilized in accordance with Section 5.15 of the Indenture, and not make or permit any of its Subsidiaries or Indiana Gaming L.P. to make, any changes in such Plans and Specifica- tions, Construction Budgets and Construction Schedules, except such changes that (x) do not materially alter the scope of the applicable Project, or (y) are set forth in revised Plans and Specifications, a revised Construction Budget or a revised Construction Schedule which are delivered to the applicable Construction Supervisor, consistent with a determination by the Company to the 15 effect that the Company Percentage of such revised Con- struction Budget does not exceed cash on deposit in the Construction Account, (ii) deliver to the applicable Con- struction Supervisor, as promptly as possible, copies of material change orders for each Project, and (iii) keep complete and accurate records of all changes in the ap- plicable Plans and Specifications, Construction Budgets and Construction Schedules. (e) ACCESS TO INFORMATION. Permit and cause each of its Subsidiaries and Indiana Gaming L.P. to permit the Disbursement Agent and any of its respective agents on reasonable notice and at such times as shall be reasonably requested (i) to inspect each of the Plans and Specifications and Construction Budgets, (ii) to inspect and review (and receive copies of, if requested) (A) all changes to the Plans and Specifications and Construction Budgets, (B) all contracts or subcontracts relating to the Projects and any changes thereto, (C) all books and records of the Company and any of its Subsidiaries and Indiana Gaming L.P. related to the Projects and (D) such other information as the Construction Supervisor shall reasonably request relating to the performance of the Projects (including copies of receipts, invoices and other supporting documentation to substantiate the costs to be paid from the proceeds of any requested disburse- ment hereunder), (iii) to attend any job progress meet- ings and (iv) to discuss, in the presence of a designated employee of the Company or Indiana Gaming L.P., the Pro- jects and other matters related thereto with any Project Architect, any contractor or subcontractor performing work or supplying material for the Projects or any em- ployee of the Company and any of its Subsidiaries and Indiana Gaming L.P. (f) CERTAIN RIGHTS. Not claim any rights with respect to the Accounts except as specifically set forth in the Indenture, herein or in accordance with applicable law. (g) FURTHER ASSURANCES. From time to time at the expense of the Company, promptly execute, deliver, file and record all further instruments, indorsement and other documents, and take such further action as the Trustee may deem reasonably desirable in obtaining the full benefits of this Agreement and of the rights, reme- 16 dies and powers herein granted, including, without limi- tation, the following: (i) the filing of any financing statements, in form acceptable to the Trustee under the UCC in effect in any jurisdiction with respect to the liens and security inter- ests granted hereby. The Company also hereby authorizes the Trustee to file any such financ- ing statement without the signature of the Company to the extent permitted by applicable law. A photocopy or other reproduction of this Agreement shall be sufficient as a financing statement and may be filed in lieu of the orig- inal to the extent permitted by applicable law. The Company will pay or reimburse the Trustee for all filing fees and related expenses; (ii) furnish to the Trustee from time to time statements and schedules further identifying and describing the Cash Collateral and such other reports in connection with the Cash Collateral as the Trustee may reasonably request, all in reasonable detail and in form satisfactory to the Trustee. (h) CHANGE OF NAME; IDENTITY; CORPORATE STRUCTURE; OR CHIEF EXECUTIVE OFFICE. Not change its name, identity, corporate structure or the location of its chief executive office without (i) giving the Trustee and the Disbursement Agent at least thirty (30) days' prior written notice clearly describing such new name, identity, corporate structure or new location and provid- ing such other information in connection therewith as the Trustee may reasonably request, and (ii) taking all action satisfactory to the Trustee as the Trustee may reasonably request to maintain the security interest of the Trustee in the Cash Collateral intended to be granted hereby at all times fully perfected with the same or better priority and in full force and effect. (i) PROMPT NOTICE. Upon discovering that it requires funding for a Project and is unable to make the representations and warranties contained herein in connection with a Request for a Cash Disbursement, promptly notify the Trustee and the Holders of such event. 17 SECTION 2 COVENANTS OF THE DISBURSEMENT AGENT. For so long as this Agreement shall remain in effect, in addition to its other undertakings, the Disbursement Agent: (a) THE ACCOUNTS. Shall maintain the Accounts as follows: (i) Notwithstanding anything to the contrary in this or any other agreement relating to the Accounts, each of the Accounts is and will be held in trust on behalf of the Trustee for the benefit of the Holders and not commingled with any ordinary deposit or commer- cial bank account, will be maintained with the trust department of the Disbursement Agent solely for the Trustee for the benefit of the Holders and will be subject to the written instructions of the Trustee. (ii) Unless otherwise instruct- ed in writing by the Trustee for the benefit of the Holders, the Disbursement Agent shall in- vest amounts on deposit in the Accounts in Permitted Investments in accordance with the written instructions of the Company. (iii) All disbursements and releases pursuant to this Agreement shall be made by the Disbursement Agent irrespective of, and without deduction for, any counterclaim, defense, recoupment or set-off and shall be fi- nal, and the Disbursement Agent will not seek to recover from the Trustee for any reason any such payment once made. (iv) All service charges and fees with respect to this Agreement or the Ac- counts shall be paid by the Company. (v) The Disbursement Agent irrevocably waives and renounces any pledge, security interest (whether consensual, statuto- ry or otherwise) or right of offset or compen- sation that it has or may ever have for its own benefit with respect to the Accounts. 18 (b) BOOKS AND RECORDS. Shall maintain appropriate books and records with respect to each Ac- count in which shall be recorded all transactions related thereto including, without limitation, all disbursements hereunder and any Permitted Investments made by the Dis- bursement Agent and shall permit the Trustee or any of its agents or representatives to inspect and to make copies of such books and records at the Company's sole cost and expense. ARTICLE VII EVENTS OF DEFAULT; REMEDIES; RIGHTS UPON DEFAULT SECTION 1 EVENT OF DEFAULT. For purposes of this Agreement, the term "Event of Default" shall have the meaning provided in the Indenture and shall also include any default in the performance, or breach, of any covenant of the Company set forth in Section 6.1 hereof that continues for 30 days after written notice has been given from the Trustee or from holders of at least 25% of the aggregate principal amount of the Notes then out- standing, specifying such default and requiring that it be remedied. SECTION 2 RIGHTS AND REMEDIES GENERALLY. If an Event of Default shall occur and be continuing, then and in every such case, the Trustee shall have all the rights of a secured party under the UCC, shall have all rights now or hereafter existing under all other applica- ble laws, and, subject to any mandatory requirements of applicable law then in effect, shall have all the rights set forth in this Agreement and all the rights set forth with respect to the Cash Collateral or this Agreement in any other security agreement between the parties. SECTION 3 ASSEMBLY OF COLLATERAL. If an Event of Default shall occur and be continuing, upon five days notice to the Company, the Company shall, at its own ex- pense, assemble the Cash Collateral (or from time to time any portion thereof) and make it available to the Trustee at any place or places designated by the Trustee which is reasonably convenient to both parties. 19 SECTION 4 DISPOSITION OF COLLATERAL. The Trustee will give the Company reasonable notice of the time and place of any public sale of the Cash Collateral or any part thereof or of the time after which any pri- vate sale or any other intended disposition thereof is to be made. The Company agrees that the requirements of reasonable notice to it shall be met if such notice is mailed, postage prepaid to its address specified in Section 8.2 of this Agreement (or such other address that the Company may provide to the Trustee in writing) at least ten (10) days before the time of any public sale or after which any private sale may be made. SECTION 5 RECOURSE. The Company shall remain liable for any deficiency if the proceeds of any sale or other disposition of the Cash Collateral are insufficient to satisfy the Indenture Obligations in accordance with the terms of the Indenture. The Company shall also be liable for all expenses of the Trustee incurred in con- nection with collecting such deficiency, including, without limitation, the fees and disbursements of any attorneys employed by the Trustee to collect such defi- ciency. SECTION 6 EXPENSES; ATTORNEYS' FEES. The Company shall reimburse the Trustee for all its expenses in connection with the exercise of its rights hereunder, including, without limitation, all reasonable attorneys' fees and legal expenses incurred by the Trustee. Ex- penses of retaking, holding, preparing for sale, selling or the like shall include the reasonable attorneys' fees and legal expenses of the Trustee. All such expenses shall be secured hereby. SECTION 7 LIMITATION ON DUTIES REGARDING PRESERVATION OF CASH COLLATERAL. (a) The Trustee's sole duty with respect to the custody, safekeeping and physi- cal preservation of the Cash Collateral in its posses- sion, under Section 9-207 of the UCC or otherwise, shall be to deal with it in the same manner as the Trustee deals with similar property for its own account. (b) The Trustee shall have no obligation to take any steps to preserve rights against prior par- ties to any Cash Collateral. 20 (c) Neither the Trustee nor any of its directors, officers, employees or agents shall be liable for failure to demand, collect or realize upon all or any part of the Cash Collateral or for any delay in doing so or shall be under any obligation to sell or otherwise dispose of any Cash Collateral upon the request of the Company or otherwise. (d) Neither the Trustee nor the Disburse- ment Agent nor any of their directors, officers, employ- ees or agents shall be liable for disbursements made in good faith reliance on any certificate provided to either of them pursuant to the terms of this Agreement; PROVID- ED, HOWEVER, that the Trustee, the Disbursement Agent and their respective directors, officers, employees and agents shall remain liable for damages caused by dis- bursements made through their gross negligence, bad faith or willful misconduct. ARTICLE VIII MISCELLANEOUS SECTION 1 AMENDMENTS, ETC. No amendment, modification or waiver of any provision of this Agreement may be made except in accordance with Article X of the Indenture; PROVIDED, that any such amendment, modifica- tion or waiver which adversely affects the Disbursement Agent shall require the prior written consent of the Disbursement Agent. SECTION 2 NOTICES, ETC. All notices and other communications required or permitted hereunder shall be in writing and shall be sufficiently given if made by hand delivery, by telex, by facsimile or registered or certified mail, postage prepaid, return receipt re- quested, addressed as follows: To Disbursement Agent: LaSalle National Trust, N.A. 135 S. LaSalle Chicago, Illinois 60603 Attention: Corporate Trust Administration, Room 1825 21 To Trustee: First National Bank of Commerce 210 Baronne Street New Orleans, Louisiana 70112 Attention: Marilyn Maloney To the Company: Argosy Gaming Company 219 Piasa Street Alton, Illinois 62002-6232 Attention to each of: Chief Financial Officer and Controller with a copy to: Winston & Strawn 35 West Wacker Drive Chicago, Illinois 60605 Attention: Joseph Walsh, Esq. Any party hereto may by notice to each other party designate such additional or different addresses as shall be furnished in writing by such party. Any notice or communication to any party shall be deemed to have been given or made as of the date so delivered, if per- sonally delivered; when answered back, if telexed; when receipt is acknowledged, if faxed; and five calendar days after mailing, if sent by registered or certified mail (except that a notice of change of address shall not be deemed to have been given until actually received by the addressee). SECTION 3 NO WAIVER; REMEDIES. No failure on the part of the Disbursement Agent, the Trustee, or any Holder to exercise, and no delay in exercising, any right under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any such right preclude any other or further exercise thereof or the exercise of any other right. SECTION 4 INDEMNITY AND EXPENSES. (a) The Company agrees to indemnify the Trustee, the Holders, the Disbursement Agent and each Construction Supervisor (the "Indemnified Parties") from and against any and all claims, losses and liabilities growing out of or result- 22 ing from this Agreement (including, without limitation, enforcement of this Agreement), except claims, losses or liabilities resulting from such Indemnified Party's bad faith, gross negligence or willful misconduct as deter- mined by a final judgment of a court of competent juris- diction. (b) The Company will upon demand pay to the Disbursement Agent, the Trustee or the applicable Construction Supervisor the amount of any and all reason- able expenses, including the reasonable fees and expenses of its counsel and of any experts and agents, that the Disbursement Agent or the Trustee may incur in connection with (i) the administration of this Agreement, (ii) the exercise or enforcement of any of the rights of the Dis- bursement Agent, the Trustee, or the Holders hereunder or (iii) the failure by the Company to perform or observe any of the provisions hereof. The Company will also pay on demand all reasonable fees and expenses of the appli- cable Construction Supervisor in connection with this Agreement. (c) Notwithstanding any other provision of this Agreement, the fees and expenses (but not indemni- ties) payable to any Construction Supervisor and included in the relevant Construction Budget shall be paid from the Construction Account upon request by the Company. (d) The making of any Cash Disbursement or part thereof shall not constitute an approval or accep- tance of the work or material by the Trustee or the Dis- bursement Agent nor shall such approval give rise to any liability or responsibility related to: (i) the quality of the work, the quantity of the work, the rate or progress in completion of the work, or the sufficiency of materials or labor being supplied in connec- tion therewith; and (ii) any errors, omissions, inconsistencies or other defects of any nature in the Plans and Specifications and any inspec- tion of the work that either the Trustee, the Disbursement Agent or the Construction Supervi- sor may choose to make, whether through any consulting engineer, agent or employee or offi- 23 cer, during the progress of the work shall be solely for the Trustee and/or the Disbursement Agent's information, and under no circumstances will any such inspection be deemed to have been made for the purpose of supervising or superin- tending the work or for the information or pro- tection of any right or interest of any persons other than the Trustee, the Disbursement Agent or the Holders. (e) In no event shall either the Trustee or the Disbursement Agent be liable for any Liens which may be filed by third parties against the Projects. SECTION 5 EXECUTION IN COUNTERPARTS. This Agreement may be executed in any number of separate coun- terparts and by different parties hereto in separate counterparts, each of which, when so executed, shall be deemed to be an original and all of which, taken togeth- er, shall constitute one and the same agreement. Deliv- ery of an executed counterpart of a signature page to this Agreement by telecopier shall be effective as deliv- ery of a manually executed counterpart of this Agreement. SECTION 6 RELATIONSHIP OF TRUSTEE. The Trust- ee shall not be under any responsibility in respect of the validity or sufficiency of this Agreement or the execution and delivery hereof or in respect of the valid- ity or sufficiency of any document or agreement delivered in connection herewith, including, but not limited to, the Request for a Cash Disbursement as provided by Exhib- it A. The Trustee shall not be accountable for the use or application of the funds in the Accounts or for Cash Disbursements, except as set forth herein or in the Indenture. SECTION 7 GOVERNING LAW. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Illinois. SECTION 8 GAMING LAWS. Each of the provisions of this Agreement is subject to, and shall be enforced in compliance with, the provisions of any applicable laws and regulations promulgated by any Gaming Authority. SECTION 9 WAIVER OF JURY TRIAL. Each of the Company, the Trustee and the Disbursement Agent hereby 24 irrevocably waives all right to trial by jury in any ac- tion, proceeding or counterclaim (whether based on con- tract, tort or otherwise) arising out of or relating to this Agreement, or the actions of any party hereto in the negotiation, administration, performance or enforcement thereof. SECTION 10 TERMINATION. The rights, duties and obligations of each of the parties hereto as provided for hereunder shall cease and this Agreement shall termi- nate upon the disbursement of all funds from the Accounts or the earlier discharge in full of all of the Indenture Obligations. ARTICLE IX ARBITRATION Section 9.1 ARBITRATION. Any disagreement with respect to the release of funds from the Construc- tion Account, or any related disagreement with respect to the construction, meaning or effect of this Agreement, arising out of this Agreement or concerning the rights or obligations of the parties hereunder shall be submitted to arbitration, one arbitrator to be chosen by the Compa- ny, one by the Disbursement Agent (with the approval of the applicable Construction Supervisor), and a third to be chosen by the first two arbitrators before they enter into arbitration. The arbitrators shall be impartial and shall be active or retired persons with experience in construction, development and/or construction lending (and in the case of the Ship Project, maritime construc- tion, development and/or construction lending). In the event that either party should fail to choose an arbitrator within 10 days following a written request by the other party to enter into arbitration, the requesting party may choose two arbitrators who shall, in turn, choose the third arbitrator. If the first two arbitrators have not chosen a third arbitrator at the end of 10 days following the last day of the selection of the first two arbitrators, each of the first two arbitrators shall name three candidates, of whom the other arbitrator shall eliminate two, and the determination of the third arbitrator shall be made from the remaining two candi- dates by drawing lots. Each party shall present its case 25 to the arbitrators within 15 days following the date of the appointment of the third arbitrator. The decision of a majority of the three arbitrators shall be final and binding upon both parties. Such decision shall be ren- dered within 10 days of the completion of such arbitra- tion. Judgment may be entered upon the arbitration award in any court having jurisdiction. Each party shall bear the expense of its own arbitrator and shall jointly and equally bear with the other the expense of the third arbitrator and of the arbitration. In the event that the two arbitrators are chosen by one party, as above provid- ed, the expense of the arbitrators and the arbitration shall be equally divided between the two parties. Any such arbitration shall take place in Chicago, Illinois unless some other location is mutually agreed upon by the parties. The arbitrators shall resolve any dispute aris- ing hereunder in a manner consistent with the intent of the parties as expressed in this Agreement. The arbitra- tors shall not award any punitive, consequential or exem- plary damages or any amount in excess of the amount to be released from the Construction Account. All awards by the arbitrators shall be payable solely from the amounts on deposit in the Construction Account. 26 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written. ARGOSY GAMING COMPANY By: ----------------------------- Name: Title: FIRST NATIONAL BANK OF COMMERCE, as Trustee By: ----------------------------- Name: Title: LASALLE NATIONAL TRUST, N.A., as Disbursement Agent By: ----------------------------- Name: Title: 27 EX-4.6 7 EXHIBIT 4.6 EXHIBIT 4.6 FORM OF SECURITY AGREEMENT (ARGOSY GAMING COMPANY) THIS SECURITY AGREEMENT, dated as of June 5, 1996 (as amended, restated, supplemented or otherwise modified from time to time, this "Security Agreement") is by and between ARGOSY GAMING COMPANY, a Delaware corporation (the "Grantor"), and FIRST NATIONAL BANK OF COMMERCE, as trustee (together with its successors in such capacity, the "Trustee" or the "Grantee") for the holders of those certain Notes (as hereinafter defined). W I T N E S S E T H WHEREAS, the Grantor, the Grantee and the Guarantors (as defined in the Indenture (as hereinafter defined)) have entered into that certain Indenture dated June 5, 1996 (as amended, restated, supplemented or otherwise modified from time to time, the "Indenture"), pursuant to which, among other things, the Grantor shall issue its 13 1/4% First Mortgage Notes due 2004 (the "Original Notes"); and WHEREAS, pursuant to a Registration Rights Agreement between the Grantor, the Guarantors and Bear, Stearns & Co. Inc., Donaldson, Lufkin & Jenrette Securities Corporation, BA Securities, Inc. and Deutsche Morgan Grenfell/C. J. Lawrence Inc. (collectively, the "Initial Purchasers"), the Grantor and the Guarantors will file a registration statement with respect to an offer to exchange the Original Notes for a new series of 13 1/4% First Mortgage Notes due 2004 registered under the Securities Act of 1933, as amended, with terms substantially identical to those of the Original Notes (the "Series B Notes" and, together with the Original Notes, the "Notes"); WHEREAS, pursuant to the Indenture, the Grantee shall act as the trustee for the holders of the Original Notes and the holders of the Series B Notes (collectively, the "Noteholders"); WHEREAS, to secure the repayment of the Notes and any and all other Secured Obligations (as defined in Section 1 hereof) of the Grantor, the Grantor has agreed to grant to the Grantee for the ratable benefit of the Noteholders a security interest in and to the Collateral (as defined in Section 2 hereof) upon the terms and subject to the conditions hereinafter set forth; WHEREAS, Grantor and the Guarantors will derive substantial direct and indirect benefit from the issuance of the Notes; and WHEREAS, it is a condition precedent to the purchase of the Original Notes by the Initial Purchasers from the Grantor that the Grantor shall have executed and delivered this Security Agreement to the Grantee for the ratable benefit of the Noteholders; NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants herein contained and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: SECTION 1. DEFINITIONS 1.1 CERTAIN DEFINED TERMS. Terms defined in the Indenture and not otherwise defined herein have the respective meanings provided for in the Indenture. Each term defined in the first paragraph and the Recitals shall have the meaning set forth above whenever used herein, unless otherwise expressly provided or unless the context clearly requires otherwise. When used herein, (a) the terms ACCOUNT, CHATTEL PAPER, DEPOSIT ACCOUNT, DOCUMENT, EQUIPMENT, FIXTURE, GENERAL INTANGIBLES, GOODS, INVENTORY, INSTRUMENT, INVESTMENT PROPERTY and UNCERTIFICATED SECURITY shall have the respective meanings assigned to such terms in the Uniform Commercial Code (as defined below) and (b) the following terms shall have the following meanings: "ACCOUNT DEBTOR" shall means the party who is obligated on or under any Account or Contract Right of the Grantor or, if appropriate, any General Intangible of the Grantor. "APPLICABLE GAMING REGULATIONS" shall mean, at any particular time, federal and state gaming and gambling statutes, laws, rules and regulations applicable to the Grantor or its Subsidiaries (as defined in the Indenture). "COLLATERAL" shall have the meaning assigned thereto in Section 2 hereof. "CONTRACT RIGHTS" shall means any right of the Grantor to payment under a contract for the sale or lease of Goods or the rendering of services, which right at the time is not yet earned by performance. "EVENT OF DEFAULT" means when any of the following events shall have occurred: (i) the occurrence of an "Event of Default" as defined in the Indenture; or (ii) failure in the due observance or performance by the Grantor of any of the covenants and conditions in this Security Agreement required to be observed and performed by Grantor and continuance of such failure for thirty (30) days after the Grantor becomes aware or should have become aware of such failure. "INTELLECTUAL PROPERTY" means all of Grantor's intellectual property, including without limitation all present and future designs, patents, patent rights and applications therefor, trademarks, service marks, business names, logos and registrations or applications therefor, trade names, inventions, copyrights and all applications and registrations therefor, software or computer programs, source codes, object codes, license rights, trade secrets, methods, processes, knowhow, drawings, specifications, descriptions, and all memoranda, notes and records with respect to any -2- research and development, whether now owned or hereafter acquired by any Grantor, all goodwill associated with any of the foregoing and proceeds of all of the foregoing. "NON-TANGIBLE COLLATERAL" shall mean, collectively, the Grantor's Accounts, Contract Rights and General Intangibles. "PERMITTED LIENS" shall have the meaning specified in the Indenture. "PROCEEDS" means all "proceeds" (as defined in the Uniform Commercial Code) of, and all other profits, rentals or receipts, in whatever form, arising from the collection, sale, lease, exchange, assignment, licensing or other disposition of, or realization upon, any Collateral. "SECURED OBLIGATIONS" means all Secured Obligations of the Grantor to repay the Notes and any and all other Secured Obligations of the Grantor to the Grantee under the Indenture, this Security Agreement and the other Security Documents (as that term is defined in the Indenture). Without limiting the foregoing, the Secured Obligations shall include (i) the payment of the principal of and premium and Liquidated Damages (as that term is defined in the Indenture), if any, and interest on the Notes, (ii) the payment of all other indebtedness of the Grantor in respect of the Notes and the Indenture and (iii) the due performance of and compliance by the Grantor with all the terms of and all the obligations to the Grantee under the Notes and the Indenture. "SECURITY INTERESTS" means the security interests granted pursuant to Section 2, as well as all other security interests created or assigned as additional security for the Secured Obligations pursuant to the provisions of this Security Agreement. "TERMINATION DATE" shall have the meaning assigned thereto in Section 8.7 hereof. "UNIFORM COMMERCIAL CODE" shall mean the Uniform Commercial Code as in effect in the State of New York on the date of this Security Agreement; provided, however, that if by reason of mandatory provisions of law, the perfection or effect of perfection or non-perfection of the security interest granted hereunder in any Collateral is governed by the Uniform Commercial Code as in effect in a jurisdiction other than New York, "Uniform Commercial Code" shall mean the Uniform Commercial Code as in effect in such other jurisdiction for purposes of the provisions hereof relating to such perfection or effect of perfection or non-perfection. SECTION 2. GRANT OF SECURITY INTERESTS In order to secure the payment and performance of the Secured Obligations, Grantor hereby grants to Grantee, for the ratable benefit of the Noteholders, a continuing security interest in and to all right, title and interest of the Grantor in the following property, whether now owned or existing or hereafter owned, acquired, licensed, leased, consigned or arising and regardless of where located (all being collectively referred to as, the "COLLATERAL"): (i) Accounts; -3- (ii) Chattel Paper; (iii) Deposit Accounts; (iv) Documents or other receipts covering, evidencing or representing goods; (v) Equipment; (vi) Fixtures; (vii) General Intangibles; (viii) Goods (including, without limitation, all its Equipment, Fixtures and Inventory), and together will all accessions, additions, attachments, improvements, substitutions and replacements thereto and therefor; (ix) Intellectual Property; (x) Instruments and, to the extent not otherwise included in the definition of Instruments, Investment Property (as defined in the Uniform Commercial Code as in effect in the State of Illinois), including without limitation financial assets and securities accounts; (xi) Inventory; (xii) money (of every jurisdiction whatsoever); (xiii) Uncertificated Securities; (xiv) all books, records, ledger cards, files, correspondence, computer programs, tapes, disks and related data processing software that at any time evidence or contain information relating to any of the property described above or are otherwise necessary or helpful in the collection thereof or realization thereon; (xv) all undocumented vessels, engines, machinery, masts, boats, anchors, cables, chains, rigging, tackle, apparel, furniture, including but not limited to all gaming equipment and related devises, and all other appurtenances thereunto and appertaining or belonging, whether now or hereafter acquired, and also any and all additions, improvements and replacements hereafter made in or to such vessels or in or to such equipment and appurtenances; and (xvi) Proceeds of all or any of the property described above, including proceeds of any insurance policies covering any of the property described above; -4- PROVIDED, HOWEVER, that there shall be expressly excluded from the Collateral the Grantor's or any Subsidiary's gaming license(s) and any interest in such gaming license(s) and Indiana Gaming Company, L.P.'s certificate of suitability and gaming license and any interest in such certificate and gaming license; PROVIDED, FURTHER, HOWEVER, that there shall be expressly excluded from the Collateral (i) that certain Charter and Equipment Lease Agreement dated as of October 30, 1995 by and between St. Charles Riverfront Station, Inc. and the Grantor with regard to the "Casino St. Charles" and all of the Grantor's rights thereunder and (ii) the charter and equipment sublease agreement to be entered into by and between the Grantor and Indiana Gaming Company, L.P. with regard to the "Casino St. Charles" and all of the Grantor's rights thereunder. SECTION 3. REPRESENTATIONS AND WARRANTIES. The Grantor represents and warrants that: (i) no Uniform Commercial Code financing statement (other than which may have been filed on behalf of the Grantee or in connection with Permitted Liens) covering any of the Collateral is on file in any public office; (ii) the Grantor is (or, to the extent the Collateral is acquired after the date hereof, will be) the lawful owner of all of the Collateral, free of all liens and claims whatsoever, other than the security interest hereunder and Permitted Liens, with full power and authority to execute this Security Agreement, to perform the Grantor's Secured Obligations hereunder and to subject the Collateral to the security interest hereunder; (iii) the Grantor is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware; (iv) the execution and delivery of this Security Agreement and the performance by the Grantor of its Secured Obligations hereunder are within the Grantor's corporate powers, have been duly authorized by all necessary corporate action, have received all necessary governmental approval (if any shall be required), and do not and will not contravene or conflict with any provision of law or of the charter or by-laws of the Grantor or of any agreement, instrument or order binding upon the Grantor; (v) this Security Agreement is a legal, valid and binding obligation of the Grantor, enforceable in accordance with its terms; (vi) all information with respect to the Collateral set forth in any schedule, certificate or other writing at any time heretofore or hereafter furnished by the Grantor to the Grantee or any Noteholder, and all other written information heretofore or hereafter furnished by the Grantor to the Grantee or any Noteholder, is and will be true and correct in all material respects as of the date furnished; -5- (vii) the address of the location of the records of the Grantor concerning Non-Tangible Collateral of the Grantor and the address of the Grantor's chief executive office are as set forth on Schedule I hereto, and the Grantor's Inventory and other Goods are located at its own premises at the address(es) shown on such Schedule I; (viii) the Grantor is in compliance with the requirements of all applicable laws, rules, regulations and orders of every governmental authority, the noncompliance with which could materially adversely affect the business, results of operations, condition (financial or otherwise) or business affairs of the Grantor and its Subsidiaries, taken as a whole, or the value of the Collateral or the worth of the Collateral as collateral security; (ix) the Grantor is the lawful and exclusive owner or licensee of the trademarks listed in Schedule II hereto, except those listed as being held under a non-exclusive license, said listed trademarks include all the United States federal registrations or applications registered in the United States Patent and Trademark office; (x) the Grantor is the lawful and exclusive owner or licensee of all rights in the patents listed in Schedule III hereto and in the copyrights listed in Schedule IV hereto, said patents include all the United States patents and applications for United States patents that the Grantor owns and said copyrights constitute all the United States copyrights registered in the United States Copyright Office and applications for United States copyrights that the Grantor now uses or practices under; (xi) to the knowledge of the Grantor, all of the Intellectual Property is subsisting and none has been adjudged invalid or unenforceable, in whole or in part; (xii) to the best of the Grantor's knowledge, all of the Intellectual Property is valid and enforceable and, in the case of the patents and patent applications included in the Intellectual Property, the Grantor has notified the Grantee in writing of all prior uses (including public uses and sales ) of which it is aware; (xiii) the security interests in the Collateral granted to the Grantee hereunder constitute perfected security interests therein superior and prior to all Liens (other than Permitted Liens); provided, however, the Grantor makes no representations or warranties under this clause (xiii) with regard to Deposit Accounts or money of which the Grantee has not taken possession; (xiv) except to the extent that the Grantee shall consent in writing (which consent shall not be unreasonably withheld), the Grantor (either itself or through -6- licensees) will, unless the Grantor shall reasonably determine that a trademark which (or an application for which) is included as part of the Intellectual Property (any "Trademark") is of negligible economic value to the Grantor, (A) continue to use each Trademark on each and every trademark class of goods applicable to its current line as reflected in its current catalogs, brochures, advertisements and price lists in order to maintain each Trademark in full force and effect free from any claim of abandonment for non-use, (B) maintain as in the past the quality of products and services offered under each Trademark, (C) employ each Trademark with the appropriate notice of application or registration, (D) not use any Trademark except for the uses for which registration or application for registration of such Trademark has been made, and (E) not (and not permit any licensee or sublicensee thereto to) abandon any Trademark or do any act of knowingly omit to do any act whereby any Trademark may become invalidated or abandoned; and (xv) unless the Grantor shall reasonably determine that a patent, patent application or Trademark is of negligible economic value to the Grantor, the Grantor shall use its best efforts to maintain all registrations of such Intellectual Property in full force and effect by, without limitation, preparing and filing in a timely manner and with the appropriate offices all necessary applications for renewal or to extend the term thereof and all documents required to be filed therewith. SECTION 4. COVENANTS OF GRANTOR. The Grantor covenants and agrees that except as provided in the Indenture: (i) Grantor will take such actions as are reasonably necessary to keep all tangible Collateral in good repair, working order and condition, normal depreciation excepted, and will, from time to time, replace any worn, broken or defective parts thereof; (ii) Grantor will keep all Collateral free and clear of all security interests, liens and encumbrances except the creation or existence of Permitted Liens or as otherwise permitted under the Indenture; (iii) Grantor will, at all reasonable times, permit Grantee or its representative to examine or inspect any Collateral, wherever located, and to examine, inspect and copy Grantor's books and records pertaining to the Collateral and its business and financial condition and will, upon request of the Grantee, at any time when an Event of Default has occurred and is continuing, deliver to the Grantee all of such records and papers which pertain to the Collateral and the Account Debtors; -7- (iv) Grantor will keep accurate and complete records pertaining to the Collateral and pertaining to Grantor's business and financial condition and will submit to Grantee such periodic reports concerning the Collateral and Grantor's business and financial condition as Grantee may from time to time reasonably request; (v) Grantor will pay when due or reimburse Grantee on demand for all expenses, including reasonable attorneys' fees and legal expenses, incurred by the Grantee in connection with the collection of any of the Secured Obligations and all other out-of-pocket expenses (including in each case all reasonable attorneys' fees) incurred by Grantee in connection with the creation, perfection, satisfaction or enforcement of the Security Interest or the execution or creation, continuance or enforcement of this Security Agreement or any or all of the Secured Obligations and, in the case of an Event of Default, incurred by the Grantee in seeking to collect any of the Secured Obligations and to enforce its rights hereunder; (vi) Grantor will not use or keep any Collateral, or permit it to be used or kept, for any unlawful purpose or in violation of any federal, state or local law, statute or, ordinance; (vii) without the prior written consent of Grantee, Grantor will not sell, transfer, assign (by operation of law or otherwise), exchange or otherwise dispose of all or any portion of the Collateral or any interest therein, or release any party obligated with respect to the Collateral, except for the sale or lease of Inventory in the ordinary course of its business and as otherwise permitted by the Indenture and this Security Agreement, and if the Collateral, or any part thereof or interest therein, is sold, transferred, assigned, exchanged, or otherwise disposed of in violation of these provisions, the security interest of Grantee shall continue in such Collateral or part thereof notwithstanding such sale, transfer, assignment, exchange or other disposition, and Grantor will hold the proceeds thereof in a separate account for Grantee's benefit and Grantor will, at Grantee's request, transfer such proceeds to Grantee in kind; and (viii) the Grantor will execute such Uniform Commercial Code financing statements and other documents (including, without limitation, any assignment of claim form under or pursuant to the federal assignment of claims statute, 31 U.S.C. Section 3726, any successor or amended version thereof or any regulation promulgated under or pursuant to any version thereof), and pay the cost of filing or recording the same or this Security Agreement in all public offices necessary or appropriate, and will do such other acts and things as may be necessary to establish and maintain a valid, perfected security interest in the Collateral (free of all other liens, claims and rights of third -8- parties whatsoever other than Permitted Liens) to secure the performance and payment of the Secured Obligations; (ix) Grantor will promptly pay when due all license fees, registration fees, taxes, assessments and other charges which may be levied upon or assessed against the ownership, operation, possession, maintenance or use of its Equipment and other Goods (as applicable); provided, however, that the Grantor shall not be required to pay any such fee, tax, assessment or other charge, the validity of which is being contested by the grantor in good faith by appropriate proceedings, so long as forfeiture of any part of this Equipment or other Goods will not result from the failure of the Grantor to pay any such fee, tax, assessment or other charge, during the period of such contest; (x) upon the reasonable request of the Grantee, stamp on its records concerning the Collateral (and/or enter in its computer records concerning the Collateral) and add on all Chattel Paper constituting a portion of the Collateral a notation, in form reasonably satisfactory to the Grantee, of the security interest of the Grantee hereunder; (xi) at all times keep all its Inventory and other Goods insured under policies maintained with reputable insurance companies against loss, damage, theft and other risks to such extent as is customarily maintained by companies similarly situated (and, in any event, as is required by applicable law) and such policies or certificates thereof shall, if the Grantee so requests, be furnished to the Grantee and, whenever an Event of Default shall be existing, the Grantee may apply any proceeds of such insurance which may be received by it toward payment of the Notes, whether or not due; (xii) furnish to the Grantee, as soon as possible and in any event within thirty (30) days prior to the occurrence from time to time of any change in the address of the Grantor's chief executive office or in the name of the Grantor, notice in writing of such change; (xiii) prosecute diligently all applications now pending with respect to Intellectual Property rights; (xiv) protect, preserve and maintain all rights in the Collateral, including but not limited to the duty to prosecute and/or defend against any and all suits contesting infringement or dilution of the Intellectual Property, any other suits containing allegations respecting the validity of the Collateral or any thereof, and any suits claiming injury to the goodwill associated with any of the Trademarks; -9- (xv) keep all its Inventory and other Goods, unless the Grantee shall otherwise consent in writing, at its own premises at address(es) shown on Schedule I hereto; (xvi) keep, at its address(es) so indicated on Schedule I hereto, its records concerning Non-Tangible Collateral, which records will be of such character as will enable the Grantee or its designees to determine at any time the status thereof; and (xvii) upon request of the Grantee, cause to be noted on the applicable certificate, in the event any of its Equipment is covered by a certificate of title, the security interest of the Grantee in the Equipment covered thereby. Any expenses incurred in protecting, preserving and maintaining any of the Collateral shall be borne by the Grantor. Whenever an Event of Default shall be existing, the Grantee shall have the right to bring suit to enforce any or all of the Intellectual Property or licenses thereunder, in which event the Grantor shall at the request of the Grantee do any and all lawful acts and execute any and all proper documents required by the Grantee in aid of such enforcement and the Grantor shall promptly, upon demand, reimburse and indemnify the Grantee for all costs and expenses incurred by the Grantee in the exercise of its rights under this Section 4. SECTION 5. PROCESSING SALE COLLECTIONS, ETC. Until such time as an Event of Default shall have occurred and remained continuing and the Grantee shall have notified the Grantor of the revocation of such power and authority, the Grantor (i) may, in the ordinary course of its business, at its own expense, sell, lease or furnish under contracts of service any of the Inventory normally held by the Grantor for such purpose, and use and consume, in the ordinary course of its business, any raw materials, work in process or materials normally held by the Grantor for such purpose; (ii) will, at its own expense, endeavor to collect, as and when due, all amounts due with respect to any of the Non-Tangible Collateral, including the taking of such action with respect to such collection as the Grantee may reasonably request or, in the absence of such request, as the Grantor may deem advisable; and (iii) may grant, in the ordinary course of business, to any party obligated on any of the Non-Tangible Collateral, any rebate, refund or allowance to which such party may be lawfully entitled, and may accept, in connection therewith, the return of Goods, the sale or lease of which shall have given rise to such Non-Tangible Collateral. -10- Upon request of the Grantee at any time an Event of Default has occurred and is continuing, the Grantor will (except as the Grantee may otherwise consent in writing) forthwith, upon receipt, transmit and deliver to the Grantee, in the form received, all cash, checks, drafts, chattel paper and other instruments or writings for the payment of money (properly endorsed, where required, so that such items may be collected by the Grantee) which may be received by the Grantor (except for amounts payable to regulatory authorities as required by law) at any time in full or partial payment or otherwise as proceeds of any of the Collateral. The Grantee may, at the direction of the holders of at least 50% of the aggregate principal amount of the Notes then outstanding, at any time an Event of Default has occurred and is continuing, whether before or after any revocation of such power and authority, notify any parties obligated on any of the Non-Tangible Collateral to make payment to the Grantee of any, amounts due or to become due thereunder and enforce collection of any of the Non-Tangible Collateral by suit or otherwise and surrender, release or exchange all or any part thereof or compromise or extend or renew of any period (whether or not longer than the original period) any indebtedness thereunder or evidenced thereby. Upon request of the Grantee at any time a Event of Default has occurred and is continuing, the Grantor will, at its own expense notify any parties obligated on any of the Non-Tangible Collateral to make payment to the Grantee of any amounts due or to become due thereunder. SECTION 6. EVENT OF DEFAULT. (i) Whenever an Event of Default (as that term is defined in the Indenture) shall have occurred and remained continuing, subject to compliance with Applicable Gaming Regulations, the Grantee may exercise from time to time any rights and remedies available to it under applicable law, including without limitation the rights of a secured party under the Uniform Commercial Code. (ii) The Grantor agrees, in case of an Event of Default, (1) at Grantee's request, to assemble, at its expense, all its Inventory and other Goods (other than Fixtures) at a convenient place or places acceptable to the Grantee, and (2) at Grantee's request, to execute all such documents and do all such other things which may be necessary or desirable in order to enable the Grantee or its nominee to be registered as owner of the Intellectual Property with any competent registration authority. (iii) Any notification of intended disposition of any of the Collateral required by law shall be deemed reasonably and properly given if given at least ten (10) days before such disposition. Any proceeds of any disposition by the Grantee of any of the Collateral shall be applied as set forth in SECTION 7. -11- SECTION 7. APPLICATION OF PROCEEDS. The proceeds of a sale of Collateral sold after the occurrence and during the continuation of an Event of Default shall be applied by the Grantee in accordance with the Indenture. SECTION 8. MISCELLANEOUS PROVISIONS. SECTION 8.1 LIMITATION ON DUTY OF GRANTEE IN RESPECT OF COLLATERAL. The Grantee shall be deemed to have exercised reasonable care in the custody and preservation of any of the Collateral in its possession if it takes such action for that purpose as the Grantor requests in writing, but failure of the Grantee to comply with any such request shall not of itself be deemed a failure to exercise reasonable care, and no failure of the Grantee to preserve or protect any rights with respect to such Collateral against prior parties, or to do any act with respect to the preservation of such Collateral not so requested by the Grantor, shall be deemed a failure to exercise reasonable care in the custody or preservation of such Collateral. SECTION 8.2 LIMITATIONS OF GAMING REGULATIONS. The Grantee acknowledges that its rights and remedies with respect to the Collateral upon an Event of Default are subject to the limitations and restrictions of Applicable Gaming Regulations. Further, without limiting any of the foregoing, the Grantee further acknowledges and agrees that, notwithstanding any other provision of this Security Agreement to the contrary, (i) nothing in this Security Agreement shall effect any transfer of any "ownership interest" (within the meaning of 68 Indiana Administrative Code 5) in Indiana Gaming Company, L.P. ("Indiana L.P.") or effect any transfer, sale, purchase, lease or hypothecation of, or any borrowing or loaning of any money against, the certificate of suitability of Indiana L.P., or any owner's license subsequently issued to Indiana L.P., (ii) no person, other than the Grantor or the other current owners of Indiana L.P., shall have any "ownership interest" in Indiana L.P., and (iii) no person may exercise any rights or remedies granted in this Security Agreement against Indiana L.P. unless and until such exercise (a) is approved by the Indiana Gaming Commission and (b) complies with all Indiana laws and regulations, including 68 Indiana Administrative Code 5. In addition, the exercise of Grantee's rights hereunder is expressly subject to the terms of that certain Second Amended and Restated Agreement of Limited Partnership of Indiana Gaming Company, L.P. dated February 21, 1996 (including without limitation Section 14.2(e) thereof). Further, without limiting any of the foregoing, the Grantee further acknowledges and agrees to the requirement of the Riverboat Gaming Enforcement Division, Office of State Police, Department of Public Safety and Corrections, State of Louisiana (the "Division") and/or its successor, that, within five (5) days of the commencement of the exercise of any remedy(ies) set forth in this Security Agreement in favor of the Grantee or the Noteholders with respect to Argosy of Louisiana, Inc., Catfish Queen Partnership in Commendam or Jazz Enterprises, Inc., the Grantee shall notify the Division or its successor, in writing, of the date, nature and scope of the exercise of such remedy(ies) and further acknowledges that the exercise of such remedy(ies) and any transfer or proposed transfer of any ownership interest or economic interest resulting therefrom or related thereto shall require compliance with any applicable provisions of (i) Title 4, Section 528 of the Louisiana Revised Statutes and all regulations promulgated pursuant thereto, and/or (ii) Title 27, Section 1 et seq. of the Louisiana Revised Statutes and any regulations promulgated pursuant thereto. Further, without limiting any of the foregoing, Grantee acknowledges that the foreclosure, -12- possession, sale, transfer or disposition of certain gaming equipment and machinery is subject to compliance with Applicable Gaming Regulations which may be proscriptive or require prior consent or approval by applicable state gaming commissions, including the Missouri Gaming Commission, to such foreclosure, possession, sale, transfer or disposition. Grantee hereby further acknowledges that Missouri law does not presently permit the Grantee to foreclose or take possession of certain gaming equipment and machinery without the Grantee being licensed by the Missouri Gaming Commission or, in the alternative, the creation of a different mechanism that is in compliance with Missouri laws and is acceptable to the Missouri Gaming Commission (which mechanism could include, subject to the Missouri Gaming Commission's approval, the sale, transfer or disposition of such gaming equipment and machinery in question to an entity licensed by the Missouri Gaming Commission). SECTION 8.3 NOTICE. All notices or other communications required or permitted hereunder shall be in writing and shall be sufficiently given if made by hand delivery, by telex, by telecopier or registered or certified mail, postage prepaid, return receipt requested, addressed to the last known address of the respective party. SECTION 8.4 NO WAIVER; AMENDMENT. No delay on the part of the Grantee in the exercise of any right or remedy shall operate as a waiver thereof, and no single or partial exercise by the Grantee of any right or remedy shall preclude other or further exercise thereof or the exercise of any other right or remedy. No amendment to, modification or waiver of, or consent with respect to, any provision of this Security Agreement shall be effective unless the same shall be in writing and signed and delivered by the Grantee, and then such amendment, modification, waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. SECTION 8.5 CAPTIONS. Section captions used in this Security Agreement are for convenience of reference only and shall not affect the construction of this Security Agreement. SECTION 8.6 COUNTERPARTS. This Security Agreement may be executed in any number of counterparts and by the different parties on separate counterparts and each such counterpart shall be deemed to be an original, but all such counterparts shall together constitute but one and the same Security Agreement. SECTION 8.7 TERMINATION; RELEASE OF COLLATERAL. This Security Agreement shall terminate with respect to all Collateral when all of the Secured Obligations have been fully and indefeasibly paid and satisfied (the date of such termination of all Collateral, the "Termination Date"). In addition, the Collateral, or any portion thereof, may be released as provided in the Indenture (including without limitation, Articles IV and IX thereof). At the time of any such termination, the Grantee, at the request and expense of the Grantor, will execute and deliver to the Grantor a proper instrument or instruments acknowledging the satisfaction and termination of this Security Agreement with respect to such Collateral, and will duly assign, transfer and deliver to the Grantor any such Collateral as has not yet theretofore been sold or otherwise applied or released pursuant to this Security Agreement, together with any moneys at the time held by the Grantee in -13- respect of such Collateral. Such assignment and delivery shall be without warranty by or recourse to the Grantee, except as to the absence of any prior assignments by the Grantee of its interest in the Collateral. SECTION 8.8 GOVERNING LAW. THIS SECURITY AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS. SECTION 8.9 BINDING AGREEMENT; ASSIGNMENT. This Security Agreement shall be binding upon the Grantor and the Grantee and their respective successors and assigns, and shall inure to the benefit of the Grantor, the Noteholders and the Grantee and their respective successors and assigns. SECTION 8.10 DOCUMENTS SUFFICIENT AS FINANCING STATEMENT. At the option of the Grantee, this Security Agreement, or a carbon, photographic or other reproduction of this Security Agreement or of any Uniform Commercial Code financing statement covering the Collateral or any portion thereof shall be sufficient as a Uniform Commercial Code financing statement and may be filed as such. SECTION 8.11 CONFLICTS WITH PLEDGE AGREEMENTS OR SHIP MORTGAGES. To the extent that the Collateral is also subject to the Parent Pledge Agreement (as defined in the Indenture), any Subsidiary Pledge Agreement (as defined in the Indenture) or any Ship Mortgage (as defined in the Indenture) and any provisions of the Parent Pledge Agreement, any such Subsidiary Pledge Agreement or any such First Preferred Ship Mortgage conflict with the provisions of this Security Agreement, the provisions of the Parent Pledge Agreement, such Subsidiary Pledge Agreement or such First Preferred Ship Mortgage, as applicable, shall control. SECTION 8.12 JURISDICTION; SERVICE OF PROCESS; VENUE. THE GRANTOR HEREBY IRREVOCABLY AGREES THAT ANY LEGAL ACTION OR PROCEEDING PERTAINING TO THIS SECURITY AGREEMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK, BOROUGH OF MANHATTAN, OR IN THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK, AND BY THIS EXECUTION AND DELIVERY OF A COUNTERPART HEREOF, THE GRANTOR IRREVOCABLY SUBMITS TO THE JURISDICTION OF SUCH COURTS. THE GRANTOR HEREBY IRREVOCABLY AGREES THAT SERVICE OF PROCESS IN ANY SUCH ACTION OF PROCEEDING MAY BE MADE BY MAILING, BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, A COPY OF THE SUMMONS AND COMPLAINT, OR OTHER LEGAL PROCESS IN SUCH ACTION OR PROCEEDINGS TO THE GRANTOR AT ITS ADDRESS SHOWN ON THE SIGNATURE PAGE HEREOF (OR ANY OTHER ADDRESS OF THE GRANTOR APPEARING ON THE RECORDS OF THE GRANTEE). SERVICE OF PROCESS IN ANY SUCH ACTION OR PROCEEDING, EFFECTED AS AFORESAID, SHALL BE LEGAL UPON RECEIPT BY THE GRANTOR AND SHALL BE DEEMED PERSONAL SERVICE UPON THE GRANTOR AND SHALL BE LEGAL AND BINDING UPON THE GRANTOR FOR ALL -14- PURPOSES, THE GRANTOR HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE IN ANY SUCH ACTION OR PROCEEDING IN ANY SUCH COURT AS WELL AS ANY RIGHT IT MAY NOT OR HEREAFTER HAVE TO REMOVE ANY SUCH ACTION OF PROCEEDING, ONCE COMMENCED, TO ANOTHER COURT ON THE GROUNDS OF FORUM NON CONVENIENS OR OTHERWISE. SECTION 8.13 WAIVER OF RIGHT TO JURY TRIAL. THE GRANTOR AND THE GRANTEE HEREBY WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS SECURITY AGREEMENT OR ANY AMENDMENT INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH AND AGREE THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY. [signature page follows] -15- IN WITNESS WHEREOF, this Security Agreement has been duly executed as of the day and year first above written. ADDRESS: ARGOSY GAMING COMPANY, Argosy Gaming Company a Delaware corporation, 219 Piasa Street as Grantor Alton, Illinois 62002 Attention: Joseph G. Uram Facsimile: (618) 474-7636 By: ___________________________________ Phone No.: (618) 474-7620 Name: Joseph G. Uram Title: Executive Vice President, Treasurer and Chief Financial Officer ADDRESS: FIRST NATIONAL BANK OF COMMERCE, First National Bank of Commerce as Trustee and as Grantee Corporate Trust Division 210 Baronne Street New Orleans, Louisiana 70112 By: ___________________________________ Facsimile: (504) 561-1432 Phone No.: (504) 561-1640 Name: Denis L. Milliner Title: Vice President and Trust Officer Document Number: EX-4-6.WP EX-4.7 8 EXHIBIT 4.7 EXHIBIT 4.7 SCHEDULE TO EXHIBIT 4.7 ----------------------- The Subsidiary Security Agreements by and between each of the following parties and First National Bank of Commerce, as Trustee, are substantially identical in all material respects to the attached form document except as indicated below. SCHEDULE OF GUARANTORS EXECUTING SUBSIDIARY SECURITY AGREEMENTS --------------------------------------------------------------- Alton Gaming Company Argosy of Louisiana, Inc. Catfish Queen Partnership in Commendam The Indiana Gaming Company Iowa Gaming Company Jazz Enterprises, Inc. The Missouri Gaming Company The St. Louis Gaming Company Pursuant to Paragraph 2 of Item 601 of S-K, the following form is filed in lieu of the various Subsidiary Security Agreements. Any material details in which such Subsidiary Security Agreements differ from the enclosed form document are described in the enclosed form document. FORM OF SUBSIDIARY SECURITY AGREEMENT [(INSERT SUBSIDIARY NAME)] THIS SECURITY AGREEMENT, dated as of June 5, 1996 (as amended, restated, supplemented or otherwise modified from time to time, this "security agreement") is by and between [INSERT SUBSIDIARY NAME], a _________ corporation (the "Grantor"), and FIRST NATIONAL BANK OF COMMERCE, as trustee (together with its successors in such capacity, the "Trustee" or the "Grantee") for the holders of those certain Notes (as hereinafter defined). W I T N E S S E T H WHEREAS, the Grantor, Argosy Gaming Company, a Delaware corporation ("Argosy"), the Grantee and the other Guarantors (as defined in the Indenture (as hereinafter defined)) have entered into that certain Indenture dated June 5, 1996 (as amended, restated, supplemented or otherwise modified from time to time, the "Indenture"), pursuant to which, among other things, Argosy shall issue its 13 1/4% First Mortgage Notes due 2004 (the "Original Notes"); and WHEREAS, pursuant to a Registration Rights Agreement between Argosy, the Grantor and the other Guarantors and Bear, Stearns & Co. Inc., Donaldson, Lufkin & Jenrette Securities Corporation, BA Securities, Inc. and Deutsche Morgan Grenfell/C. J. Lawrence Inc. (collectively, the "Initial Purchasers"), Argosy, the Grantor and the other Guarantors will file a registration statement with respect to an offer to exchange the Original Notes for a new series of 13 1/4% First Mortgage Notes due 2004 registered under the Securities Act of 1933, as amended, with terms substantially identical to those of the Original Notes (the "Series B Notes" and, together with the Original Notes, the "Notes"); WHEREAS, pursuant to the Indenture, the Grantee shall act as the trustee for the holders of the Original Notes and the holders of the Series B Notes (collectively, the "Noteholders"); WHEREAS, to secure the repayment of the Notes and any and all other Secured Obligations (as defined in Section 1 hereof) of the Grantor, the Grantor has agreed to grant to the Grantee for the ratable benefit of the Noteholders a security interest in and to the Collateral (as defined in Section 2 hereof) upon the terms and subject to the conditions hereinafter set forth; WHEREAS, Grantor and the Guarantors will derive substantial direct and indirect benefit from the issuance of the Notes; and -1- WHEREAS, it is a condition precedent to the purchase of the Original Notes by the Initial Purchasers from Argosy that the Grantor shall have executed and delivered this Security Agreement to the Grantee for the ratable benefit of the Noteholders; NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants herein contained and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: SECTION 1. DEFINITIONS 1.1 CERTAIN DEFINED TERMS. Terms defined in the Indenture and not otherwise defined herein have the respective meanings provided for in the Indenture. Each term defined in the first paragraph and the Recitals shall have the meaning set forth above whenever used herein, unless otherwise expressly provided or unless the context clearly requires otherwise. When used herein, (a) the terms ACCOUNT, CHATTEL PAPER, DEPOSIT ACCOUNT, DOCUMENT, EQUIPMENT, FIXTURE, GENERAL INTANGIBLES, GOODS, INVENTORY, INSTRUMENT, INVESTMENT PROPERTY and UNCERTIFICATED SECURITY shall have the respective meanings assigned to such terms in the Uniform Commercial Code (as defined below) and (b) the following terms shall have the following meanings: "ACCOUNT DEBTOR" shall means the party who is obligated on or under any Account or Contract Right of the Grantor or, if appropriate, any General Intangible of the Grantor. "APPLICABLE GAMING REGULATIONS" shall mean, at any particular time, federal and state gaming and gambling statutes, laws, rules and regulations applicable to Argosy or its Subsidiaries (as defined in the Indenture). "COLLATERAL" shall have the meaning assigned thereto in Section 2 hereof. "CONTRACT RIGHTS" shall means any right of the Grantor to payment under a contract for the sale or lease of Goods or the rendering of services, which right at the time is not yet earned by performance [ADD IN THE INDIANA GAMING COMPANY ONLY - including without limitation, the Grantor's rights under that certain Management Agreement by and between The Indiana Gaming Company and Indiana Gaming Company, L.P. dated April 11, 1994 (as amended by that certain Amendment No. 1 to Management Agreement dated February 21, 1996]. "EVENT OF DEFAULT" means when any of the following events shall have occurred: (i) the occurrence of an "Event of Default" as defined in the Indenture; or (ii) failure in the due observance or performance by the Grantor of any of the covenants and conditions in this Security Agreement required to be observed and performed by Grantor and continuance of such failure for thirty (30) days after the Grantor becomes aware or should have become aware of such failure. -2- "INTELLECTUAL PROPERTY" means all of Grantor's intellectual property, including without limitation all present and future designs, patents, patent rights and applications therefor, trademarks, service marks, business names, logos and registrations or applications therefor, trade names, inventions, copyrights and all applications and registrations therefor, software or computer programs, source codes, object codes, license rights, trade secrets, methods, processes, knowhow, drawings, specifications, descriptions, and all memoranda, notes and records with respect to any research and development, whether now owned or hereafter acquired by any Grantor, all goodwill associated with any of the foregoing and proceeds of all of the foregoing. "NON-TANGIBLE COLLATERAL" shall mean, collectively, the Grantor's Accounts, Contract Rights and General Intangibles. "PERMITTED LIENS" shall have the meaning specified in the Indenture. "PROCEEDS" means all "proceeds" (as defined in the Uniform Commercial Code) of, and all other profits, rentals or receipts, in whatever form, arising from the collection, sale, lease, exchange, assignment, licensing or other disposition of, or realization upon, any Collateral. "SECURED OBLIGATIONS" means all Secured Obligations of the Grantor to repay the Notes and any and all other Secured Obligations of the Grantor to the Grantee under the Indenture, this Security Agreement and the other Security Documents (as that term is defined in the Indenture). Without limiting the foregoing, the Secured Obligations shall include (i) the payment of the principal of and premium and Liquidated Damages (as that term is defined in the Indenture), if any, and interest on the Notes, (ii) the payment of all other indebtedness of the Grantor in respect of the Notes and the Indenture and (iii) the due performance of and compliance by the Grantor with all the terms of and all the obligations to the Grantee under the Notes and the Indenture. "SECURITY INTERESTS" means the security interests granted pursuant to SECTION 2, as well as all other security interests created or assigned as additional security for the Secured Obligations pursuant to the provisions of this Security Agreement. "TERMINATION DATE" shall have the meaning assigned thereto in SECTION 8.7 hereof. "UNIFORM COMMERCIAL CODE" shall mean the Uniform Commercial Code as in effect in the State of New York on the date of this Security Agreement; provided, however, that if by reason of mandatory provisions of law, the perfection or effect of perfection or non-perfection of the security interest granted hereunder in any Collateral is governed by the Uniform Commercial Code as in effect in a jurisdiction other than New York, "Uniform Commercial Code" shall mean the Uniform Commercial Code as in effect in such other jurisdiction for purposes of the provisions hereof relating to such perfection or effect of perfection or non-perfection. -3- SECTION 2. GRANT OF SECURITY INTERESTS In order to secure the payment and performance of the Secured Obligations, Grantor hereby grants to Grantee, for the ratable benefit of the Noteholders, a continuing security interest in and to all right, title and interest of the Grantor in the following property, whether now owned or existing or hereafter owned, acquired, licensed, leased, consigned or arising and regardless of where located (all being collectively referred to as, the "COLLATERAL"): (i) Accounts; (ii) Chattel Paper; (iii) Deposit Accounts; (iv) Documents or other receipts covering, evidencing or representing goods; (v) Equipment; (vi) Fixtures; (vii) General Intangibles; (viii) Goods (including, without limitation, all its Equipment, Fixtures and Inventory), and together will all accessions, additions, attachments, improvements, substitutions and replacements thereto and therefor; (ix) Intellectual Property; (x) Instruments and, to the extent not otherwise included in the definition of Instruments, Investment Property (as defined in the Uniform Commercial Code as in effect in the State of Illinois), including without limitation financial assets and securities accounts; (xi) Inventory; (xii) money (of every jurisdiction whatsoever); (xiii) Uncertificated Securities; (xiv) all books, records, ledger cards, files, correspondence, computer programs, tapes, disks and related data processing software that at any time evidence or contain information relating to any of the property described above or are otherwise necessary or helpful in the collection thereof or realization thereon; -4- (xv) all undocumented vessels, engines, machinery, masts, boats, anchors, cables, chains, rigging, tackle, apparel, furniture, including but not limited to all gaming equipment and related devises, and all other appurtenances thereunto and appertaining or belonging, whether now or hereafter acquired, and also any and all additions, improvements and replacements hereafter made in or to such vessels or in or to such equipment and appurtenances; and (xvi) Proceeds of all or any of the property described above, including proceeds of any insurance policies covering any of the property described above; PROVIDED, HOWEVER, that there shall be expressly excluded from the Collateral the Grantor's or any Subsidiary's gaming license(s) and any interest in such gaming license(s) [ADD IN THE INDIANA GAMING COMPANY ONLY - and Indiana Gaming Company, L.P.'s certificate of suitability and gaming license and any interest in such certificate and gaming license] [ADD IN IOWA GAMING COMPANY ONLY - and Belle of Sioux City, L.P.'s gaming license and any interest in such gaming license. Notwithstanding the foregoing, the Collateral shall not include (i) the partnership interest owned by the Grantor in Belle of Sioux City, L.P. and (ii) the Grantor's rights and interests in that certain Management and Boat Lease Agreement dated December 1, 1994 by and between Belle of Sioux City, L.P. and the Grantor]. [ADD IN THE MISSOURI GAMING COMPANY AND THE ST. LOUIS GAMING COMPANY ONLY - Grantee hereby acknowledges that Missouri law does not presently allow any pledge, hypothecation or transfers of gaming licenses (or any interest therein) issued under the Missouri Riverboat Gambling Act or any security interest attached to any such license.] SECTION 3. REPRESENTATIONS AND WARRANTIES. The Grantor represents and warrants that: (i) no Uniform Commercial Code financing statement (other than which may have been filed on behalf of the Grantee or in connection with Permitted Liens) covering any of the Collateral is on file in any public office; (ii) the Grantor is (or, to the extent the Collateral is acquired after the date hereof, will be) the lawful owner of all of the Collateral, free of all liens and claims whatsoever, other than the security interest hereunder and Permitted Liens, with full power and authority to execute this Security Agreement, to perform the Grantor's Secured Obligations hereunder and to subject the Collateral to the security interest hereunder; (iii) the Grantor is a corporation duly organized, validly existing and in good standing under the laws of the State of __________; (iv) the execution and delivery of this Security Agreement and the performance by the Grantor of its Secured Obligations hereunder are within the Grantor's corporate powers, have been duly authorized by all necessary corporate action, have received all necessary governmental approval (if any shall be required), and do not and will not contravene or conflict with any provision of law or of the charter or by-laws of the Grantor or of any agreement, instrument or order binding upon the Grantor; -5- (v) this Security Agreement is a legal, valid and binding obligation of the Grantor, enforceable in accordance with its terms; (vi) all information with respect to the Collateral set forth in any schedule, certificate or other writing at any time heretofore or hereafter furnished by the Grantor to the Grantee or any Noteholder, and all other written information heretofore or hereafter furnished by the Grantor to the Grantee or any Noteholder, is and will be true and correct in all material respects as of the date furnished; (vii) the address of the location of the records of the Grantor concerning Non-Tangible Collateral of the Grantor and the address of the Grantor's chief executive office are as set forth on SCHEDULE I hereto, and the Grantor's Inventory and other Goods are located at its own premises at the address(es) shown on such SCHEDULE I; (viii)the Grantor is in compliance with the requirements of all applicable laws, rules, regulations and orders of every governmental authority, the noncompliance with which could materially adversely affect the business, results of operations, condition (financial or otherwise) or business affairs of the Grantor and its Subsidiaries, taken as a whole, or the value of the Collateral or the worth of the Collateral as collateral security; (ix) the Grantor is the lawful and exclusive owner or licensee of the trademarks listed in SCHEDULE II hereto, except those listed as being held under a non-exclusive license, said listed trademarks include all the United States federal registrations or applications registered in the United States Patent and Trademark office; (x) the Grantor is the lawful and exclusive owner or licensee of all rights in the patents listed in SCHEDULE III hereto and in the copyrights listed in SCHEDULE IV hereto, said patents include all the United States patents and applications for United States patents that the Grantor owns and said copyrights constitute all the United States copyrights registered in the United States Copyright Office and applications for United States copyrights that the Grantor now uses or practices under; (xi) to the knowledge of the Grantor, all of the Intellectual Property is subsisting and none has been adjudged invalid or unenforceable, in whole or in part; -6- (xii) to the best of the Grantor's knowledge, all of the Intellectual Property is valid and enforceable and, in the case of the patents and patent applications included in the Intellectual Property, the Grantor has notified the Grantee in writing of all prior uses (including public uses and sales) of which it is aware; (xiii)the security interests in the Collateral granted to the Grantee hereunder constitute perfected security interests therein superior and prior to all Liens (other than Permitted Liens); PROVIDED, HOWEVER, the Grantor makes no representations or warranties under this clause (xiii) with regard to Deposit Accounts or money of which the Grantee has not taken possession; (xiv) except to the extent that the Grantee shall consent in writing (which consent shall not be unreasonably withheld), the Grantor (either itself or through licensees) will, unless the Grantor shall reasonably determine that a trademark which (or an application for which) is included as part of the Intellectual Property (any "Trademark") is of negligible economic value to the Grantor, (A) continue to use each Trademark on each and every trademark class of goods applicable to its current line as reflected in its current catalogs, brochures, advertisements and price lists in order to maintain each Trademark in full force and effect free from any claim of abandonment for non-use, (B) maintain as in the past the quality of products and services offered under each Trademark, (C) employ each Trademark with the appropriate notice of application or registration, (D) not use any Trademark except for the uses for which registration or application for registration of such Trademark has been made, and (E) not (and not permit any licensee or sublicensee thereto to) abandon any Trademark or do any act of knowingly omit to do any act whereby any Trademark may become invalidated or abandoned; and (xv) unless the Grantor shall reasonably determine that a patent, patent application or Trademark is of negligible economic value to the Grantor, the Grantor shall use its best efforts to maintain all registrations of such Intellectual Property in full force and effect by, without limitation, preparing and filing in a timely manner and with the appropriate offices all necessary applications for renewal or to extend the term thereof and all documents required to be filed therewith. SECTION 4. COVENANTS OF GRANTOR. The Grantor covenants and agrees that except as provided in the Indenture: (i) Grantor will take such actions as are reasonably necessary to keep all tangible Collateral in good repair, working order and condition, normal depreciation excepted, and will, from time to time, replace any worn, broken or defective parts thereof; -7- (ii) Grantor will keep all Collateral free and clear of all security interests, liens and encumbrances except the creation or existence of Permitted Liens or as otherwise permitted under the Indenture; (iii)Grantor will, at all reasonable times, permit Grantee or its representative to examine or inspect any Collateral, wherever located, and to examine, inspect and copy Grantor's books and records pertaining to the Collateral and its business and financial condition and will, upon request of the Grantee, at any time when an Event of Default has occurred and is continuing, deliver to the Grantee all of such records and papers which pertain to the Collateral and the Account Debtors; (iv) Grantor will keep accurate and complete records pertaining to the Collateral and pertaining to Grantor's business and financial condition and will submit to Grantee such periodic reports concerning the Collateral and Grantor's business and financial condition as Grantee may from time to time reasonably request; (v) Grantor will pay when due or reimburse Grantee on demand for all expenses, including reasonable attorneys' fees and legal expenses, incurred by the Grantee in connection with the collection of any of the Secured Obligations and all other out-of-pocket expenses (including in each case all reasonable attorneys' fees) incurred by Grantee in connection with the creation, perfection, satisfaction or enforcement of the Security Interest or the execution or creation, continuance or enforcement of this Security Agreement or any or all of the Secured Obligations and, in the case of an Event of Default, incurred by the Grantee in seeking to collect any of the Secured Obligations and to enforce its rights hereunder; (vi) Grantor will not use or keep any Collateral, or permit it to be used or kept, for any unlawful purpose or in violation of any federal, state or local law, statute or, ordinance; (vii)without the prior written consent of Grantee, Grantor will not sell, transfer, assign (by operation of law or otherwise), exchange or otherwise dispose of all or any portion of the Collateral or any interest therein, or release any party obligated with respect to the Collateral, except for the sale or lease of Inventory in the ordinary course of its business and as otherwise permitted by the Indenture and this Security Agreement, and if the Collateral, or any part thereof or interest therein, is sold, transferred, assigned, exchanged, or otherwise disposed of in violation of these provisions, the security interest of Grantee shall continue in such Collateral or part thereof notwithstanding such sale, transfer, assignment, exchange or other disposition, and Grantor will hold the proceeds thereof in a separate account for Grantee's benefit and Grantor will, at Grantee's request, transfer such proceeds to Grantee in kind; and -8- (viii)the Grantor will execute such Uniform Commercial Code financing statements and other documents (including, without limitation, any assignment of claim form under or pursuant to the federal assignment of claims statute, 31 U.S.C. Section 3726, any successor or amended version thereof or any regulation promulgated under or pursuant to any version thereof), and pay the cost of filing or recording the same or this Security Agreement in all public offices necessary or appropriate, and will do such other acts and things as may be necessary to establish and maintain a valid, perfected security interest in the Collateral (free of all other liens, claims and rights of third parties whatsoever other than Permitted Liens) to secure the performance and payment of the Secured Obligations; (ix) Grantor will promptly pay when due all license fees, registration fees, taxes, assessments and other charges which may be levied upon or assessed against the ownership, operation, possession, maintenance or use of its Equipment and other Goods (as applicable); provided, however, that the Grantor shall not be required to pay any such fee, tax, assessment or other charge, the validity of which is being contested by the grantor in good faith by appropriate proceedings, so long as forfeiture of any part of this Equipment or other Goods will not result from the failure of the Grantor to pay any such fee, tax, assessment or other charge, during the period of such contest; (x) upon the reasonable request of the Grantee, stamp on its records concerning the Collateral (and/or enter in its computer records concerning the Collateral) and add on all Chattel Paper constituting a portion of the Collateral a notation, in form reasonably satisfactory to the Grantee, of the security interest of the Grantee hereunder; (xi) at all times keep all its Inventory and other Goods insured under policies maintained with reputable insurance companies against loss, damage, theft and other risks to such extent as is customarily maintained by companies similarly situated (and, in any event, as is required by applicable law) and such policies or certificates thereof shall, if the Grantee so requests, be furnished to the Grantee and, whenever an Event of Default shall be existing, the Grantee may apply any proceeds of such insurance which may be received by it toward payment of the Notes, whether or not due; -9- (xii)furnish to the Grantee, as soon as possible and in any event within thirty (30) days prior to the occurrence from time to time of any change in the address of the Grantor's chief executive office or in the name of the Grantor, notice in writing of such change; (xiii)prosecute diligently all applications now pending with respect to Intellectual Property rights; (xiv)protect, preserve and maintain all rights in the Collateral, including but not limited to the duty to prosecute and/or defend against any and all suits contesting infringement or dilution of the Intellectual Property, any other suits containing allegations respecting the validity of the Collateral or any thereof, and any suits claiming injury to the goodwill associated with any of the Trademarks; (xv) keep all its Inventory and other Goods, unless the Grantee shall otherwise consent in writing, at its own premises at address(es) shown on Schedule I hereto; (xvi)keep, at its address(es) so indicated on Schedule I hereto, its records concerning Non-Tangible Collateral, which records will be of such character as will enable the Grantee or its designees to determine at any time the status thereof; and (xvii)upon request of the Grantee, cause to be noted on the applicable certificate, in the event any of its Equipment is covered by a certificate of title, the security interest of the Grantee in the Equipment covered thereby. Any expenses incurred in protecting, preserving and maintaining any of the Collateral shall be borne by the Grantor. Whenever an Event of Default shall be existing, the Grantee shall have the right to bring suit to enforce any or all of the Intellectual Property or licenses thereunder, in which event the Grantor shall at the request of the Grantee do any and all lawful acts and execute any and all proper documents required by the Grantee in aid of such enforcement and the Grantor shall promptly, upon demand, reimburse and indemnify the Grantee for all costs and expenses incurred by the Grantee in the exercise of its rights under this SECTION 4. SECTION 5. PROCESSING SALE COLLECTIONS, ETC. Until such time as an Event of Default shall have occurred and remained continuing and the Grantee shall have notified the Grantor of the revocation of such power and authority, the Grantor (i) may, in the ordinary course of its business, at its own expense, sell, lease or furnish under contracts of service any of the Inventory normally held by the Grantor for such purpose, and use and consume, in the ordinary course of its business, any raw materials, work in process or materials normally held by the Grantor for such purpose; -10- (ii) will, at its own expense, endeavor to collect, as and when due, all amounts due with respect to any of the Non-Tangible Collateral, including the taking of such action with respect to such collection as the Grantee may reasonably request or, in the absence of such request, as the Grantor may deem advisable; and (iii) may grant, in the ordinary course of business, to any party obligated on any of the Non-Tangible Collateral, any rebate, refund or allowance to which such party may be lawfully entitled, and may accept, in connection therewith, the return of Goods, the sale or lease of which shall have given rise to such Non-Tangible Collateral. Upon request of the Grantee at any time an Event of Default has occurred and is continuing, the Grantor will (except as the Grantee may otherwise consent in writing) forthwith, upon receipt, transmit and deliver to the Grantee, in the form received, all cash, checks, drafts, chattel paper and other instruments or writings for the payment of money (properly endorsed, where required, so that such items may be collected by the Grantee) which may be received by the Grantor (except for amounts payable to regulatory authorities as required by law) at any time in full or partial payment or otherwise as proceeds of any of the Collateral. The Grantee may, at the direction of the holders of at least 50% of the aggregate principal amount of the Notes then outstanding, at any time an Event of Default has occurred and is continuing, whether before or after any revocation of such power and authority, notify any parties obligated on any of the Non-Tangible Collateral to make payment to the Grantee of any, amounts due or to become due thereunder and enforce collection of any of the Non-Tangible Collateral by suit or otherwise and surrender, release or exchange all or any part thereof or compromise or extend or renew of any period (whether or not longer than the original period) any indebtedness thereunder or evidenced thereby. Upon request of the Grantee at any time a Event of Default has occurred and is continuing, the Grantor will, at its own expense notify any parties obligated on any of the Non-Tangible Collateral to make payment to the Grantee of any amounts due or to become due thereunder. SECTION 6. EVENT OF DEFAULT. (i) Whenever an Event of Default (as that term is defined in the Indenture) shall have occurred and remained continuing, subject to compliance with Applicable Gaming Regulations, the Grantee may exercise from time to time any rights and remedies available to it under applicable law, including without limitation the rights of a secured party under the Uniform Commercial Code. -11- (ii) The Grantor agrees, in case of an Event of Default, (1) at Grantee's request, to assemble, at its expense, all its Inventory and other Goods (other than Fixtures) at a convenient place or places acceptable to the Grantee, and (2) at Grantee's request, to execute all such documents and do all such other things which may be necessary or desirable in order to enable the Grantee or its nominee to be registered as owner of the Intellectual Property with any competent registration authority. (iii) Any notification of intended disposition of any of the Collateral required by law shall be deemed reasonably and properly given if given at least ten (10) days before such disposition. Any proceeds of any disposition by the Grantee of any of the Collateral shall be applied as set forth in SECTION 7. [ADD IN ARGOSY OF LOUISIANA, INC., JAZZ ENTERPRISES, INC. AND CATFISH QUEEN PARTNERSHIP ONLY- (iv) For purposes of Louisiana executory process, the Grantor hereby acknowledges the Secured Obligations, whether now existing or to arise hereafter, and confesses judgment for the full amount thereof if the Secured Obligations are not paid at maturity, and does by these presents consent, agree and stipulate that if any portion of the Secured Obligations is not promptly and fully paid when due, or if there should occur an Event of Default as defined above, the Secured Obligations shall, at the option of the Grantee, become immediately due and payable and it shall be lawful for the Grantee, without making a demand and without notice or putting in default, the same being hereby expressly waived, to cause all and singular the Collateral to be seized and sold by executory process, with or without appraisement (appraisement being hereby expressly waived), either in its entirely or in lots or parcels, as the Grantee may determine, to the highest bidder for cash, or on such terms as the plaintiff in such proceedings may direct. The Grantor hereby expressly waives: (a) the benefit of appraisement, as provided in Articles 2332, 2336, 2723 and 2724, Louisiana Code of Civil Procedure, and all other laws conferring the same; (b) the demand and three (3) days delay accorded by Articles 2639 and 2721, Louisiana Code of Civil Procedure; (c) the notice of seizure required by Articles 2293 and 2721, Louisiana Code of Civil Procedure; (d) the three (3) days delay provided by Articles 2331 and 2722, Louisiana Code of Civil Procedure, and (e) the benefit of the other provisions of Articles 2331, 2722 and 2723, Louisiana Code of Civil Procedure, and the benefit of any other Articles or laws relating to rights of appraisement, notice, or delay not specifically mentioned above; and the Grantor expressly agrees to the immediate seizure of the Collateral in the event of suit hereon. The Grantee shall have the option, at its discretion, of appointing itself or its agent as keeper of the collateral pursuant to the provisions of R.S. 9:5136, et seq. The keeper appointed pursuant to these provisions shall have all the powers, duties, and compensation provided for in R.S. 9:5138, and shall not be required to provide any bond otherwise than as required by law in such proceedings, pursuant to R.S. 9:5139. Such keeper shall be entitled to reimbursement for all reasonable out of pocket expenses and for a reasonable fee for its services.] -12- SECTION 7. APPLICATION OF PROCEEDS. The proceeds of a sale of Collateral sold after the occurrence and during the continuation of an Event of Default shall be applied by the Grantee in accordance with the Indenture. SECTION 8. MISCELLANEOUS PROVISIONS. SECTION 8.1 LIMITATION ON DUTY OF GRANTEE IN RESPECT OF COLLATERAL. The Grantee shall be deemed to have exercised reasonable care in the custody and preservation of any of the Collateral in its possession if it takes such action for that purpose as the Grantor requests in writing, but failure of the Grantee to comply with any such request shall not of itself be deemed a failure to exercise reasonable care, and no failure of the Grantee to preserve or protect any rights with respect to such Collateral against prior parties, or to do any act with respect to the preservation of such Collateral not so requested by the Grantor, shall be deemed a failure to exercise reasonable care in the custody or preservation of such Collateral. SECTION 8.2 LIMITATIONS OF GAMING REGULATIONS. The Grantee acknowledges that its rights and remedies with respect to the Collateral upon an Event of Default are subject to the limitations and restrictions of Applicable Gaming Regulations. [ADD IN THE INDIANA GAMING COMPANY ONLY - Further, without limiting any of the foregoing, the Grantee further acknowledges and agrees that, notwithstanding any other provision of this Security Agreement to the contrary, (i) nothing in this Security Agreement shall effect any transfer of any "ownership interest" (within the meaning of 68 Indiana Administrative Code 5) in Indiana Gaming Company, L.P. ("Indiana L.P.") or effect any transfer, sale, purchase, lease or hypothecation of, or any borrowing or loaning of any money against, the certificate of suitability of Indiana L.P., or any owner's license subsequently issued to Indiana L.P., (ii) no person, other than the Grantor or the other current owners of Indiana L.P., shall have any "ownership interest" in Indiana L.P., and (iii) no person may exercise any rights or remedies granted in this Security Agreement against Indiana L.P. unless and until such exercise (a) is approved by the Indiana Gaming Commission and (b) complies with all Indiana laws and regulations, including 68 Indiana Administrative Code 5. In addition, Grantee acknowledges that any foreclosure, possession, sale, transfer or disposition of the partnership interest held by Grantor in Indiana L.P. is subject to compliance with Applicable Gaming Regulations which may be proscriptive or require prior consent or approval by applicable state gaming commissions, including the Indiana Gaming Commission, to such foreclosure, possession, sale, transfer or disposition. Grantee hereby acknowledges that Indiana law does not presently allow any pledge, hypothecation or transfers of gaming licenses (or any interest therein) -13- issued under the Indiana Riverboat Gambling Act or any security interest attached to any such license. In addition, the exercise of Grantee's rights hereunder is expressly subject to the terms of that certain Second Amended and Restated Agreement of Limited Partnership of Indiana Gaming Company, L.P. dated February 21, 1996 (including without limitation Section 14.2(e) thereof.)][ADD IN ARGOSY OF LOUISIANA, INC., JAZZ ENTERPRISES, INC. AND CATFISH QUEEN PARTNERSHIP ONLY - Further, without limiting any of the foregoing, the Grantee further acknowledges and agrees to the requirement of the Riverboat Gaming Enforcement Division, Office of State Police, Department of Public Safety and Corrections, State of Louisiana (the "Division") and/or its successor, that, within five (5) days of the commencement of the exercise of any remedy(ies) set forth in this Security Agreement in favor of the Grantee or the Noteholders with respect to Argosy of Louisiana, Inc., Catfish Queen Partnership in Commendam or Jazz Enterprises, Inc., the Grantee shall notify the Division or its successor, in writing, of the date, nature and scope of the exercise of such remedy(ies) and further acknowledges that the exercise of such remedy(ies) and any transfer or proposed transfer of any ownership interest or economic interest resulting therefrom or related thereto shall require compliance with any applicable provisions of (i) Title 4, Section 528 of the Louisiana Revised Statutes and all regulations promulgated pursuant thereto, and/or (ii) Title 27, Section 1 et seq. of the Louisiana Revised Statutes and any regulations promulgated pursuant thereto.][ADD IN THE MISSOURI GAMING COMPANY AND THE ST. LOUIS GAMING COMPANY ONLY - Grantee acknowledges that the foreclosure, possession, sale, transfer or disposition of certain gaming equipment and machinery is subject to compliance with Applicable Gaming Regulations which may be proscriptive or require prior consent or approval by applicable state gaming commissions, including the Missouri Gaming Commission, to such foreclosure, possession, sale, transfer or disposition. Grantee hereby further acknowledges that Missouri law does not presently permit the Grantee to foreclose or take possession of certain gaming equipment and machinery without the Grantee being licensed by the Missouri Gaming Commission or, in the alternative, the creation of a different mechanism that is in compliance with Missouri laws and is acceptable to the Missouri Gaming Commission (which mechanism could include, subject to the Missouri Gaming Commission's approval, the sale, transfer or disposition of such gaming equipment and machinery in question to an entity licensed by the Missouri Gaming Commission).] SECTION 8.3 NOTICE. All notices or other communications required or permitted hereunder shall be in writing and shall be sufficiently given if made by hand delivery, by telex, by telecopier or registered or certified mail, postage prepaid, return receipt requested, addressed to the last known address of the respective party. SECTION 8.4 NO WAIVER; AMENDMENT. No delay on the part of the Grantee in the exercise of any right or remedy shall operate as a waiver thereof, and no single or partial exercise by the Grantee of any right or remedy shall preclude other or further exercise thereof or the exercise of any other right or remedy. No amendment to, modification or waiver of, or consent with respect to, any provision of this Security Agreement shall be effective unless the same shall be in writing and signed and delivered by the Grantee, and then such amendment, modification, waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. -14- SECTION 8.5 CAPTIONS. Section captions used in this Security Agreement are for convenience of reference only and shall not affect the construction of this Security Agreement. SECTION 8.6 COUNTERPARTS. This Security Agreement may be executed in any number of counterparts and by the different parties on separate counterparts and each such counterpart shall be deemed to be an original, but all such counterparts shall together constitute but one and the same Security Agreement. SECTION 8.7 TERMINATION; RELEASE OF COLLATERAL. This Security Agreement shall terminate with respect to all Collateral when all of the Secured Obligations have been fully and indefeasibly paid and satisfied (the date of such termination of all Collateral, the "Termination Date"). In addition, the Collateral, or any portion thereof, may be released as provided in the Indenture (including without limitation, Articles IV and IX thereof). At the time of any such termination, the Grantee, at the request and expense of the Grantor, will execute and deliver to the Grantor a proper instrument or instruments acknowledging the satisfaction and termination of this Security Agreement with respect to such Collateral, and will duly assign, transfer and deliver to the Grantor any such Collateral as has not yet theretofore been sold or otherwise applied or released pursuant to this Security Agreement, together with any moneys at the time held by the Grantee in respect of such Collateral. Such assignment and delivery shall be without warranty by or recourse to the Grantee, except as to the absence of any prior assignments by the Grantee of its interest in the Collateral. SECTION 8.8 GOVERNING LAW. THIS SECURITY AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS. SECTION 8.9 BINDING AGREEMENT; ASSIGNMENT. This Security Agreement shall be binding upon the Grantor and the Grantee and their respective successors and assigns, and shall inure to the benefit of the Grantor, the Noteholders and the Grantee and their respective successors and assigns. SECTION 8.10 DOCUMENTS SUFFICIENT AS FINANCING STATEMENT. At the option of the Grantee, this Security Agreement, or a carbon, photographic or other reproduction of this Security Agreement or of any Uniform Commercial Code financing statement covering the Collateral or any portion thereof shall be sufficient as a Uniform Commercial Code financing statement and may be filed as such. SECTION 8.11 CONFLICTS WITH PLEDGE AGREEMENTS OR SHIP MORTGAGES. To the extent that the Collateral is also subject to the Parent Pledge Agreement (as defined in the Indenture), any Subsidiary Pledge Agreement (as defined in the Indenture) or any Ship Mortgage (as defined in the Indenture) and any provisions of the Parent Pledge Agreement, any such Subsidiary Pledge Agreement or any such First Preferred Ship Mortgage conflict with the provisions of this Security Agreement, the provisions of the Parent Pledge Agreement, such Subsidiary Pledge Agreement or such First Preferred Ship Mortgage, as applicable, shall control. -15- SECTION 8.12 JURISDICTION; SERVICE OF PROCESS; VENUE. THE GRANTOR HEREBY IRREVOCABLY AGREES THAT ANY LEGAL ACTION OR PROCEEDING PERTAINING TO THIS SECURITY AGREEMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK, BOROUGH OF MANHATTAN, OR IN THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK, AND BY THIS EXECUTION AND DELIVERY OF A COUNTERPART HEREOF, THE GRANTOR IRREVOCABLY SUBMITS TO THE JURISDICTION OF SUCH COURTS. THE GRANTOR HEREBY IRREVOCABLY AGREES THAT SERVICE OF PROCESS IN ANY SUCH ACTION OF PROCEEDING MAY BE MADE BY MAILING, BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, A COPY OF THE SUMMONS AND COMPLAINT, OR OTHER LEGAL PROCESS IN SUCH ACTION OR PROCEEDINGS TO THE GRANTOR AT ITS ADDRESS SHOWN ON THE SIGNATURE PAGE HEREOF (OR ANY OTHER ADDRESS OF THE GRANTOR APPEARING ON THE RECORDS OF THE GRANTEE). SERVICE OF PROCESS IN ANY SUCH ACTION OR PROCEEDING, EFFECTED AS AFORESAID, SHALL BE LEGAL UPON RECEIPT BY THE GRANTOR AND SHALL BE DEEMED PERSONAL SERVICE UPON THE GRANTOR AND SHALL BE LEGAL AND BINDING UPON THE GRANTOR FOR ALL PURPOSES, THE GRANTOR HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE IN ANY SUCH ACTION OR PROCEEDING IN ANY SUCH COURT AS WELL AS ANY RIGHT IT MAY NOT OR HEREAFTER HAVE TO REMOVE ANY SUCH ACTION OF PROCEEDING, ONCE COMMENCED, TO ANOTHER COURT ON THE GROUNDS OF FORUM NON CONVENIENS OR OTHERWISE. SECTION 8.13 WAIVER OF RIGHT TO JURY TRIAL. THE GRANTOR AND THE GRANTEE HEREBY WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS SECURITY AGREEMENT OR ANY AMENDMENT INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH AND AGREE THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY. [signature page follows] -16- IN WITNESS WHEREOF, this Security Agreement has been duly executed as of the day and year first above written. Address: [INSERT SUBSIDIARY NAME], [INSERT SUBSIDIARY NAME] a _________ corporation, 219 Piasa Street as Grantor Alton, Illinois 62002 Attention: Joseph G. Uram Facsimile: (618) 474-7636 By:___________________________ Phone No.: (618) 474-7620 Name: ________________________ Title:________________________ Address: FIRST NATIONAL BANK OF COMMERCE, First National Bank of Commerce as Trustee and as Grantee Corporate Trust Division 210 Baronne Street New Orleans, Louisiana 70112 By:___________________________ Facsimile: (504) 561-1432 Phone No.: (504) 561-1640 Name: ________________________ Title:________________________ EX-4.8 9 EXHIBIT 4.8 FORM OF PLEDGE AGREEMENT (ARGOSY GAMING COMPANY) THIS PLEDGE AGREEMENT, dated as of June 5, 1996 (herein, as amended, restated, supplemented or otherwise modified from time to time, called this "Pledge Agreement") is by ARGOSY GAMING COMPANY, a Delaware corporation (herein called the "Pledgor"), to and in favor of FIRST NATIONAL BANK OF COMMERCE, as trustee (herein, together with its successors in such capacity, called the "Trustee" or the "Pledgee") for the holders of those certain Notes (as hereinafter defined). W I T N E S S E T H WHEREAS, the Pledgor, the Pledgee and the Guarantors (as defined in the Indenture) have entered into that certain Indenture dated June 5, 1996 (herein, as amended, restated, supplemented or otherwise modified from time to time, called the "Indenture"), pursuant to which, among other things, the Pledgor shall issue its 13 1/4% First Mortgage Notes due 2004 (herein called the "Original Notes"); WHEREAS, pursuant to a Registration Rights Agreement between the Pledgor, the Guarantors and Bear, Stearns & Co. Inc., Donaldson, Lufkin & Jenrette Securities Corporation, BA Securities, Inc. and Deutsche Morgan Grenfell/C. J. Lawrence Inc. (herein, collectively, called the "Initial Purchasers"), the Pledgor and the Guarantors will file a registration statement with respect to an offer to exchange the Original Notes for a new series of 13 1/4% First Mortgage Notes due 2004 registered under the Securities Act of 1933, as amended, with terms substantially identical to those of the Original Notes (herein called the "Series B Notes" and, together with the Original Notes, called the "Notes"); WHEREAS, the Pledgor will derive substantial direct and indirect benefit from the issuance of the Notes; WHEREAS, pursuant to the Indenture, the Pledgee shall act as the trustee for the holders of the Original Notes and the holders of the Series B Notes (herein, collectively, called the "Noteholders"); WHEREAS, Pledgor is (i) the owner of the shares of stock described in Schedule A hereto issued by the entities listed therein (herein called the "Pledged Stock"), (ii) the holder of those certain promissory notes described in SCHEDULE B hereto and payable by the obligors named therein (herein called the "Pledged Debt") and (iii) the holder of the partnership interests described in SCHEDULE C hereto issued by the partnerships or joint venturers named therein (herein called the "Pledged Partnership Interests"); WHEREAS, to secure the repayment of the Notes and any and all other Secured Obligations (as defined in Section 1 hereof) of the Pledgor, the Pledgor has agreed to grant to the Pledgee for the ratable benefit of the Noteholders a security interest in and to the Pledged Collateral (as defined in Section 2 hereof) upon the terms and subject to the conditions hereinafter set forth; and WHEREAS, it is a condition precedent to the purchase of the Original Notes by the Initial Purchasers from the Pledgor that the Pledgor shall have executed and delivered this Pledge Agreement to the Pledgee for the ratable benefit of the Noteholders; NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants herein contained and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: Section 1. DEFINITIONS. Terms used herein but not otherwise defined herein shall have the meanings assigned to such terms in the Indenture. Each term defined in the first paragraph and the Recitals shall have the meaning set forth above whenever used herein, unless otherwise expressly provided or unless the context clearly requires otherwise. In addition to the terms defined in the first paragraph and the Recitals, whenever used herein the following terms shall have the meanings set forth below, unless otherwise expressly provided or unless the context clearly requires otherwise: "Applicable Gaming Regulations" shall mean, at any particular time, federal and state gaming and gambling statutes, laws, rules and regulations applicable to the Pledgor or its Subsidiaries (as defined in the Indenture). "Division" shall have the meaning assigned thereto in Section 8(c) below. "Event of Default" shall mean when any of the following events shall have occurred: (i) the occurrence of an "Event of Default" as defined in the Indenture; or (ii) failure in the due observance or performance by the Pledgor of any of the covenants and conditions in this Pledge Agreement required to be observed and performed by Pledgor and continuance of such failure for thirty (30) days after the Pledgor becomes aware or should have become aware of such failure. "Pledged Collateral" shall have the meaning assigned thereto in Section 2 below. "Secured Obligations" shall mean all obligations of the Pledgor to repay the Notes and any and all other obligations of the Pledgor to the Pledgee under the Indenture, this Pledge Agreement and the other Security Documents (as that term is defined in the Indenture). Without limiting the foregoing, the Secured Obligations shall include (i) the payment of the principal of and premium and Liquidated Damages (as that term is defined in the Indenture), if any, and interest on the Notes, (ii) the payment of all other indebtedness of the Pledgor in respect of the Notes and the -2- Indenture and (iii) the due performance of and compliance by the Pledgor with all the terms of and all the obligations to the Pledgee under the Notes and the Indenture. "Securities Act" shall have the meaning assigned thereto in Section 8(a)(3) below. Section 2. Pledge. As security for the timely payment and performance in full of the Secured Obligations, the Pledgor hereby hypothecates, pledges, sets over and delivers unto the Pledgee, and grants to the Pledgee (for the ratable benefit of the Noteholders) a security interest in and to all of the Pledgor's right, title and interest in and to, the following (herein, collectively, called the "Pledged Collateral"): (i) the Pledged Stock, the Pledged Partnership Interests and the certificates representing or evidencing all such shares and interests; (ii) all payments of principal or interest, dividends, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of, in exchange for or upon the conversion of the Pledged Stock or the Pledged Partnership Interests; (iii) the Pledged Debt and other instruments evidencing the Pledged Debt; (iv) all payments of principal or interest, cash, instruments and other property from time to time received, receivable and otherwise distributed in respect of or in exchange for any and all of the Pledged Debt; (v) all rights and privileges and all securities entitlements of the Pledgor with respect to the securities and other property referred to in clauses (i), (ii), (iii) and (iv) above; (vi) all additional shares of stock of the Guarantors from time to time acquired by the Pledgor in any manner and the certificates representing such additional shares and interests and all dividends, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for such shares and interests; (vii) all additional indebtedness from time to time owed to the Pledgor by any obligor of the Pledged Debt and the instruments evidencing such indebtedness and all interest, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any and all of such indebtedness; and (viii) all proceeds of any of the foregoing. Section 3. SECURITY FOR SECURED OBLIGATIONS. The Pledgor grants the aforementioned security interest in the Pledged Collateral to and in favor of the Pledgee to secure the full and faithful payment and performance by the Pledgor of the Secured Obligations. -3- Section 4. DELIVERY OF THE COLLATERAL. The Pledgor shall deliver to the Pledgee, (A) any stock certificates, partnership certificates, notes or other securities or instruments now or hereafter included in the Pledged Collateral duly indorsed to the Pledgee in blank or accompanied by stock powers duly executed in blank or other instruments of transfer satisfactory to the Pledgee together with such other instruments and documents as the Pledgee may reasonably request, (B) debt instruments, if any, including all notes payable to the Pledgor from any one or all of the Guarantors, now and hereinafter included in the Pledged Collateral duly endorsed to the Pledgee in blank; and (C) all other property comprising part of the Pledged Collateral accompanied by proper instruments of assignment duly executed by the Pledgor and such other instruments or documents as may be necessary in order to perfect and/or maintain the security interest granted hereunder in and to the Pledged Collateral. Each delivery of such Pledged Collateral shall be accompanied by a schedule describing the securities and/or indebtedness theretofore and then being pledged hereunder, which schedule shall be attached hereto and made a part hereof. Each schedule so delivered shall supersede any prior schedules so delivered. Section 5. REPRESENTATIONS AND WARRANTIES. As further security for the full and faithful performance of the Secured Obligations, the Pledgor hereby represents, warrants and covenants to the Pledgee that: (a) the Pledged Stock includes all of the outstanding capital stock of the Guarantors owned by the Pledgor and the Pledged Stock has been duly authorized and validly issued and is fully paid and nonassessable; (b) the Pledged Partnership Interests include all of the outstanding partnership interests in Guarantors owned by the Pledgor and the Pledged Partnership Interests have been duly authorized and validly issued, and all payments required to be made by any holder of such partnership interests in respect of such interests have been made; (c) the Pledged Debt has been duly authorized, authenticated or issued and delivered and is the legal, valid and binding obligations of the payors thereof; (d) except for the security interest granted hereunder, the Pledgor (i) is and will at all times continue to be the direct owner, legally, beneficially and of record, of the Pledged Stock, the Pledged Partnership Interests and the Pledged Debt; (ii) holds the same free and clear of all liens, security interests, options or other charges or encumbrances; (iii) will make no assignment, pledge, hypothecation or transfer of, or create any security interest in or otherwise encumber, the Pledged Collateral; (iv) will cause all securities within the Pledged Collateral to be certificated securities; PROVIDED, HOWEVER, the Pledgee acknowledges that the Pledged -4- Partnership Interests shall not be deemed securities for the purposes of this Pledge Agreement; and (v) will cause any and all certificates, instruments or other documents representing or evidencing Pledged Collateral to be forthwith deposited with the Pledgee and pledged or assigned thereunder; (e) by virtue of the execution and delivery by Pledgor of this Pledge Agreement, when the Pledged Stock and the Pledged Debt are delivered to the Pledgee in accordance with this Pledge Agreement, and upon the filing of UCC financing statements in the appropriate filing offices with respect to the Pledged Partnership Interests, which office is the office of the Illinois Secretary of State, and with respect to dividends payable in respect to the Pledged Stock, the Pledgee will obtain a valid, legal and perfected first priority security interest in the Pledged Collateral as security for the repayment of the Secured Obligations free and clear of all liens (other than Permitted Liens); (f) the Pledgor will cause the Guarantors not to issue any stock or other equity securities unless such securities are issued in accordance with the terms of the Indenture and the Pledgor's pro rata share of such securities is concurrently pledged and delivered to the Pledgee hereunder (except as otherwise not required under the Indenture); (g) the Pledgor will at any time or times hereafter execute such financing statements, continuation statements or other instruments of assurance as Pledgee may reasonably request to establish, maintain and/or perfect the Pledgee's security interest in the Pledged Collateral; (h) this Pledge Agreement is the legal, valid and binding commitment of the Pledgor according to its terms, except as such enforcement may be limited by the effect of applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to or affecting the rights of creditors generally; (i) the pledge effected hereby is effective to vest in the Pledgee, for the benefit of the Pledgee and the Noteholders, the rights of the Pledgee in the Pledged Collateral as set forth herein; (j) there are no conditions precedent to the effectiveness of this Pledge Agreement which have not been satisfied or waived; (k) the Pledgor's chief executive office and place of business is located at Alton, Illinois, and its records concerning the Pledged Collateral are kept at said office; (l) the Pledgor will furnish to the Pledgee, as soon as possible and in any event within thirty (30) days prior to the occurrence from time to time of any change in the address of the Pledgor's chief executive office or in the name of the Pledgor, notice in writing of such changes; and -5- (m) none of the Pledged Stock constitutes margin stock, as defined in Regulation U of the Board of Governors of the Federal Reserve System. The Pledgor covenants and agrees that it will defend the Pledgee's right, title and security interest in and to the Pledged Collateral and the proceeds thereof against the claims and demands of all persons whomsoever, and the Pledgor covenants and agrees that it will have like title to and right to pledge any other property at any time hereafter pledged to the Pledgee as Pledged Collateral hereunder and will likewise defend the Pledgee's right thereto and security interest therein. Section 6. REGISTRATION IN NOMINEE NAME; DENOMINATIONS. Subject to Applicable Gaming Regulations: (a) The Pledgee, on behalf of the Noteholders, shall have the right (in its sole and absolute discretion) to hold the Pledged Stock in its own name, the name of its nominee or the name of the Pledgor, endorsed or assigned in blank or in favor of the Pledgee; (b) the Pledgor will promptly give to the Pledgee copies of any notices or other communications received by it specifically with respect to Pledged Stock registered in the name of the Pledgor; (c) the Pledgee shall at all times have the right to exchange the certificates representing Pledged Stock for certificates of smaller or larger denominations for any purposes consistent with this Pledge Agreement; and (d) the Pledgee may, at the direction of the holders of at least 50% of the aggregate principal amount of the Notes then outstanding, at any time an Event of Default has occurred and is continuing, whether before or after any revocation of such power and authority, notify any parties obligated on any of the Non-Tangible Collateral (as defined in that certain Security Agreement dated as of the date hereof between the Pledgor and the Pledgee) to make payment to the Pledgee of any, amounts due or to become due thereunder and enforce collection of any of the Non-Tangible Collateral by suit or otherwise and surrender, release or exchange all or any part thereof or compromise or extend or renew for any period (whether or not longer than the original period) any indebtedness thereunder or evidenced thereby. Upon request of the Pledgee at any time an Event of Default has occurred and is continuing, the Pledgor will, at its own expense, notify any parties obligated on any of the Non-Tangible Collateral to make payment to the Pledgee of any amounts due or to become due thereunder. Section 7. VOTING RIGHTS; DIVIDENDS AND INTEREST; ETC. Notwithstanding any other provision hereof (including without limitation subsection (v) of Section 2 hereof) and subject to compliance with Applicable Gaming Regulations: (a) unless and until an Event of Default shall have occurred and be continuing: -6- (i) the Pledgor shall be entitled to exercise or refrain from exercising any and all voting rights and other consensual rights accruing to it as the owner of the Pledged Collateral or any part thereof for any purpose consistent with the terms of this Pledge Agreement and the Indenture; provided, however, that the exercise or refrain from exercising of rights could not reasonably be expected, in the best judgment of the Pledgor, to have a material adverse effect on the value of the Pledged Collateral or to adversely affect the rights and remedies of the Pledgee or the Noteholders under this Pledge Agreement or the Indenture or the ability of the Pledgee or the Noteholders to exercise the same; (ii) the Pledgee shall execute and deliver to the Pledgor, or cause to be executed and delivered to the Pledgor, all such proxies, powers of attorney, and other instruments as the Pledgor may reasonably request for the purpose of enabling the Pledgor to exercise the voting rights which it is entitled to exercise or refrain from exercising pursuant to subparagraph (i) above; and (iii) the Pledgor shall be entitled to receive and retain any and all cash principal, interest, dividends and other income payable on or with respect to or in accordance with the Pledged Collateral to the extent and only to the extent that such dividends and interest payments are permitted by, and otherwise paid in accordance with, the terms and conditions of the Indenture and applicable laws; PROVIDED, that any and all other dividends and distributions and interest made on or in respect of the Pledged Collateral, whether paid or payable in cash, securities or other property and, whether resulting from a subdivision, combination or reclassification, or received in exchange for the Pledged Collateral or any part thereof, or as a result of any merger, consolidation, acquisition or other exchange of assets to which the issuer thereof may be a party or otherwise, shall be applied by Pledgor in accordance with the terms of the Indenture. (b) (i) Upon the occurrence and during the continuance of an Event of Default, or any event which, with giving of notice or lapse of time, or both, would become an Event of Default, all rights of the Pledgor to dividends and interest which the Pledgor is authorized to receive pursuant to paragraph (a)(iii) of this Section 7 shall cease, and all such rights shall thereupon become vested in the Pledgee, who shall have the sole and exclusive right and authority to receive and retain as Pledged Collateral such dividends and interest payments; (ii) All dividends, distributions and interest payments which are received by the Pledgor contrary to the provisions of this Section 7(b) shall be received in trust for the benefit of the Pledgee and the Noteholders, shall be segregated from other property or funds of the Pledgor and shall be immediately delivered to the Pledgee in the same form as so received (with any necessary endorsement). Any and all money and other property paid over to or received by the Pledgee pursuant to the provisions of this subdivision (ii) of paragraph 7(b) shall be deposited by the Pledgee in an account to be established by the -7- Pledgee for the benefit of the Pledgee and the Noteholders upon receipt of such money or other property and shall be applied in accordance with the provisions of Section 9 hereof. (c) Upon the occurrence and during the continuance of an Event of Default, or any event which, with giving of notice or lapse of time, or both, would become an Event of Default, all rights of the Pledgor to exercise or refrain from exercising the voting rights which it is entitled to exercise or refrain from exercising pursuant to paragraph (a) (i)of this Section 7 shall, upon notice to the Pledgee, cease, and all such rights shall thereupon become vested in the Pledgee, which shall have the sole and exclusive right (but not the obligation) and authority to exercise such voting rights. The Pledgor shall execute and deliver to the Pledgee all such proxies, powers of attorney, and other instruments as the Pledgee shall request for the purpose of enabling the Pledgee to exercise or refrain from exercising the voting rights which it is entitled to exercise or refrain from exercising pursuant to this Section 7(c) during the continuance of such Event of Default. Section 8. REMEDIES UPON AN EVENT OF DEFAULT. Upon the occurrence and during the continuance of an Event of Default, whether or not all of the Secured Obligations shall have become due and payable, subject to compliance with Applicable Gaming Regulations: (a) the Pledgee shall have the following remedies: (i) subject to the notice requirements and other relevant provisions of the Notes and the Indenture, the Pledgee may, at its option, declare all or any part of the Secured Obligations immediately due and payable and may exercise all of its rights and remedies under the Indenture, the Notes and the Security Documents (as that term is defined in the Indenture); (ii) the Pledgee may, at its option and in the name of the Pledgor or otherwise, collect and dispose of all or any part of the Pledged Collateral at a public or private sale without demand of performance, advertisement or notice (all of which are hereby waived by Pledgor) for such prices and on such terms as the Pledgee may reasonably determine and the Pledgee or anyone else may be the purchaser, lessee, assignee or recipient or any or all of the Pledged Collateral so disposed of at any public sale (or, to the extent permitted by law, at any private sale) and, to the extent provided by law, thereafter hold the same absolutely, free from any claim or right of whatsoever kind, including any right or equity of redemption (statutory or otherwise) of the Pledgor, any such demand, notice and right or equity being hereby expressly waived and released; PROVIDED that at least 10 days' notice of the time and place of any such sale shall be given to Pledgor, and the Pledgee is authorized to apply all proceeds from the disposition of the Pledged Collateral in accordance with the terms of the Indenture; (iii) the Pledgor recognizes that by reason of certain prohibitions contained in the Securities Act of 1933 (as amended from time to time, the "Securities Act"), and applicable state securities law, the Pledgee may be compelled, -8- with respect to any sale of all or any part of the Pledged Collateral, to limit purchasers to those who will agree, among other things, to acquire the Pledged Collateral for their own account, for investment and not with a view to the distribution or resale thereof. The Pledgor acknowledges that any such private sales may be at prices and on terms less favorable to the Pledgee than those obtainable through a public sale without such restrictions, and, notwithstanding such circumstances, agrees that any such private sale shall be deemed to have been made in a commercially reasonable manner and that the Pledgee shall have no obligation to engage in public sales and no obligation to delay the sale of any Pledged Collateral for the period of time necessary to permit the Guarantors to register any such Pledged Collateral for public sale; (iv) the Pledgee shall have the right to require all distributions and other amounts payable with respect to the Pledged Collateral to be applied in accordance with the terms of the Indenture; (v) at Pledgee's request, the Pledgor shall cooperate with the Pledgee and do all things necessary to enable the Pledgee to sell any and all of the Pledged Collateral, in compliance with all applicable securities and other laws and regulations; and (vi) the Pledgee may exercise or enforce any and all rights or remedies available to the Pledgee by law or agreement against the Pledgor. (b) The Pledgor agrees that, upon the occurrence and during the continuance of an Event of Default, if for any reason the Pledgee desires and exercises its right to sell any of the Pledged Collateral pursuant to this Section 8, the Pledgor shall, at any time and from time to time, upon the written request of the Pledgee: (i) take (or use its best efforts to cause to be taken) such action to prepare, distribute and/or file such documents, as are required or advisable in the opinion of counsel for the Trustee to register the Pledged Stock under the Securities Act of 1933 (as amended from time to time, the "Securities Act") to permit the public sale of such Pledged Collateral, including, but not limited to, a public offering and sale of the Pledged Stock pursuant to any applicable federal and state securities laws and regulations, and to cause the registration statement to remain effective for such period as prospectuses are required by law to remain effective, or in the alternative, to effect a sale of such Pledged Collateral in accordance with an exemption under the Securities Act; (ii) indemnify, defend and hold harmless the Pledgee and any financial advisor or underwriter from and against any and all loss, liability, expenses, costs, fees and disbursements of counsel (including, without limitation, a reasonable estimate of the cost of the Pledgee of legal counsel), and any and all claims (including the costs of investigation) which they may incur insofar as such loss, -9- liability, expense or claim arises out of or is based upon any alleged untrue statement of a material fact contained in any prospectus (or any amendment or supplement thereto) or in any notification or offering circular, or arises out of or is based upon any alleged omission to state a material fact required to be stated therein or necessary to make the statements in any respect thereof not misleading, except insofar as the same may have been caused by any untrue statement or omission based upon information furnished in writing to the Pledgor or the issuer of such Pledged Securities by the Pledgee or the underwriter expressly for use therein; and (iii) the Pledgor further agrees to use its best efforts to qualify, file or register, or cause the issuer of any Pledged Stock to qualify, file or register, any of the Pledged Stock under applicable state securities laws and regulations as the Pledgee may specify and to keep effective, or cause to be kept effective, all such qualifications, filings or registrations. The Pledgor acknowledges that there is no adequate remedy at law for failure by it to comply with the foregoing provisions and that such failure would not be adequately compensable in damages, and therefore agrees that its agreements with respect to the foregoing may be specifically enforced. (c) The Pledgee acknowledges that any sale, transfer or disposition of the Pledged Collateral may be subject to compliance with Applicable Gaming Regulations which may require prior consent or approval by applicable state gaming commissions to such sale, transfer or disposition. Without limiting the foregoing, the Pledgee acknowledges that any foreclosure, possession, sale, transfer or disposition of the Pledged Stock is subject to compliance with Applicable Gaming Regulations which may be proscriptive or require prior consent or approval by applicable state gaming commissions, including without limitation the Missouri Gaming Commission, to such foreclosure, possession, sale, transfer or disposition. The Pledgee hereby acknowledges that Missouri law does not presently allow any pledge, hypothecation or transfers of gaming licenses (or any interest therein) issued under the Missouri Riverboat Gambling Act or any security interest attached to any such license. The Pledgee hereby further acknowledges that Missouri law does not presently permit the Pledgee to foreclose upon, possess, sell, transfer or dispose of certain gaming equipment and machinery without the Pledgee being licensed by the Missouri Gaming Commission or, in the alternative, the creation of a different mechanism that is in compliance with Missouri laws and is acceptable to the Missouri Gaming Commission (which mechanism could include, subject to the Missouri Gaming Commission's approval, the sale, transfer or disposition of such gaming equipment and machinery in question to an entity licensed by the Missouri Gaming Commission). Further, without limiting any of the foregoing, the Pledgee further acknowledges and agrees to the requirement of the Riverboat Gaming Enforcement Division, Office of State Police, Department of Public Safety and Corrections, State of Louisiana (the "Division"), that, within five (5) days of the commencement of the exercise of any remedy(ies) set forth in this Pledge Agreement in favor of the Pledgee or the Noteholders with respect to Argosy of Louisiana, Inc., Catfish Queen Partnership in Commendam or Jazz Enterprises, Inc., the Pledgee shall notify the -10- Division, in writing, of the date, nature and scope of the exercise of such remedy(ies) and further acknowledges that the exercise of such remedy(ies) and any transfer or proposed transfer of any ownership interest or economic interest resulting therefrom or related thereto shall require compliance with any applicable provisions of Title 4, Section 528 of the Louisiana Revised Statutes and all regulations promulgated pursuant thereto. Further, without limiting any of the foregoing, the Pledgee further acknowledges and agrees that, notwithstanding any other provision of this Pledge Agreement to the contrary, (i) nothing in this Pledge Agreement shall effect any transfer of any "ownership interest" (within the meaning of 68 Indiana Administrative Code 5) in Indiana Gaming Company, L.P. ("Indiana L.P.") or effect any transfer, sale, purchase, lease or hypothecation of, or any borrowing or loaning of any money against, the certificate of suitability of Indiana L.P., or any owner's license subsequently issued to Indiana L.P., (ii) no person, other than The Indiana Gaming Company or the other current owners of Indiana L.P., shall have any "ownership interest" in Indiana L.P., and (iii) no person may exercise any rights or remedies granted in this Pledge Agreement against Indiana L.P., unless and until such exercise (a) is approved by the Indiana Gaming Commission and (b) complies with all Indiana laws and regulations, including 68 Indiana Administrative Code 5. In addition, the exercise of Pledgee's rights hereunder is expressly subject to the terms of that certain Second Amended and Restated Agreement of Limited Partnership of Indiana Gaming Company, L.P. dated February 21,1996 (including without limitation Section 14.2(e) thereof). Section 9. APPLICATION OF PROCEEDS OF SALE. The proceeds of any sale of Pledged Collateral pursuant to Section 8 hereof, as well as any Pledged Collateral consisting of cash, shall be applied by the Pledgee in the order and to the items provided for and as set forth in the Indenture. Section 10. REIMBURSEMENT OF PLEDGEE. The Pledgor hereby agrees to reimburse the Pledgee and the Noteholders, on demand, for all expenses incurred by the Pledgee in connection with the administration and enforcement of this Pledge Agreement and agrees to indemnify the Pledgee and hold the Pledgee and the Noteholders harmless from and against any and all liability incurred by the Pledgee hereunder or in connection herewith, unless such liability shall have been determined by a final, non-appealable order of a court of competent jurisdiction to have resulted solely from willful misconduct or gross negligence on the part of the Pledgee or the Noteholders. Section 11. PLEDGEE APPOINTED ATTORNEY-IN-FACT. Except as otherwise provided herein, the Pledgor hereby appoints the Pledgee the attorney-in-fact of the Pledgor, from time to time after the occurrence and during the continuance of an Event of Default, for the purposes of carrying out the provisions of this Pledge Agreement or taking any action or executing any instrument which the Pledgee may deem necessary or advisable to accomplish the purposes hereof, which appointment is irrevocable and coupled with an interest. Without limiting the generality of the foregoing, the Pledgee shall have the right, upon the occurrence and during the continuance of an Event of Default, subject to compliance with Applicable Gaming Regulations, with full power of substitution either in the Pledgee's name or in the name of the Pledgor, to ask for, demand, sue for, collect, receive and give acquittance for any and all monies due or to become due under or by virtue of any Pledged Collateral, to endorse checks, drafts, orders and other instruments for the payment of money payable to the Pledgor constituting Pledged Collateral or any part thereof or on account thereof and to give -11- full discharge for the same, to settle, compromise, prosecute or defend any action, claim or proceeding with respect thereto, and to sell, assign, endorse, pledge, transfer and make any agreement respecting, or otherwise deal with, the same; PROVIDED, HOWEVER, that nothing herein contained shall be construed as requiring or obligating the Pledgee to make any commitment or to make any inquiry as to the nature or sufficiency of any payment received by the Pledgee, or to present or file any claim or notice, or to take any action with respect to the Pledged Collateral or any part thereof or the monies due or to become due in respect thereof or any property covered thereby, and no action taken by the Pledgee or omitted to be taken with respect to the Pledged Collateral or any part thereof shall give rise to any defense, counterclaim or offset in favor of any Pledgor or to any claim or action against the Pledgee. Section 11.1 PLEDGEE MAY PERFORM. If the Pledgor fails to perform any agreement contained herein, the Pledgee may itself perform, or cause performance of, such agreement and the expenses of the Pledgee incurred in connection therewith shall be payable by the Pledgor under Section 11.2 below. Section 11.2 EXPENSES. The Pledgor will upon demand pay to the Pledgee the amount of any and all reasonable expenses, including the reasonable fees and expenses of its counsel and of any experts and agents, which the Pledgee may incur in connection with (i) the administration of this Pledge Agreement, (ii) the custody or preservation of, or the sale of, collection from or other realization upon, any of the Pledged Collateral, (iii) the exercise or enforcement of any of the rights of the Pledgee or the Noteholders hereunder or (iv) the failure by the Pledgor to perform or observe any of the provisions hereof. Section 12. THE PLEDGEE AS AGENT. The Pledgee will hold in accordance with this Pledge Agreement all items of the collateral at any time received by it under this Pledge Agreement. It is expressly understood and agreed that the obligations of the Pledgee as holder of the Pledged Collateral and with respect to the disposition thereof, and otherwise under this Pledge Agreement, are only those expressly set forth in this Pledge Agreement. The Pledgee shall act hereunder on the terms and conditions set forth herein. Section 13. NO WAIVER. No failure on the part of the Pledgee to exercise, and no delay in exercising, any right, power or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power or remedy by the Pledgee preclude any other or further exercise thereof or the exercise of any other right, power or remedy. All remedies hereunder are cumulative and are not exclusive of any other remedies provided by law. The Pledgee shall not be deemed to have waived any rights hereunder or under any other agreement or instrument unless such waiver shall be in writing and signed by such party. Section 14. PLEDGOR'S SECURED OBLIGATIONS ABSOLUTE, ETC.. The obligations of the Pledgor under this Pledge Agreement shall, subject to compliance with Applicable Gaming Regulations, be absolute and unconditional and shall remain in full force and effect without regard to, and shall not be released, suspended, discharged, terminated or otherwise affected by any circumstances or occurrence whatsoever, including, without limitation: (a) any renewal, extension, amendment or modification of, or addition or supplement to or deletion from any of the Indenture, -12- the Notes or any other instrument or agreement referred to therein, or any assignment or transfer of any thereof; (b) any waiver, consent, extension, indulgence or other action or inaction under or in respect of any such instrument or agreement or this Pledge Agreement, the Indenture, or the Notes or any exercise or non-exercise of any right, remedy, power or privilege under or in respect of this Pledge Agreement, the Indenture or the Notes; (c) any furnishing of any additional security to the Pledgee or any acceptance thereof or any sale, exchange, release, surrender or realization of or upon any security by the Pledgee; (d) any invalidity, irregularity or unenforceability of all or part of the Secured Obligations or of any security therefor; (e) any bankruptcy, insolvency, reorganization, composition, adjustment, dissolution, liquidation or other like proceeding relating to the Pledgor or any subsidiary of the Pledgor, or any action taken with respect to this Pledge Agreement by any trustee or receiver, or by any court, in any such proceeding, whether or not the Pledgor shall have notice or knowledge of any of the foregoing or (f) any other circumstance which might otherwise constitute a defense available to, or discharge of, the Pledgor in respect of the Secured Obligations or in respect of this Pledge Agreement. Section 15. TERMINATION. This Pledge Agreement shall terminate when all of the Secured Obligations, whether or not contingent, have been fully and indefeasibly paid and satisfied. In addition, the Pledged Collateral may be released as provided in the Indenture (including without limitation Articles IV and IX thereof). Upon such termination or release, the Pledgee shall reassign and deliver to the Pledgor, or to such person or persons as the Pledgor shall designate, against receipt therefor, such of the Pledged Collateral (if any) as shall not have been sold or otherwise applied by the Pledgee pursuant to the terms hereof and shall still be held by the Pledgee hereunder, together with appropriate instruments of reassignment and release. Any such reassignment shall be without recourse to or warranty by the Pledgee and at the expense of the Pledgor. Section 16. NOTICES. All notices or other communications required or permitted hereunder shall be in writing and shall be sufficiently given if made by hand delivery, by telex, by telecopier or registered or certified mail, postage prepaid, return receipt requested, addressed to the last known address of the respective party. Section 17. FURTHER ASSURANCES. The Pledgor agrees that at any time from time to time, at the expense of the Pledgor, the Pledgor will do such further acts and things, and execute and deliver such additional conveyances, assignments, agreements and instruments, as the Pledgee may at any time request in connection with the administration and enforcement of this Pledge Agreement, with respect to the Pledged Collateral or any part thereof or in order to better assure and confirm unto the Pledgee its rights and remedies hereunder. Section 18. BINDING AGREEMENT; ASSIGNMENTS. The Pledge Agreement, and the terms, covenants and conditions hereof, shall be binding upon and inure to the benefit of the parties hereto, the Noteholders and their respective successors and assigns, except that without the written consent of the Pledgee the Pledgor shall not be permitted, either expressly or by operation of law, to assign this Pledge Agreement or any interest herein or in the Pledged Collateral or any part thereof, or, except as otherwise permitted by the terms of this Pledge Agreement, otherwise transfer, pledge, encumber or grant any option with respect to the Pledged Collateral or any part thereof. -13- Section 19. SURVIVAL OF AGREEMENT; SEVERABILITY. (a) All covenants and agreements made by the Pledgor herein and in the certificates or other instruments prepared or delivered in connection with this Pledge Agreement shall be considered to have been relied upon by the Pledgee and the Noteholders and shall survive the issuance by the Pledgor of the Notes and shall continue in full force and effect as long as any of the Secured Obligations, whether or not contingent, have not been fully and indefeasibly paid and satisfied. (b) In the event any one or more of the provisions contained in this Pledge Agreement should be held invalid, illegal or unenforceable in any respect, no party hereto shall be required to comply with such provision for so long as such provision is held to be invalid, illegal or unenforceable, and the validity, legality and enforceability of the remaining provisions contained herein or therein shall not in any way be affected or impaired thereby. The parties shall endeavor in good faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions. Section 20. GOVERNING LAW. THIS PLEDGE AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS. Section 21. HEADINGS. Section headings used herein are for convenience only, and are not to affect the construction of, or be taken into consideration in interpreting, this Pledge Agreement. Section 22. COUNTERPARTS. This Pledge Agreement may be executed in any number of copies or counterparts, all of which taken together shall constitute one agreement, and any of the parties may execute this Pledge Agreement by signing any such copy or counterpart. -14- IN WITNESS WHEREOF, the parties hereto have duly executed this Pledge Agreement, or caused this Pledge Agreement to be duly executed, as of the day and year first above written. ARGOSY GAMING COMPANY, a Delaware corporation By: -------------------------------- Name: Joseph G. Uram Title: Executive Vice President, Treasurer and Chief Financial Officer FIRST NATIONAL BANK OF COMMERCE, as Trustee By: -------------------------------- Name: Denis L. Milliner Title: Vice President and Trust Officer -15- EX-4.9 10 EXHIBIT 4.9 EXHIBIT 4.9 ----------- SCHEDULE TO EXHIBIT 4.9 ----------------------- The Subsidiary Pledge Agreements by and between each of the following parties and First National Bank of Commerce, as Trustee, are substantially identical in all material respects to the attached form document except as indicated below. SCHEDULE OF GUARANTORS EXECUTING GUARANTEES ------------------------------------------- Alton Gaming Company Argosy of Louisiana, Inc. Catfish Queen Partnership in Commendam The Indiana Gaming Company Iowa Gaming Company Jazz Enterprises, Inc. The Missouri Gaming Company The St. Louis Gaming Company Pursuant to Paragraph 2 of Item 601 of S-K, the following form is filed in lieu of the various Subsidiary Pledge Agreements. Any material details in which such Subsidiary Pledge Agreements differ from the enclosed form document are described in the enclosed form document. FORM OF SUBSIDIARY PLEDGE AGREEMENT [INSERT SUBSIDIARY NAME] THIS PLEDGE AGREEMENT, dated as of June 5, 1996 (herein, as amended, restated, supplemented or otherwise modified from time to time, called this "Pledge Agreement") is by [INSERT SUBSIDIARY NAME], a ____________ corporation (herein called the "Pledgor"), to and in favor of FIRST NATIONAL BANK OF COMMERCE, as trustee (herein, together with its successors in such capacity, called the "Trustee" or the "Pledgee") for the holders of those certain Notes (as hereinafter defined). W I T N E S S E T H WHEREAS, the Pledgor, Argosy Gaming Company, a Delaware corporation ("Argosy"), the Pledgee and the other Guarantors (as defined in the Indenture) have entered into that certain Indenture dated June 5, 1996 (herein, as amended, restated, supplemented or otherwise modified from time to time, called the "Indenture"), pursuant to which, among other things, Argosy shall issue its 13 1/4% Notes due 2004 (herein called the "Original Notes"); WHEREAS, pursuant to a Registration Rights Agreement between Argosy, the Pledgor, the other Guarantors and Bear, Stearns & Co. Inc., Donaldson, Lufkin & Jenrette Securities Corporation, BA Securities, Inc. and Deutsche Morgan Grenfell/C. J. Lawrence Inc. (herein, collectively, called the "Initial Purchasers"), Argosy, the Pledgor and the other Guarantors will file a registration statement with respect to an offer to exchange the Original Notes for a new series of 13 1/4% Notes due 2004 registered under the Securities Act of 1933, as amended, with terms substantially identical to those of the Original Notes (herein called the "Series B Notes" and, together with the Original Notes, called the "Notes"); WHEREAS, the Pledgor will derive substantial direct and indirect benefit from the issuance of the Notes; WHEREAS, pursuant to the Indenture, the Pledgee shall act as the trustee for the holders of the Original Notes and the holders of the Series B Notes (herein, collectively, called the "Noteholders"); WHEREAS, Pledgor is (i) the owner of the shares of stock described in SCHEDULE A hereto issued by the entities listed therein (herein called the "Pledged Stock"), (ii) the holder of those certain promissory notes described in SCHEDULE B hereto and payable by the obligors named therein (herein called the "Pledged Debt") and (iii) the holder of the partnership interests described in SCHEDULE C hereto issued by the partnerships or joint venturers named therein (herein called the "Pledged Partnership Interests"); WHEREAS, to secure the repayment of the Notes and any and all other Secured Obligations (as defined in Section 1 hereof) of the Pledgor, the Pledgor has agreed to grant to the Pledgee for the ratable benefit of the Noteholders a security interest in and to the Pledged Collateral (as defined in Section 2 hereof) upon the terms and subject to the conditions hereinafter set forth; and WHEREAS, it is a condition precedent to the purchase of the Original Notes by the Initial Purchasers from Argosy that the Pledgor shall have executed and delivered this Pledge Agreement to the Pledgee for the ratable benefit of the Noteholders; NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants herein contained and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: Section 1. DEFINITIONS. Terms used herein but not otherwise defined herein shall have the meanings assigned to such terms in the Indenture. Each term defined in the first paragraph and the Recitals shall have the meaning set forth above whenever used herein, unless otherwise expressly provided or unless the context clearly requires otherwise. In addition to the terms defined in the first paragraph and the Recitals, whenever used herein the following terms shall have the meanings set forth below, unless otherwise expressly provided or unless the context clearly requires otherwise: "Applicable Gaming Regulations" shall mean, at any particular time, federal and state gaming and gambling statutes, laws, rules and regulations applicable to Argosy or its Subsidiaries (as defined in the Indenture). "Division" shall have the meaning assigned thereto in Section 8(c) below. "Event of Default" shall mean when any of the following events shall have occurred: (i) the occurrence of an "Event of Default" as defined in the Indenture; or (ii) failure in the due observance or performance by the Pledgor of any of the covenants and conditions in this Pledge Agreement required to be observed and performed by Pledgor and continuance of such failure for thirty (30) days after the Pledgor becomes aware or should have become aware of such failure. "Pledged Collateral" shall have the meaning assigned thereto in Section 2 below. "Secured Obligations" shall mean all obligations of the Pledgor to repay the Notes and any and all other obligations of the Pledgor to the Pledgee under the Indenture, this Pledge Agreement and the other Security Documents (as that term is defined in the Indenture). Without limiting the foregoing, the Secured Obligations shall include (i) the payment of the principal of and -2- premium and Liquidated Damages (as that term is defined in the Indenture), if any, and interest on the Notes, (ii) the payment of all other indebtedness of the Pledgor in respect of the Notes and the Indenture and (iii) the due performance of and compliance by the Pledgor with all the terms of and all the obligations to the Pledgee under the Notes and the Indenture. "Securities Act" shall have the meaning assigned thereto in Section 8(a)(3) below. Section 2. PLEDGE. As security for the timely payment and performance in full of the Secured Obligations, the Pledgor hereby hypothecates, pledges, sets over and delivers unto the Pledgee, and grants to the Pledgee (for the ratable benefit of the Noteholders) a security interest in and to all of the Pledgor's right, title and interest in and to, the following (herein, collectively, called the "Pledged Collateral"): (i) the Pledged Stock, the Pledged Partnership Interests and the certificates representing or evidencing all such shares and interests; (ii) all payments of principal or interest, dividends, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of, in exchange for or upon the conversion of the Pledged Stock or the Pledged Partnership Interests; (iii) the Pledged Debt and other instruments evidencing the Pledged Debt; (iv) all payments of principal or interest, cash, instruments and other property from time to time received, receivable and otherwise distributed in respect of or in exchange for any and all of the Pledged Debt; (v) all rights and privileges and all securities entitlements of the Pledgor with respect to the securities and other property referred to in clauses (i), (ii), (iii) and (iv) above; (vi) all additional shares of stock of the Guarantors from time to time acquired by the Pledgor in any manner and the certificates representing such additional shares and interests and all dividends, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for such shares and interests; (vii) all additional indebtedness from time to time owed to the Pledgor by any obligor of the Pledged Debt and the instruments evidencing such indebtedness and all interest, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any and all of such indebtedness; and (viii) all proceeds of any of the foregoing. [INSERT FOR IOWA GAMING COMPANY ONLY: Notwithstanding the foregoing, the Pledged Collateral shall not include (i) the partnership interest owned by the Pledgor in Belle of Sioux City, -3- L.P. and (ii) the Pledgor's rights and interests in that certain Management and Boat Lease Agreement dated December 1, 1994 by and between Belle of Sioux City, L.P. and the Pledgor.] Section 3. SECURITY FOR SECURED OBLIGATIONS. The Pledgor grants the aforementioned security interest in the Pledged Collateral to and in favor of the Pledgee to secure the full and faithful payment and performance by the Pledgor of the Secured Obligations. Section 4. DELIVERY OF THE COLLATERAL. The Pledgor shall deliver to the Pledgee, (A) any stock certificates, partnership certificates, notes or other securities or instruments now or hereafter included in the Pledged Collateral duly indorsed to the Pledgee in blank or accompanied by stock powers duly executed in blank or other instruments of transfer satisfactory to the Pledgee together with such other instruments and documents as the Pledgee may reasonably request, (B) debt instruments, if any, including all notes payable to the Pledgor from any one or all of the Guarantors, now and hereinafter included in the Pledged Collateral duly endorsed to the Pledgee in blank; and (C) all other property comprising part of the Pledged Collateral accompanied by proper instruments of assignment duly executed by the Pledgor and such other instruments or documents as may be necessary in order to perfect and/or maintain the security interest granted hereunder in and to the Pledged Collateral. Each delivery of such Pledged Collateral shall be accompanied by a schedule describing the securities and/or indebtedness theretofore and then being pledged hereunder, which schedule shall be attached hereto and made a part hereof. Each schedule so delivered shall supersede any prior schedules so delivered. Section 5. REPRESENTATIONS AND WARRANTIES. As further security for the full and faithful performance of the Secured Obligations, the Pledgor hereby represents, warrants and covenants to the Pledgee that: (a) the Pledged Stock includes all of the outstanding capital stock of the Guarantors owned by the Pledgor and the Pledged Stock has been duly authorized and validly issued and is fully paid and nonassessable; (b) the Pledged Partnership Interests include all of the outstanding partnership interests in Guarantors owned by the Pledgor and the Pledged Partnership Interests have been duly authorized and validly issued, and all payments required to be made by any holder of such partnership interests in respect of such interests have been made; (c) the Pledged Debt has been duly authorized, authenticated or issued and delivered and is the legal, valid and binding obligations of the payors thereof; (d) except for the security interest granted hereunder, the Pledgor (i) is and will at all times continue to be the direct owner, legally, beneficially and of record, of the Pledged Stock, the Pledged Partnership Interests and the Pledged Debt; -4- (ii) holds the same free and clear of all liens, security interests, options or other charges or encumbrances; (iii) will make no assignment, pledge, hypothecation or transfer of, or create any security interest in or otherwise encumber, the Pledged Collateral; (iv) will cause all securities within the Pledged Collateral to be certificated securities; PROVIDED, HOWEVER, the Pledgee acknowledges that the Pledged Partnership Interests shall not be deemed securities for the purposes of this Pledge Agreement; and (v) will cause any and all certificates, instruments or other documents representing or evidencing Pledged Collateral to be forthwith deposited with the Pledgee and pledged or assigned thereunder; (e) by virtue of the execution and delivery by Pledgor of this Pledge Agreement, when the Pledged Stock and the Pledged Debt are delivered to the Pledgee in accordance with this Pledge Agreement, and upon the filing of UCC financing statements in the appropriate filing offices with respect to the Pledged Partnership Interests, which office is the office of the Illinois Secretary of State, and with respect to dividends payable in respect to the Pledged Stock, the Pledgee will obtain a valid, legal and perfected first priority security interest in the Pledged Collateral as security for the repayment of the Secured Obligations free and clear of all liens (other than Permitted Liens); (f) the Pledgor will cause the Guarantors owned by the Pledgor not to issue any stock or other equity securities unless such securities are issued in accordance with the terms of the Indenture and the Pledgor's pro rata share of such securities is concurrently pledged and delivered to the Pledgee hereunder (except as otherwise not required under the Indenture); (g) the Pledgor will at any time or times hereafter execute such financing statements, continuation statements or other instruments of assurance as Pledgee may reasonably request to establish, maintain and/or perfect the Pledgee's security interest in the Pledged Collateral; (h) this Pledge Agreement is the legal, valid and binding commitment of the Pledgor according to its terms, except as such enforcement may be limited by the effect of applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to or affecting the rights of creditors generally; (i) the pledge effected hereby is effective to vest in the Pledgee, for the benefit of the Pledgee and the Noteholders, the rights of the Pledgee in the Pledged Collateral as set forth herein; -5- (j) there are no conditions precedent to the effectiveness of this Pledge Agreement which have not been satisfied or waived; (k) the Pledgor's chief executive office is located at Alton, Illinois, and its records concerning the Pledged Collateral are kept at said office; (l) the Pledgor will furnish to the Pledgee, as soon as possible and in any event within thirty (30) days prior to the occurrence from time to time of any change in the address of the Pledgor's chief executive office or in the name of the Pledgor, notice in writing of such changes; and (m) none of the Pledged Stock constitutes margin stock, as defined in Regulation U of the Board of Governors of the Federal Reserve System. The Pledgor covenants and agrees that it will defend the Pledgee's right, title and security interest in and to the Pledged Collateral and the proceeds thereof against the claims and demands of all persons whomsoever, and the Pledgor covenants and agrees that it will have like title to and right to pledge any other property at any time hereafter pledged to the Pledgee as Pledged Collateral hereunder and will likewise defend the Pledgee's right thereto and security interest therein. Section 6. REGISTRATION IN NOMINEE NAME; DENOMINATIONS. Subject to Applicable Gaming Regulations: (a) The Pledgee, on behalf of the Noteholders, shall have the right (in its sole and absolute discretion) to hold the Pledged Stock in its own name, the name of its nominee or the name of the Pledgor, endorsed or assigned in blank or in favor of the Pledgee; (b) the Pledgor will promptly give to the Pledgee copies of any notices or other communications received by it specifically with respect to Pledged Stock registered in the name of the Pledgor; (c) the Pledgee shall at all times have the right to exchange the certificates representing Pledged Stock for certificates of smaller or larger denominations for any purposes consistent with this Pledge Agreement; and (d) the Pledgee may, at the direction of the holders of at least 50% of the aggregate principal amount of the Notes then outstanding, at any time an Event of Default has occurred and is continuing, whether before or after any revocation of such power and authority, notify any parties obligated on any of the Non-Tangible Collateral (as defined in that certain Security Agreement dated as of the date hereof between the Pledgor and the Pledgee) to make payment to the Pledgee of any, amounts due or to become due thereunder and enforce collection of any of the Non-Tangible Collateral by suit or otherwise and surrender, release or exchange all or any part thereof or compromise or extend or renew for -6- any period (whether or not longer than the original period) any indebtedness thereunder or evidenced thereby. Upon request of the Pledgee at any time an Event of Default has occurred and is continuing, the Pledgor will, at its own expense, notify any parties obligated on any of the Non-Tangible Collateral to make payment to the Pledgee of any amounts due or to become due thereunder. Section 7. VOTING RIGHTS; DIVIDENDS AND INTEREST; ETC. Notwithstanding any other provision hereof (including without limitation subsection (v) of Section 2 hereof) and subject to compliance with Applicable Gaming Regulations: (a) unless and until an Event of Default shall have occurred and be continuing: (i) the Pledgor shall be entitled to exercise or refrain from exercising any and all voting rights and other consensual rights accruing to it as the owner of the Pledged Collateral or any part thereof for any purpose consistent with the terms of this Pledge Agreement and the Indenture; PROVIDED, HOWEVER, that the exercise or refrain from exercising of rights could not reasonably be expected, in the best judgment of the Pledgor, to have a material adverse effect on the value of the Pledged Collateral or to adversely affect the rights and remedies of the Pledgee or the Noteholders under this Pledge Agreement or the Indenture or the ability of the Pledgee or the Noteholders to exercise the same; (ii) the Pledgee shall execute and deliver to the Pledgor, or cause to be executed and delivered to the Pledgor, all such proxies, powers of attorney, and other instruments as the Pledgor may reasonably request for the purpose of enabling the Pledgor to exercise the voting rights which it is entitled to exercise or refrain from exercising pursuant to subparagraph (i) above; and (iii) the Pledgor shall be entitled to receive and retain any and all cash principal, interest, dividends and other income payable on or with respect to or in accordance with the Pledged Collateral to the extent and only to the extent that such dividends and interest payments are permitted by, and otherwise paid in accordance with, the terms and conditions of the Indenture and applicable laws; PROVIDED, that any and all other dividends and distributions and interest made on or in respect of the Pledged Collateral, whether paid or payable in cash, securities or other property and, whether resulting from a subdivision, combination or reclassification, or received in exchange for the Pledged Collateral or any part thereof, or as a result of any merger, consolidation, acquisition or other exchange of assets to which the issuer thereof may be a party or otherwise, shall be applied by Pledgor in accordance with the terms of the Indenture. (b) (i) Upon the occurrence and during the continuance of an Event of Default, or any event which, with giving of notice or lapse of time, or both, would become an Event of Default, all rights of the Pledgor to dividends and interest which -7- the Pledgor is authorized to receive pursuant to paragraph (a)(iii) of this Section 7 shall cease, and all such rights shall thereupon become vested in the Pledgee, who shall have the sole and exclusive right and authority to receive and retain as Pledged Collateral such dividends and interest payments; (ii) All dividends, distributions and interest payments which are received by the Pledgor contrary to the provisions of this Section 7(b) shall be received in trust for the benefit of the Pledgee and the Noteholders, shall be segregated from other property or funds of the Pledgor and shall be immediately delivered to the Pledgee in the same form as so received (with any necessary endorsement). Any and all money and other property paid over to or received by the Pledgee pursuant to the provisions of this subdivision (ii) of paragraph 7(b) shall be deposited by the Pledgee in an account to be established by the Pledgee for the benefit of the Pledgee and the Noteholders upon receipt of such money or other property and shall be applied in accordance with the provisions of Section 9 hereof. (c) Upon the occurrence and during the continuance of an Event of Default, or any event which, with giving of notice or lapse of time, or both, would become an Event of Default, all rights of the Pledgor to exercise or refrain from exercising the voting rights which it is entitled to exercise or refrain from exercising pursuant to paragraph (a)(i) of this Section 7 shall, upon notice to the Pledgee, cease, and all such rights shall thereupon become vested in the Pledgee, which shall have the sole and exclusive right (but not the obligation) and authority to exercise such voting rights. The Pledgor shall execute and deliver to the Pledgee all such proxies, powers of attorney, and other instruments as the Pledgee shall request for the purpose of enabling the Pledgee to exercise or refrain from exercising the voting rights which it is entitled to exercise or refrain from exercising pursuant to this Section 7(c) during the continuance of such Event of Default. Section 8. REMEDIES UPON AN EVENT OF DEFAULT. Upon the occurrence and during the continuance of an Event of Default, whether or not all of the Secured Obligations shall have become due and payable, subject to compliance with Applicable Gaming Regulations: (a) the Pledgee shall have the following remedies: (i) subject to the notice requirements and other relevant provisions of the Notes and the Indenture, the Pledgee may, at its option, declare all or any part of the Secured Obligations immediately due and payable and may exercise all of its rights and remedies under the Indenture, the Notes and the Security Documents (as that term is defined in the Indenture); (ii) the Pledgee may, at its option and in the name of the Pledgor or otherwise, collect and dispose of all or any part of the Pledged Collateral at a public or private sale without demand of performance, advertisement or notice (all of which are hereby waived by Pledgor) for such prices and on such terms as the Pledgee may reasonably determine and the Pledgee or anyone else may be the purchaser, lessee, -8- assignee or recipient or any or all of the Pledged Collateral so disposed of at any public sale (or, to the extent permitted by law, at any private sale) and, to the extent provided by law, thereafter hold the same absolutely, free from any claim or right of whatsoever kind, including any right or equity of redemption (statutory or otherwise) of the Pledgor, any such demand, notice and right or equity being hereby expressly waived and released; PROVIDED that at least 10 days' notice of the time and place of any such sale shall be given to Pledgor, and the Pledgee is authorized to apply all proceeds from the disposition of the Pledged Collateral in accordance with the terms of the Indenture; (iii) the Pledgor recognizes that by reason of certain prohibitions contained in the Securities Act of 1933 (as amended from time to time, the "Securities Act"), and applicable state securities law, the Pledgee may be compelled, with respect to any sale of all or any part of the Pledged Collateral, to limit purchasers to those who will agree, among other things, to acquire the Pledged Collateral for their own account, for investment and not with a view to the distribution or resale thereof. The Pledgor acknowledges that any such private sales may be at prices and on terms less favorable to the Pledgee than those obtainable through a public sale without such restrictions, and, notwithstanding such circumstances, agrees that any such private sale shall be deemed to have been made in a commercially reasonable manner and that the Pledgee shall have no obligation to engage in public sales and no obligation to delay the sale of any Pledged Collateral for the period of time necessary to permit the Guarantors to register any such Pledged Collateral for public sale; (iv) the Pledgee shall have the right to require all distributions and other amounts payable with respect to the Pledged Collateral to be applied in accordance with the terms of the Indenture; (v) at Pledgee's request, the Pledgor shall cooperate with the Pledgee and do all things necessary to enable the Pledgee to sell any and all of the Pledged Collateral, in compliance with all applicable securities and other laws and regulations; and (vi) the Pledgee may exercise or enforce any and all rights or remedies available to the Pledgee by law or agreement against the Pledgor. (b) The Pledgor agrees that, upon the occurrence and during the continuance of an Event of Default, if for any reason the Pledgee desires and exercises its right to sell any of the Pledged Collateral pursuant to this Section 8, the Pledgor shall, at any time and from time to time, upon the written request of the Pledgee: (i) take (or use its best efforts to cause to be taken) such action to prepare, distribute and/or file such documents, as are required or advisable in -9- the opinion of counsel for the Trustee to register the Pledged Stock under the Securities Act of 1933 (as amended from time to time, the "Securities Act") to permit the public sale of such Pledged Collateral, including, but not limited to, a public offering and sale of the Pledged Stock pursuant to any applicable federal and state securities laws and regulations, and to cause the registration statement to remain effective for such period as prospectuses are required by law to remain effective, or in the alternative, to effect a sale of such Pledged Collateral in accordance with an exemption under the Securities Act; (ii) indemnify, defend and hold harmless the Pledgee and any financial advisor or underwriter from and against any and all loss, liability, expenses, costs, fees and disbursements of counsel (including, without limitation, a reasonable estimate of the cost of the Pledgee of legal counsel), and any and all claims (including the costs of investigation) which they may incur insofar as such loss, liability, expense or claim arises out of or is based upon any alleged untrue statement of a material fact contained in any prospectus (or any amendment or supplement thereto) or in any notification or offering circular, or arises out of or is based upon any alleged omission to state a material fact required to be stated therein or necessary to make the statements in any respect thereof not misleading, except insofar as the same may have been caused by any untrue statement or omission based upon information furnished in writing to the Pledgor or the issuer of such Pledged Securities by the Pledgee or the underwriter expressly for use therein; and (iii) the Pledgor further agrees to use its best efforts to qualify, file or register, or cause the issuer of any Pledged Stock to qualify, file or register, any of the Pledged Stock under applicable state securities laws and regulations as the Pledgee may specify and to keep effective, or cause to be kept effective, all such qualifications, filings or registrations. The Pledgor acknowledges that there is no adequate remedy at law for failure by it to comply with the foregoing provisions and that such failure would not be adequately compensable in damages, and therefore agrees that its agreements with respect to the foregoing may be specifically enforced. (c) The Pledgee acknowledges that any sale, transfer or disposition of the Pledged Collateral may be subject to compliance with Applicable Gaming Regulations which may require prior consent or approval by applicable state gaming commissions to such sale, transfer or disposition. [FOR THE MISSOURI GAMING COMPANY AND THE ST. LOUIS GAMING COMPANY ONLY - Without limiting the foregoing, the Pledgee acknowledges that any foreclosure, possession, sale, transfer or disposition of the Pledged Stock is subject to compliance with Applicable Gaming Regulations which may be proscriptive or require prior consent or approval by applicable state gaming commissions, including without limitation the Missouri Gaming Commission, to such foreclosure, possession, sale, transfer or disposition. The Pledgee hereby acknowledges that Missouri law -10- does not presently allow any pledge, hypothecation or transfers of gaming licenses (or any interest therein) issued under the Missouri Riverboat Gambling Act or any security interest attached to any such license. The Pledgee hereby further acknowledges that Missouri law does not presently permit the Pledgee to foreclose upon, possess, sell, transfer or dispose of certain gaming equipment and machinery without the Pledgee being licensed by the Missouri Gaming Commission or, in the alternative, the creation of a different mechanism that is in compliance with Missouri laws and is acceptable to the Missouri Gaming Commission (which mechanism could include, subject to the Missouri Gaming Commission's approval, the sale, transfer or disposition of such gaming equipment and machinery in question to an entity licensed by the Missouri Gaming Commission).] [FOR ARGOSY OF LOUISIANA, INC., JAZZ ENTERPRISES, INC. AND CATFISH QUEEN PARTNERSHIP ONLY - Further, without limiting any of the foregoing, the Pledgee further acknowledges and agrees to the requirement of the Riverboat Gaming Enforcement Division, Office of State Police, Department of Public Safety and Corrections, State of Louisiana (the "Division") and/or its successor, that, within five (5) days of the commencement of the exercise of any remedy(ies) set forth in this Pledge Agreement in favor of the Pledgee or the Noteholders with respect to Argosy of Louisiana, Inc., Catfish Queen Partnership in Commendam or Jazz Enterprises, Inc., the Pledgee shall notify the Division or its successor, in writing, of the date, nature and scope of the exercise of such remedy(ies) and further acknowledges that the exercise of such remedy(ies) and any transfer or proposed transfer of any ownership interest or economic interest resulting therefrom or related thereto shall require compliance with any applicable provisions of (i) Title 4, Section 528 of the Louisiana Revised Statutes and all regulations promulgated pursuant thereto, and/or (ii) Title 27, Section 1 et seq. of the Louisiana Revised Statutes and any regulations promulgated pursuant thereto.] [FOR INDIANA GAMING COMPANY ONLY - Further, without limiting any of the foregoing, the Pledgee further acknowledges and agrees that, notwithstanding any other provision of this Pledge Agreement to the contrary, (i) nothing in this Pledge Agreement shall effect any transfer of any "ownership interest" (within the meaning of 68 Indiana Administrative Code 5) in Indiana Gaming Company, L.P. ("Indiana L.P.") or effect any transfer, sale, purchase, lease or hypothecation of, or any borrowing or loaning of any money against, the certificate of suitability of Indiana L.P., or any owner's license subsequently issued to Indiana L.P., (ii) no person, other than the Pledgor or the other current owners of Indiana L.P., shall have any "ownership interest" in Indiana L.P., and (iii) no person may exercise any rights or remedies granted in this Pledge Agreement against Indiana L.P., unless and until such exercise (a) is approved by the Indiana Gaming Commission and (b) complies with all Indiana laws and regulations, including 68 Indiana Administrative Code 5. In addition, Pledgee acknowledges that any foreclosure, possession, sale, transfer or disposition of the partnership interest held by Pledgor in Indiana L.P. is subject to compliance with Applicable Gaming Regulations which may be proscriptive or require prior consent or approval by applicable state gaming commissions, including the Indiana Gaming Commission, to such foreclosure, possession, sale, transfer or disposition. Pledgee hereby acknowledges that Indiana law does not presently allow any pledge, hypothecation or transfers of gaming licenses (or any interest therein) issued under the Indiana Riverboat Gambling Act or any security interest attached to any such license. In addition, the exercise of Pledgee's rights hereunder is expressly -11- subject to the terms of that certain Second Amended and Restated Agreement of Limited Partnership of Indiana Gaming Company, L.P. dated February 21, 1996 (including without limitation Section 14.2(e) thereof).] Section 9. APPLICATION OF PROCEEDS OF SALE. The proceeds of any sale of Pledged Collateral pursuant to Section 8 hereof, as well as any Pledged Collateral consisting of cash, shall be applied by the Pledgee in the order and to the items provided for and as set forth in the Indenture. Section 10. REIMBURSEMENT OF PLEDGEE. The Pledgor hereby agrees to reimburse the Pledgee and the Noteholders, on demand, for all expenses incurred by the Pledgee in connection with the administration and enforcement of this Pledge Agreement and agrees to indemnify the Pledgee and hold the Pledgee and the Noteholders harmless from and against any and all liability incurred by the Pledgee hereunder or in connection herewith, unless such liability shall have been determined by a final, non-appealable order of a court of competent jurisdiction to have resulted solely from willful misconduct or gross negligence on the part of the Pledgee or the Noteholders. Section 11. PLEDGEE APPOINTED ATTORNEY-IN-FACT. Except as otherwise provided herein, the Pledgor hereby appoints the Pledgee the attorney-in-fact of the Pledgor, from time to time after the occurrence and during the continuance of an Event of Default, for the purposes of carrying out the provisions of this Pledge Agreement or taking any action or executing any instrument which the Pledgee may deem necessary or advisable to accomplish the purposes hereof, which appointment is irrevocable and coupled with an interest. Without limiting the generality of the foregoing, the Pledgee shall have the right, upon the occurrence and during the continuance of an Event of Default, subject to compliance with Applicable Gaming Regulations, with full power of substitution either in the Pledgee's name or in the name of the Pledgor, to ask for, demand, sue for, collect, receive and give acquittance for any and all monies due or to become due under or by virtue of any Pledged Collateral, to endorse checks, drafts, orders and other instruments for the payment of money payable to the Pledgor constituting Pledged Collateral or any part thereof or on account thereof and to give full discharge for the same, to settle, compromise, prosecute or defend any action, claim or proceeding with respect thereto, and to sell, assign, endorse, pledge, transfer and make any agreement respecting, or otherwise deal with, the same; PROVIDED, HOWEVER, that nothing herein contained shall be construed as requiring or obligating the Pledgee to make any commitment or to make any inquiry as to the nature or sufficiency of any payment received by the Pledgee, or to present or file any claim or notice, or to take any action with respect to the Pledged Collateral or any part thereof or the monies due or to become due in respect thereof or any property covered thereby, and no action taken by the Pledgee or omitted to be taken with respect to the Pledged Collateral or any part thereof shall give rise to any defense, counterclaim or offset in favor of any Pledgor or to any claim or action against the Pledgee. Section 11.1 PLEDGEE MAY PERFORM. If the Pledgor fails to perform any agreement contained herein, the Pledgee may itself perform, or cause performance of, such agreement and the expenses of the Pledgee incurred in connection therewith shall be payable by the Pledgor under Section 11.2 below. -12- Section 11.2 EXPENSES. The Pledgor will upon demand pay to the Pledgee the amount of any and all reasonable expenses, including the reasonable fees and expenses of its counsel and of any experts and agents, which the Pledgee may incur in connection with (i) the administration of this Pledge Agreement, (ii) the custody or preservation of, or the sale of, collection from or other realization upon, any of the Pledged Collateral, (iii) the exercise or enforcement of any of the rights of the Pledgee or the Noteholders hereunder or (iv) the failure by the Pledgor to perform or observe any of the provisions hereof. Section 12. THE PLEDGEE AS AGENT. The Pledgee will hold in accordance with this Pledge Agreement all items of the collateral at any time received by it under this Pledge Agreement. It is expressly understood and agreed that the obligations of the Pledgee as holder of the Pledged Collateral and with respect to the disposition thereof, and otherwise under this Pledge Agreement, are only those expressly set forth in this Pledge Agreement. The Pledgee shall act hereunder on the terms and conditions set forth herein. Section 13. NO WAIVER. No failure on the part of the Pledgee to exercise, and no delay in exercising, any right, power or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power or remedy by the Pledgee preclude any other or further exercise thereof or the exercise of any other right, power or remedy. All remedies hereunder are cumulative and are not exclusive of any other remedies provided by law. The Pledgee shall not be deemed to have waived any rights hereunder or under any other agreement or instrument unless such waiver shall be in writing and signed by such party. Section 14. PLEDGOR'S SECURED OBLIGATIONS ABSOLUTE, ETC.. The obligations of the Pledgor under this Pledge Agreement shall, subject to compliance with Applicable Gaming Regulations, be absolute and unconditional and shall remain in full force and effect without regard to, and shall not be released, suspended, discharged, terminated or otherwise affected by any circumstances or occurrence whatsoever, including, without limitation: (a) any renewal, extension, amendment or modification of, or addition or supplement to or deletion from any of the Indenture, the Notes or any other instrument or agreement referred to therein, or any assignment or transfer of any thereof; (b) any waiver, consent, extension, indulgence or other action or inaction under or in respect of any such instrument or agreement or this Pledge Agreement, the Indenture, or the Notes or any exercise or non-exercise of any right, remedy, power or privilege under or in respect of this Pledge Agreement, the Indenture or the Notes; (c) any furnishing of any additional security to the Pledgee or any acceptance thereof or any sale, exchange, release, surrender or realization of or upon any security by the Pledgee; (d) any invalidity, irregularity or unenforceability of all or part of the Secured Obligations or of any security therefor; (e) any bankruptcy, insolvency, reorganization, composition, adjustment, dissolution, liquidation or other like proceeding relating to the Pledgor or any subsidiary of the Pledgor, or any action taken with respect to this Pledge Agreement by any trustee or receiver, or by any court, in any such proceeding, whether or not the Pledgor shall have notice or knowledge of any of the foregoing or (f) any other circumstance which might otherwise constitute a defense available to, or discharge of, the Pledgor in respect of the Secured Obligations or in respect of this Pledge Agreement. -13- Section 15. TERMINATION. This Pledge Agreement shall terminate when all of the Secured Obligations, whether or not contingent, have been fully and indefeasibly paid and satisfied. In addition, the Pledged Collateral may be released as provided in the Indenture (including without limitation Articles IV and IX thereof). Upon such termination or release, the Pledgee shall reassign and deliver to the Pledgor, or to such person or persons as the Pledgor shall designate, against receipt therefor, such of the Pledged Collateral (if any) as shall not have been sold or otherwise applied by the Pledgee pursuant to the terms hereof and shall still be held by the Pledgee hereunder, together with appropriate instruments of reassignment and release. Any such reassignment shall be without recourse to or warranty by the Pledgee and at the expense of the Pledgor. Section 16. NOTICES. All notices or other communications required or permitted hereunder shall be in writing and shall be sufficiently given if made by hand delivery, by telex, by telecopier or registered or certified mail, postage prepaid, return receipt requested, addressed to the last known address of the respective party. Section 17. FURTHER ASSURANCES. The Pledgor agrees that at any time from time to time, at the expense of the Pledgor, the Pledgor will do such further acts and things, and execute and deliver such additional conveyances, assignments, agreements and instruments, as the Pledgee may at any time request in connection with the administration and enforcement of this Pledge Agreement, with respect to the Pledged Collateral or any part thereof or in order to better assure and confirm unto the Pledgee its rights and remedies hereunder. Section 18. BINDING AGREEMENT; ASSIGNMENTS. The Pledge Agreement, and the terms, covenants and conditions hereof, shall be binding upon and inure to the benefit of the parties hereto, the Noteholders and their respective successors and assigns, except that without the written consent of the Pledgee the Pledgor shall not be permitted, either expressly or by operation of law, to assign this Pledge Agreement or any interest herein or in the Pledged Collateral or any part thereof, or, except as otherwise permitted by the terms of this Pledge Agreement, otherwise transfer, pledge, encumber or grant any option with respect to the Pledged Collateral or any part thereof. Section 19. SURVIVAL OF AGREEMENT; SEVERABILITY. (a) All covenants and agreements made by the Pledgor herein and in the certificates or other instruments prepared or delivered in connection with this Pledge Agreement shall be considered to have been relied upon by the Pledgee and the Noteholders and shall survive the issuance by the Pledgor of the Notes and shall continue in full force and effect as long as any of the Secured Obligations, whether or not contingent, have not been fully and indefeasibly paid and satisfied. (b) In the event any one or more of the provisions contained in this Pledge Agreement should be held invalid, illegal or unenforceable in any respect, no party hereto shall be required to comply with such provision for so long as such provision is held to be invalid, illegal or unenforceable, and the validity, legality and enforceability of the remaining provisions contained herein or therein shall not in any way be affected or impaired thereby. The parties shall endeavor in good faith negotiations to replace the invalid, illegal or unenforceable provisions with valid -14- provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions. Section 20. GOVERNING LAW. THIS PLEDGE AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS. Section 21. HEADINGS. Section headings used herein are for convenience only, and are not to affect the construction of, or be taken into consideration in interpreting, this Pledge Agreement. Section 22. COUNTERPARTS. This Pledge Agreement may be executed in any number of copies or counterparts, all of which taken together shall constitute one agreement, and any of the parties may execute this Pledge Agreement by signing any such copy or counterpart. -15- IN WITNESS WHEREOF, the parties hereto have duly executed this Pledge Agreement, or caused this Pledge Agreement to be duly executed, as of the day and year first above written. [INSERT SUBSIDIARY NAME] a ______________ corporation By:___________________________ Name: ________________________ Title: _______________________ FIRST NATIONAL BANK OF COMMERCE, as Trustee By: ___________________________ Name: _________________________ Title: ________________________ Document Number: EX-4-9. -16- EX-4.10 11 EXHIBIT 4.10 EXHIBIT 4.10 Schedule to Exhibit 4.10 The First Preferred Ship Mortgage by and between each of the following parties and First National Bank of Commerce, as Trustee, and relating to the indicated vessel, are substantially identical in all material respects to the attached form document except as indicated below. Schedule of Mortagors executing First Preferred Ship Mortgages and the vessels they relate to ------------------------------------------------------------- Alton Gaming Company (relating to Argosy I) Alton Gaming Company (relating to Alton Belle Casino II) Catfish Queen Partnership in Commendam (relating to Argosy III) The Missouri Gaming Company (relating to Argosy IV) Iowa Gaming Company (relating to Argosy V) Argosy Gaming Company (relating to Spirit of America) Alton Gaming Company (relating to Alton Landing) Pursuant to Paragraph 2 of Item 601 of S-K, the following form is filed in lieu of the various First Preferred Ship Mortgages. Any material details in which such First Preferred Ship Mortgages differ from the enclosed form document are described in the enclosed form document. - ------------------------------------------------------------------------------ FORM OF FIRST PREFERRED SHIP MORTGAGE made by [NAME OF MORTGAGOR] in favor of FIRST NATIONAL BANK OF COMMERCE, as Trustee _____________________________ Dated as of June 5, 1996 _____________________________ - ------------------------------------------------------------------------------ Mortgagor: [NAME OF MORTGAGOR] Mortgagor's Interest in each Vessel: 100% Mortgagee: First National Bank of Commerce, as Trustee Mortgagee's Interest: 100% Amount of Mortgage: $235,000,000 FIRST PREFERRED SHIP MORTGAGE THIS FIRST PREFERRED SHIP MORTGAGE, dated as of June 5, 1996 (this "Mortgage"), is granted by [NAME OF MORTGAGOR], a ________ corporation (the "Mortgagor"), to FIRST NATIONAL BANK OF COMMERCE, as trustee (in such capacity, hereinafter called the "Mortgagee") under that certain Indenture dated as of June 5, 1996 (as amended, restated, supplemented or otherwise modified from time to time, the "Indenture") by and among Argosy Gaming Company, a Delaware corporation (the "Borrower"), the Mortgagor and the other Guarantors (as defined in the Indenture) and Mortgagee, as trustee for the holders of those certain Notes (as hereinafter defined). WHEREAS, the names and addresses of the parties to this Mortgage are set forth in full in Section 3.2 of Article III hereto; WHEREAS, the Mortgagor is the sole owner of the whole of the vessel (hereinafter as more particularly identified and described, the "Vessel"), which Vessel has been duly documented in the name of the Mortgagor under the laws of the United States; WHEREAS, pursuant to the Indenture, among other things, the Borrower shall issue its 13 1/4% First Mortgage Notes due 2004 (the "Original Notes"); WHEREAS, pursuant to a Registration Rights Agreement between the Borrower and Bear Stearns & Co. Inc., Donaldson, Lufkin & Jenrette Securities Corporation, BA Securities, Inc. and Deutsche Morgan Grenfell/C.J. Lawrence Inc. (collectively, the "Initial Purchasers"), the Borrower and the Guarantors will file a registration statement with respect to an offer to exchange the Initial Notes for a new series of 13 1/4% First Mortgage Notes due 2004 registered under the Securities Act of 1933, as amended, with terms substantially identical to those of the Initial Notes (the "Series B Notes" and, together with the Initial Notes, the "Notes"); WHEREAS, pursuant to the Indenture, the Mortgagee shall act as the trustee for the holders of the Original Notes and the holders of the Series B Notes (collectively, the "Noteholders"); WHEREAS, it is a condition precedent to the purchase of the Initial Notes by the Initial Purchasers that the Mortgagor shall have executed and delivered this Mortgage to the Mortgagee; WHEREAS, the Mortgagor will derive substantial direct and indirect benefit from the sale of the Notes pursuant to the Indenture in that the Borrower and the Mortgagor are the beneficiaries of joint management and other operational, financial and economic synergies and, pursuant to the Indenture, the Mortgagor has guaranteed the payment and performance of all obligations of the Borrower arising under or in respect of the Notes; -2- NOW THEREFORE, in consideration of the premises and of the additional covenants herein contained and to induce the Initial Purchasers to purchase the Original Notes and Noteholders to purchase the Notes and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Mortgagor hereby agrees with the Mortgagee as follows: As security for the prompt performance and payment of the Secured Obligations (as defined in Section 3.1 below), when, if and as due, and all other sums which may be secured by this Mortgage and to secure the due performance and observance of all the agreements and covenants contained in the Indenture and the Security Documents (as defined in the Indenture), THE MORTGAGOR HAS GRANTED, CONVEYED, MORTGAGED, PLEDGED, HYPOTHECATED, CONFIRMED, TRANSFERRED AND SET OVER, AND BY THESE PRESENTS DOES GRANT, CONVEY, MORTGAGE, PLEDGE, HYPOTHECATE, CONFIRM, ASSIGN, TRANSFER AND SET OVER UNTO AND IN FAVOR OF THE MORTGAGEE a first priority security interest in, and all right, title and interest of the Mortgagor in and to the following property, now owned or hereinafter acquired (the "Collateral"): (i) the whole of the vessel known as the [NAME OF VESSEL], official number ______, home port of Falling Waters, West Virginia, together with its barge facility and all of its boilers, engines, machinery, motors, masts, spars, boats, pumps, anchors, cables, chains, rigging, tackle, cranes, apparel, furniture, including, but not limited to, all gaming equipment and related devices and operations, and all other appurtenances thereunto appertaining or belonging, whether now or hereafter acquired, and also any and all additions, improvements and replacements hereafter made in or to said vessel or in or to its equipment and appurtenances aforesaid (the "Vessel"); (ii) any charter, lease, sublease or other transfer or disposition of whatever kind or nature of the Vessel, together with all renewals thereof, executed from time to time, and all payments received thereunder and all rights to enforce payments thereunder, including, without limitation, all payments of rent, all insurance proceeds and all other amounts due or to become due thereunder; and (iii) to the extent not otherwise included, all proceeds of all or any of the foregoing. It is expressly agreed that anything herein contained to the contrary notwithstanding, the Mortgagor shall remain liable under any lease and any other document or instrument expressly assumed by it thereunder all in accordance with and pursuant to the terms and provisions thereof, and the Mortgagee shall have no obligation or liability under any lease or any other document or instrument included in the Collateral by reason of or arising out of this Mortgage, nor shall the Mortgagee be required or obligated in any manner to perform or fulfill any obligations of the Mortgagor under or pursuant to any lease or any other document or instrument included in the Collateral except as herein expressly provided, to make any payment, or to make any inquiry as to -3- the nature or sufficiency of any payment received by it, or present or file any claim, or take any action to collect or enforce the payment of any amounts which may have been assigned to it or to which it may be entitled at any time or times. Notwithstanding the foregoing, so long as there is no Event of Default (as defined in Section 2.1 hereof), the Mortgagor shall be entitled to exercise all of its rights and remedies pursuant to the terms of any document included in the Collateral. TO HAVE AND TO HOLD all and singular the above mortgaged and described property unto the Mortgagee and its successors and assigns, to its and its successors' and assigns' own use, benefit and behoof forever, upon the terms herein set forth for the enforcement of the payment of Two Hundred Thirty-Five Million Dollars ($235,000,000) and interest, expenses and fees in accordance with the terms of the Indenture, the Security Documents (as defined in the Indenture) and all other Secured Obligations and to secure the performance and observance of, and compliance with all agreements, covenants, terms and conditions in this Mortgage contained. PROVIDED ONLY, and the condition of these presents is such, that if the entire Secured Obligations shall be paid as and when the same shall become due and payable, if the Mortgagor, its successors or assigns shall pay or cause to be paid all other such sums as may hereafter become secured by this Mortgage and shall perform, observe and comply with all agreements, covenants, terms and conditions in this Mortgage, expressed or implied, to be performed, observed or complied with by and on the part of the Mortgagor, then these presents and the rights hereunder shall cease, determine and be void; otherwise the same shall be and remain in full force and effect. IT IS HEREBY COVENANTED, DECLARED AND AGREED that the property above described is to be held subject to the further agreements and conditions hereinafter. ARTICLE I REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE MORTGAGOR SECTION 1.1 PERFORMANCE OF SECURED OBLIGATIONS. The Mortgagor hereby agrees with the Mortgagee duly and promptly to perform and to observe the Secured Obligations. SECTION 1.2 COMPLIANCE WITH LAWS. (a) 46 U.S.C. Section 31321. The Mortgagor will cause this Mortgage to be duly recorded in accordance with the provisions of Chapter 313 of Title 46, United States Code, and will otherwise cause compliance with and satisfaction of all of the provisions of said Chapter 313, as amended ("Chapter 313") in order to establish and maintain this Mortgage as a first preferred mortgage lien thereunder upon the Vessel and upon all renewals, replacements and improvements made in or to the same for the amount indicated in Article IV hereof, as the same may be amended, modified or increased from time to time, and will do all such other acts and execute all such -4- instructions, deeds, conveyances, mortgages and assurances as the Mortgagee shall reasonably require in order to subject and maintain the Vessel to the lien of the Mortgage. (b) DOCUMENTATION. The Mortgagor will comply with and satisfy all of the provisions of the laws of the United States in order that the Vessel shall continue to be documented pursuant to the laws of the United States as a vessel of the United States under the United States flag. SECTION 1.3 LAWS, TREATISES AND CONVENTIONS. In the event that this Mortgage or the Secured Obligations, or any provision hereof or thereof, shall be deemed invalidated in whole or in part by reason of any present or future laws, or any decision of any authoritative court, or if the documents at any time held by the Mortgagee shall be deemed by the Mortgagee for any reason insufficient to carry out the true intent and spirit of this Mortgage or the Secured Obligations, then, from time to time, the Mortgagor will execute, on its own behalf such other and further assurances and documents as, in the reasonable opinion of the Mortgagee, may be required more effectually to subject the Vessel to the terms and provisions of the Mortgage, including the payment of all sums required to be paid by the Mortgagor under the Secured Obligations hereby secured. SECTION 1.4 NOTICE OF MORTGAGE. The Mortgagor will cause a notice, reading as follows (or containing such additional information relating to any permitted mortgage that is placed on the Vessel as may be approved by the Mortgagee) printed in plain type of such size that the paragraph of reading matter shall cover a space not less than six inches wide by nine inches high, and framed, to be placed and kept prominently exhibited in the chart room and in the master's cabin of the Vessel if such room and cabin are contained in the Vessel and, if not, where such notices customarily are kept for vessels of the type of the Vessel: "NOTICE OF SHIP MORTGAGE This vessel is owned by [Name of Mortgagor], a _______ corporation, and is covered by a First Preferred Ship Mortgage in favor of First National Bank of Commerce, as Trustee, pursuant to the provisions of 46 U.S.C. Section 31321 ET SEQ., a certified copy of which mortgage is kept with this Vessel's papers, as amended. Under the terms of said Mortgage, neither the owner, any charterer, the master or agent of this vessel nor any other person has any right, power or authority to create, incur, or permit to be placed or imposed upon this vessel any lien whatsoever, other than liens for wages of a stevedore when employed directly by a person listed in 46 U.S.C. Section 31341, for wages of the crew in respect of this vessel, general average or for salvage (including contract salvage), liens fully covered by insurance and any deductible applicable thereto, or, to the extent they are liens subordinate to the liens of the said Mortgage, other liens incident to current operations or for repairs." SECTION 1.5 CHANGE OF PORT OF DOCUMENTATION. The Mortgagor will not transfer or change the flag or port of documentation of the Vessel without having obtained the prior written consent of the Mortgagee, and any such written consent to any one transfer or change of flag or port -5- of documentation shall not be construed to be a waiver of this provision with respect to any subsequent proposed transfer or change of flag or port of documentation. SECTION 1.6 INSURANCE. (a) On and after the date of this Mortgage, the Mortgagor will cause to be carried and maintained in respect of the Vessel hull and machinery and protection and indemnity insurance in such amounts and with such first class insurance companies, underwriters, protection and indemnity associations or clubs, as is representative of hull and machinery and protection and indemnity insurance customarily maintained by owners of like vessels with respect to such vessels. (b) In the event of any actual, constructive or compromised total loss of the Vessel, such loss shall not be adjusted or compromised without the prior written consent of the Mortgagee, and all insurance or other payments for such shall be paid to the Mortgagor and applied by the Mortgagor in accordance with the terms of the Indenture. (c) The Mortgagor shall assign to the Mortgagee, for the benefit of the Mortgagee and the Noteholders, all policies and contracts of such insurance, subject to the other provisions of this Section 1.6. However, notwithstanding such assignment: (i) any loss under any insurance on the Vessel with respect to protection and indemnity or collision liability risks may be paid directly to the person to whom any liability covered by such insurance has been incurred, or to the Mortgagor to reimburse it for any loss, damage or expense incurred by it and covered by such insurance; PROVIDED that in the latter event the underwriter shall have first received evidence that the liability insured against has been discharged; and (ii) in the case of any loss to the Vessel or any other loss involving liability of the Vessel (other than a loss covered by subparagraph (i) above in this paragraph (c) or by paragraph (b) of this Section 1.6) under insurance with respect to the Vessel the underwriters may pay directly for the repair, salvage, liability or other charges involved, or, if the Mortgagor shall have first fully repaired the damage and paid the cost thereof or discharged the liability or paid other charges and the underwriters shall have first received evidence thereof, shall pay the Mortgagor as reimbursement therefor. (d) In the event that any claim or lien is asserted against the Vessel for loss, damage or expense which is covered by insurance required hereunder, and it is necessary for the Mortgagor to obtain a bond or supply other security to prevent arrest of the Vessel or to release the Vessel from arrest on account of such claim or lien, the Mortgagee, on request of the Mortgagor or its agent, may, in the sole discretion of the Mortgagee, assign to any person, firm or corporation executing a surety or guarantee bond or other agreement to save or release the Vessel from such arrest, all right, title and interest of the Mortgagee in and to said insurance covering said loss, -6- damage or expense, as collateral security to indemnify such person, firm or corporation against liability under said bond or other agreement. (e) If requested by the Mortgagee at any time and from time to time, the Mortgagor will deliver to the Mortgagee copies of all cover notes, binders, policies and certificates of membership in protection and indemnity associations, and all endorsements and riders amendatory thereof, in respect of insurance maintained in connection with the Vessel. (f) The Mortgagor agrees that it will not do or permit or willingly allow to be done any act by which any insurance required by the terms of this Mortgage may be suspended, impaired or canceled, and that it will not permit or allow the Vessel to undertake any voyage or run any risk or transport any cargo or passengers which may not be permitted by the policies in force, having previously insured the Vessel by additional coverage to extend to such voyages, risks, passengers or cargoes. SECTION 1.7 LIBEL OR ATTACHMENT. If a libel is filed upon the Vessel or if the Vessel shall be attached, levied upon or taken into custody by virtue of any proceeding in any court or tribunal or by any government or other authority, the Mortgagor will promptly notify the Mortgagee thereof by telegram or cable, confirmed by letter addressed to the Mortgagee, and within thirty (30) days after such libel, levy, attachment or taking into custody will cause the Vessel subject thereto to be released (unless such libel, levy, attachment or taking into custody is being contested in good faith by appropriate proceedings) and will promptly notify the Mortgagee of such release in the manner aforesaid. SECTION 1.8 INSPECTION. The Mortgagor at all reasonable times will afford the Mortgagee or its authorized representatives full and complete access to the Vessel for the purpose of inspecting or surveying (provided that such surveying does not disrupt or interfere with the business conducted on such Vessel) the same and its papers and records, and at the request of the Mortgagee, the Mortgagor will deliver for inspection copies of any and all contracts and documents relating to the Vessel, whether on board or not. SECTION 1.9 SALE OR OTHER DISPOSITION OF VESSEL. Except as permitted in the Indenture, the Mortgagor will not sell, charter, mortgage, transfer or in any other way dispose of all or any part of the Vessel (except (i) by way of time or voyage charter party, (ii) transfer of appurtenances to the Vessel permitted by Section 2.11 hereof or (iii) pursuant to a charter or lease in the ordinary course of business) without the prior written consent of the Mortgagee. Except as otherwise provided in the preceding sentence, any sale, mortgage or transfer of all or any part of any Vessel shall be subject to the provisions of this Mortgage and the lien hereof. SECTION 1.10 REQUISITION OF TITLE OR USE. In the event that the title to or ownership of the Vessel, or the use of the Vessel, shall be requisitioned, purchased or taken by, or the Vessel shall be seized by or forfeited to, any government of any country or any department, agency or representative thereof, pursuant to any present or future law, proclamation, decree, order or otherwise or by any other person or persons, whether or not acting under color of governmental -7- authority, the compensation, purchase price, reimbursement or award for such requisition, purchase, seizure, forfeiture or other taking of such title, ownership or use shall forthwith be and become payable to the Mortgagor, who shall be entitled to receive the same and shall apply it as provided in the Indenture. The Mortgagor hereby constitutes and appoints the Mortgagee its true and lawful attorney, for it and in its name, place and stead, from and after an Event of Default and during the continuance thereof, to collect, receipt for, acknowledge the payment of, sue for and execute any documentation or writing that may be necessary or required in order to obtain payment of said compensation, purchase price, reimbursement or award, giving and granting to said attorney full power and authority to do and perform every act and thing whatsoever requisite or necessary to be done in or about the premises as fully and to all intents and purposes as it, the Mortgagor, might or could do if personally present at the doing thereof, with full power of substitution, hereby, ratifying and confirming all that its said attorney or substitute shall do or cause to be done by virtue hereof, and the Mortgagor shall promptly execute and deliver to the Mortgagee such documents and shall promptly do and perform such acts as in the opinion of the Mortgagee may be necessary or useful to facilitate or expedite the collection by the Mortgagee of such compensation, purchase price, reimbursement or award. SECTION 1.11 OUTSTANDING LIENS. Mortgagor lawfully owns and is lawfully possessed of the Vessel free and clear of all Liens, except Permitted Liens under the Indenture; and Mortgagor will and does hereby warrant and defend the title and possession thereto and to every part thereof for the benefit of Mortgagee against the claims and demands of all persons whomsoever subject to the Permitted Liens and other matters permitted under the Indenture. SECTION 1.12 OPERATION OF VESSEL. Mortgagor will not cause or permit the Vessel to be operated in any manner contrary to law and Mortgagor will not engage in any unlawful trade or violate any law or regulation or expose the Vessel to penalty or forfeiture, and will not do, or suffer or permit to be done, anything which can or may injuriously affect the registration or flag of the Vessel under the laws and regulations of the United States of America. Mortgagor will not operate the Vessel outside the navigation limits of the insurance required pursuant to Section 1.6 of this Mortgage. SECTION 1.13 CARE OF VESSEL. On the date hereof and at all times thereafter, the Vessel is, and shall be, tight, staunch and strong and well and sufficiently tackled, apparelled, furnished and equipped and in all respects seaworthy. Mortgagor shall preserve and maintain the Vessel in good condition, repair and working order (reasonable wear and tear excepted) and supplied with all necessary equipment and shall cause to be made all necessary repairs, renewals, replacements, betterments and improvements thereof, all as in its reasonable judgement may be necessary, so that the business carried on in connection therewith may be properly and advantageously conducted at all times; PROVIDED, HOWEVER, that nothing in this Section shall prevent Mortgagor from discontinuing any operation or maintenance of any portion of the Vessel, or disposing thereof, if such discontinuance or disposal is desirable in the conduct of the business of the Mortgagor. -8- SECTION 1.14 PAYMENT OF TAXES. Mortgagor will pay or cause to be paid prior to delinquency, all taxes, assessments, governmental levies, fines and penalties lawfully imposed on Mortgagor or on the Vessel. ARTICLE II EVENTS OF DEFAULT AND REMEDIES SECTION 2.1 For all purposes of this Mortgage the term "Event of Default" shall mean when any of the following events shall have occurred: (a) The occurrence of an "Event of Default" as defined in the Indenture. (b) Failure in the due and punctual observance or performance by the Mortgagor of any of the other covenants and conditions herein required to be observed and performed and continuance of such default for thirty (30) days after notice by Mortgagee. SECTION 2.2 REMEDIES UPON EVENT OF DEFAULT. If any Event of Default shall occur and be continuing uncured, then at any time thereafter while such Event of Default shall remain uncured, the Mortgagee shall have the right to exercise any or all of the following remedies: (a) Exercise all of the rights and remedies in foreclosure and otherwise given to mortgagees by the provisions of 46 U.S.C. Section 31321 et seq. or by any other provisions of applicable law; (b) Bring suit at law, in equity or in admiralty, or initiate or prosecute any other proceedings as it may consider appropriate, to recover any and all payments due, or declared due, under the Secured Obligations and hereunder, and collect the same out of any and all of the assets of the Mortgagor whether covered by this Mortgage or otherwise and in connection therewith obtain a decree ordering the sale of the Vessel in accordance with subsection (d) of this Section 2; (c) The Mortgagee may take and enter into possession of the Vessel, at any time, wherever the same may be, without legal process and without being responsible for loss or damage, and, upon demand of the Mortgagee, the Mortgagor or other person in possession shall surrender forthwith to the Mortgagee possession of the Vessel and, once in possession of the Vessel, the Mortgagee may, without being responsible for loss or damage, hold, lay up, lease, charter, operate or otherwise use the Vessel for such time and upon such terms as it may deem to be for its best advantage, and demand, collect and retain all hire, freights, earnings, issues, revenues, income, profits, return premiums, salvage awards or recoveries, recoveries in general average, and all other sums due or to become due in respect of the Vessel or in respect of any insurance thereon from any person whomsoever, accounting only for the net profits, if any, arising from such use of the Vessel and charging upon all receipts from the use of the Vessel or from the sale thereof by court proceedings or pursuant to subsection (d) of this Section all costs, expenses, charges, damages or losses by reason of such use; and if at any time the Mortgagee shall avail itself of the right herein -9- given to it to take the Vessel, the Mortgagee shall have the right to dock the Vessel taken, for a reasonable time at any dock, pier or other premises of any person in possession of the Vessel without charge, or to dock the Vessel taken at any other place at the cost and expense of the Mortgagor; and (d) The Mortgagee may take and enter into possession of the Vessel, at any time, wherever the same may be, without legal process, and, once in possession of the Vessel, if it seems desirable to the Mortgagee and without being responsible for loss or damage, sell the Vessel, at any place and at such time as the Mortgagee may specify and in such manner as the Mortgagee may deem advisable, free from any claim by the Mortgagor in admiralty, in equity, at law or by statute, after first giving notice of the time and place of sale with a general description of the property in the following manner: (i) By publishing such notice for ten (10) consecutive business days, in a daily newspaper of general circulation published in the port of registry of the Vessel; (ii) If the place of sale should not be the port of registry of the Vessel, then also by publication of a similar notice for a similar period of time in a daily newspaper, if any, published at the place of sale; and (iii) By mailing, by registered or certified mail, a similar notice to the Mortgagor on the day of first publication and at least fourteen (14) days prior to the date fixed for sale. SECTION 2.3 FINALITY OF SALE. Any sale of the Vessel made pursuant to this Mortgage, whether under the power of sale hereby granted or any judicial proceedings, shall operate to divest all right, title and interest of any nature whatsoever of the Mortgagor therein and thereto, and shall bar the Mortgagor, its successors and assigns, and all persons claiming by, through or under them from claiming any interest in or with respect to the Vessel. No purchaser shall be bound to inquire whether notice has been given, or whether any Event of Default has occurred, or as to the propriety of the sale, or as to the application of the proceeds thereof. At any such sale, the Mortgagee or any Noteholder may bid for and purchase such property and upon compliance with the terms of sale may hold, retain and dispose of such property without further accountability therefor. SECTION 2.4 POWERS AND RIGHTS OF MORTGAGEE UPON EVENT OF DEFAULT. The Mortgagee and its successors and assigns are hereby irrevocably appointed attorney-in-fact of the Mortgagor upon the occurrence and continuation of an Event of Default to execute and deliver to any purchaser aforesaid, and is hereby vested with full power and authority to make, in the name and in behalf of the Mortgagor, a good conveyance of the title to the Vessel. In the event of any sale of the Vessel, under any power herein contained, the Mortgagor will, if and when required by the Mortgagee, ratify and confirm any sale of the Vessel by executing and delivering to the purchaser thereof any such form of conveyance, instruments of transfer and releases of the Vessel as the Mortgagee may direct or approve. -10- SECTION 2.5 REVENUES AND PROCEEDS OF VESSEL. The Mortgagee is hereby appointed attorney-in-fact of the Mortgagor upon the happening of any Event of Default, in the name of the Mortgagor to demand, collect, receive, compromise and sue for, so far as may be permitted by law, all freight, hire, earnings, issues, revenues, income and profits of the Vessel and all amounts due from the underwriters under any insurance thereon as payment of losses or as return premiums or otherwise, salvage awards and recoveries, recoveries in general average or otherwise, and all other sums due or to become due at the time of the happening of any Event of Default or during the continuation thereof in respect of the Vessel, or in respect of any insurance thereon, from any person whomsoever, and to make, give and execute in the name of the Mortgagor, acquittance, receipts, releases or other discharges for the same, whether under seal or otherwise, and to endorse and accept in the name of the Mortgagor all checks, notes, drafts, warrants, agreements and other instruments in writing with respect to the foregoing. SECTION 2.6 ADDITIONAL RIGHTS. (a) The Mortgagor covenants and agrees that in addition to any and all other rights, powers and remedies elsewhere in this Mortgage granted to and conferred upon the Mortgagee, the Mortgagee in any suit to enforce any of its rights, powers or remedies, shall be entitled as a matter of right and not as a matter of discretion to the appointment of a receiver or receivers of the Vessel, and any receiver or receivers so appointed shall have full right and power to use and operate and dispose of the Vessel, and the Mortgagee may become the purchaser at such sale and shall have the right to credit on the purchase price any and all sums of money due on the Secured Obligations. (b) The Mortgagor authorizes and empowers the Mortgagee or its appointees or any of them to appear in name of the Mortgagor, its successors and assigns, in any court of any country or nation of the world where a suit is pending against the Vessel because of or on account of any alleged lien against such Vessel from which such Vessel has not been released and to take such actions as may seem proper in the reasonable judgment of the Mortgagee towards the defense of such suit and the purchase or discharge of such lien, and all expenditures made or incurred by the Mortgagee, for the purpose of such defense or purchase or discharge shall be a debt due from the Mortgagor, its successors and assigns, to the Mortgagee, and shall be secured by the lien of this Mortgage in like manner and extent as if the amount and description thereof were written herein. SECTION 2.7 REINSTATEMENT. If at any time after the occurrence of an Event of Default and prior to the actual sale of the Vessel by the Mortgagee or prior to commencement of any foreclosure proceedings, the Mortgagor completely cures all Events of Default and pays all expenses and advances of the Mortgagee consequent on such Event of Default, with interest at the then-applicable rate, then the Mortgagee shall restore the Mortgagor to its former position, but such action shall not affect any subsequent Event of Default or impair any rights consequent thereon. -11- SECTION 2.8 CUMULATIVE REMEDIES; NO WAIVER; GAMING LIMITATIONS. (a) Each and every power and remedy herein given to the Mortgagee shall be cumulative and shall be in addition to every other power and remedy herein given or now or hereafter existing at law, in equity, in admiralty or by statute, and each and every power and remedy whether herein given or otherwise existing may be exercised from time to time and as often and in such order as may be deemed expedient by the Mortgagee, and the exercise or the beginning of the exercise of any power or remedy shall not be construed to be a waiver of the right to exercise at the same time or thereafter any other power or remedy. No delay or omission by the Mortgagee in the exercise of any right or power or in the pursuance of any remedy accruing upon any Event of Default shall impair any such right, power or remedy or be construed to be a waiver of any such Event of Default or to be acquiescence therein; nor shall the acceptance by the Mortgagee of any security or of any payment of or on account of the amounts due in respect of the Secured Obligations after any Event of Default or of any payment on account of any past Event of Default be construed to be a waiver of any right to take advantage of any future Event of Default or of any past Event of Default not completely cured thereby. (b) Mortgagee acknowledges that its rights and remedies with respect to the Collateral upon an Event of Default are subject to the limitations and restrictions of applicable federal and state gaming and gambling statutes, laws, rules and regulations. [INSERT THE FOLLOWING IN ARGOSY/LOUISIANA SHIP MORTGAGE-- Mortgagee acknowledges and agrees to the requirement of the Riverboat Gaming Enforcement Division, Office of State Police, Department of Public Safety and Corrections, State of Louisiana (the "Division"), that, within five (5) days of the commencement of the exercise of any remedy(ies) in favor of Mortgagee as set forth in this Mortgage, Mortgagee shall notify the Division, in writing, of the date, nature and scope of the exercise of such remedy(ies) and further acknowledges that the exercise of such remedy(ies) and any transfer or proposed transfer of any ownership interest or economic interest resulting therefrom or related thereto shall require compliance with any applicable provisions of Title 4, Section 528 of the Louisiana Revised Statutes and all regulations promulgated pursuant thereto.] [INSERT THE FOLLOWING IN MISSOURI GAMING SHIP MORTGAGES--Mortgagee acknowledges that the foreclosure, possession, sale, transfer or disposition of certain gaming equipment and machinery is subject to compliance with applicable federal and state gaming and gambling statutes, laws, rules and regulations which may be proscriptive or require prior consent or approval by applicable state gaming commissions, including the Missouri Gaming Commission, to such foreclosure, possession, sale, transfer or disposition. Mortgagee hereby further acknowledges that Missouri law does not presently permit the Mortgagee to foreclose or take possession of certain gaming equipment and machinery without the Mortgagee being licensed by the Missouri Gaming Commission or, in the alternative, the creation of a different mechanism that is in compliance with Missouri laws and is acceptable to the Missouri Gaming Commission (which mechanism could include, subject to the Missouri Gaming Commission's approval, the sale, transfer or disposition of such gaming equipment and machinery in question to an entity licensed by the Missouri Gaming Commission).] -12- SECTION 2.9 RESTORATION OF POSITION. In case the Mortgagee shall have proceeded to enforce any right, power or remedy under this Mortgage by foreclosure, entry or otherwise, and such proceedings shall have been discontinued or abandoned for any reason or shall have been determined adversely to the Mortgagee, then and in every such case the Mortgagor and the Mortgagee shall be restored to their former positions and rights hereunder with respect to the property subject or intended to be subject to this Mortgage, and all rights, remedies and powers of the Mortgagee shall continue as if no such proceedings had been taken. SECTION 2.10 APPLICATION OF PROCEEDS. The proceeds of any sale and net earnings derived from the operation, use, charter, or any other employment of the Vessel by the Mortgagee, as mortgage creditor, and within any of the powers and authority above given, as well as the proceeds of any judgment which the Mortgagee may obtain by reason of the breach or failure to perform any of the terms of this Mortgage, as well as the proceeds of any claim for damage received by the Mortgagee while exercising the powers and the authorities above given, shall be applied as follows: FIRST: Applied to the payment of all expenses and charges, including the costs and expenses of any sale, the expenses of any retaking, attorneys' fees, court costs, and any other expenses or advances made or incurred by the Mortgagee in the protection of its rights or the pursuance of its remedies hereunder; SECOND: Applied to the payment of any damages or injuries sustained by the Mortgagee occasioned by non-compliance by the Mortgagor with the terms and provisions of this Mortgage and to furnish indemnity in the proper amount against any other liens or other encumbrances which have or may have priority over those established by this Mortgage; THIRD: Applied to the payment of the Secured Obligations in such priority as among the several obligations of the Mortgagor thereunder as the Mortgagee may elect; FOURTH: Applied to the payment of any other obligations of the Mortgagor to the Mortgagee hereunder; and FIFTH: Any surplus thereafter remaining shall be paid promptly to the Mortgagor. -13- In the event the proceeds and the net earnings referred to in this Section 2.10 should be insufficient to pay the sum total of the amounts specified in paragraphs First through Fourth above, then the Mortgagee, as mortgage creditor, shall have the right to collect and to receive from the Mortgagor, or from any other person or persons who may be chargeable in respect thereof, such amount as will fully pay any remaining deficiency with respect to the amounts specified in paragraphs First through Fourth above. SECTION 2.11 RIGHT OF PEACEFUL ENJOYMENT. Until one or more Events of Default shall happen, the Mortgagor, subject to the provisions of this Mortgage, shall be suffered and permitted to retain actual possession and use of the Vessel and shall have the right, from time to time, in its discretion, and without application to the Mortgagee, and without obtaining a release thereof by the Mortgagee, to dispose of, free from the lien hereof, any boilers, engines, machinery, masts, spars, sails, rigging, boats, anchors, chains, tackle, apparel, furniture, fittings or equipment including all gaming devices and equipment or any other appurtenances of the Vessel that are no longer useful, necessary, profitable or advantageous in the operation of the Vessel or of the business of the Vessel, provided that Mortgagor first or simultaneously replaces the same with new boilers, engines, machinery, masts, spars, sails, rigging, boats, anchors, chains, tackle, apparel, furniture, fittings, equipment, or gaming devices and equipment or other appurtenances of substantially equal value to the Mortgagor, which shall forthwith become subject to the lien of this Mortgage as a preferred mortgage thereon. [INSERT THE FOLLOWING IN SPIRIT OF AMERICA SHIP MORTGAGE-- SECTION 2.12 MORTGAGEE'S CONSENT TO CHARTER AND LEASE TO INDIANA GAMING COMPANY, L.P. Notwithstanding any other provision of this Mortgage, Mortgagee hereby consents to the charter of the Vessel and the lease of the related equipment (the "Equipment") by Mortgagor to Indiana Gaming Company, L.P. ("Indiana L.P.") pursuant to the terms of a charter and equipment lease agreement to be entered into between the Mortgagor and Indiana L.P. (together with any amendments, restatements, extensions or other modifications thereto, the "Charter"). Mortgagee agrees that the Charter, and the rights of Indiana L.P. under the Charter, will remain in full force and effect and possession of the Vessel and the Equipment under the Charter will remain undisturbed by Mortgagee during the term of the Charter so long as Indiana L.P. satisfies all of its obligations under the Charter. After receipt of notice from Mortgagee of its intent to foreclose the lien of, or otherwise enforce its rights under, the Security Documents (as defined in the Indenture) or that Mortgagee has retaken or repossessed the Vessel or received a conveyance of the Vessel and Equipment in lieu of foreclosure, Indiana L.P. will be considered to have attorned to and recognized Mortgagee, its successor and assigns, or any purchaser at the foreclosure sale, as the substitute "Owner" under the Charter and Indiana L.P.'s possession of the Vessel and Equipment will not be disturbed as provided herein. This agreement will be considered self-operative, and no separate agreements will be required to effectuate the attornment and recognition of these rights.] -14- ARTICLE III SUNDRY PROVISIONS SECTION 3.1 CERTAIN DEFINITIONS. (a) Terms used in this Mortgage which are not defined herein but which are defined in the Indenture shall have the meanings herein set forth for them in the Indenture. (b) When used herein, the term "Secured Obligations" shall mean all obligations of the Mortgagor to the Mortgagee which arise out of or in connection with any Security Document (including without limitation all obligations of the Mortgagor to Mortgagee hereunder, under any Guarantee or under any other Security Document). SECTION 3.2 The names and addresses of each of the parties to this Mortgage are as follows: (a) [NAME OF MORTGAGOR] 219 Piasa Street Alton, Illinois 62002-6232 Attention: Joseph G. Uram Phone: (618) 474-7620 Facsimile: (618) 474-7636 (b) First National Bank of Commerce, as Trustee Corporate Trust Division 210 Baronne Street New Orleans, Louisiana 70112 Attention: Denis L. Milliner Phone: (504) 561-1640 Facsimile: (504) 561-1432 unless another address shall be furnished in writing by the party to receive such notice to the party giving such notice, and any such notice shall be deemed made as of the date of mailing or hand delivery. SECTION 3.3 SURVIVAL OF AGREEMENTS. All of the covenants, promises, stipulations and agreements of the Mortgagor in this Mortgage contained shall bind the Mortgagor and its successors and assigns and shall inure to the benefit of the Mortgagee and its successors and assigns. In the event of any assignment of this Mortgage, the term "Mortgagee", as used in this Mortgage, shall be deemed to mean any such assignee. SECTION 3.4 ACTS BY AGENTS OF MORTGAGEE. Wherever and whenever herein any right, power or authority is granted or given to the Mortgagee, such right, power or authority may -15- be exercised in all cases by the Mortgagee or such agent or agents as it may appoint, and the act or acts of such agent or agents when taken shall constitute the act of the Mortgagee hereunder. SECTION 3.5 COUNTERPARTS. This Mortgage may be executed in any number of counterparts, each of which shall be an original; but such counterparts shall together constitute but one and the same instrument. SECTION 3.6 NOTICE. All notices or other communications required or permitted hereunder shall be in writing and shall be sufficiently given if made by hand delivery, by telex, by telecopier or registered or certified mail, postage prepaid, return receipt requested, addressed to the last known address of the respective party. SECTION 3.7 NO WAIVER OF PREFERRED STATUS. No provision of this Mortgage shall be deemed to constitute a waiver by the Mortgagee of the preferred status hereof given by 46 U.S.C. Section 31321 et seq. and any provision of this Mortgage which would otherwise constitute such a waiver shall to such extent be of no force or effect. SECTION 3.8 WAIVERS; AMENDMENTS. None of the terms and provisions of this Mortgage may be waived, altered, amended, modified or supplemented except by an instrument in writing executed by the Mortgagor and the Mortgagee. SECTION 3.9 GOVERNING LAW. THIS MORTGAGE AND ALL THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER AND THEIR SUCCESSORS AND ASSIGNS SHALL BE GOVERNED BY THE LAWS OF THE UNITED STATES OF AMERICA, AND, TO THE EXTENT APPLICABLE, THE LAWS OF THE STATE OF NEW YORK, EXCEPTING FOR THE CHOICE OF LAW RULES OF SAID STATE AND EXCEPT TO THE EXTENT PREEMPTED BY APPLICABLE FEDERAL AND MARITIME LAWS OF THE UNITED STATES. SECTION 3.10 FURTHER ASSURANCES. In the event that this Mortgage, or any provisions hereof, shall be deemed invalid in whole or in part by reason of any present or future law or any decision of any court having jurisdiction, or if the documents at any time held by the Mortgagee shall be deemed by the Mortgagee for any reason insufficient to carry out the rights and powers granted to the Mortgagee herein, then from time to time, the Mortgagor will do, execute, acknowledge and deliver, or cause to be done, executed, acknowledged and delivered such other and further assurances and documents as in the opinion of the Mortgagee may reasonably be required in order more effectively to subject the Vessel to the lien of this Mortgage or more effectively subject the Vessel to the performance of the terms and provisions of this Mortgage, or to enable this Mortgage to enjoy continuously the status of a First Preferred Ship Mortgage. SECTION 3.11 ILLEGALITY OR UNENFORCEABILITY. If this Mortgage or any provision of this Mortgage or the application thereof to any person or circumstances or portion of the Secured Obligations shall be invalid or unenforceable to any extent, the remainder of this Mortgage and the -16- application of such provision to other persons or circumstances or portion of the Secured Obligations shall not be affected thereby and shall be enforced to the greatest extent permitted by law. ARTICLE IV RECORDING For the purpose of recording this First Preferred Ship Mortgage as required by 46 U.S.C. Section 31321 et seq. the maximum amount of the Mortgage outstanding at one time, excluding interest, expenses and fees, is $235,000,000 (the "Total Amount"). The discharge amount is the same as the Total Amount. ARTICLE V DEFEASANCE; TERMINATION If the entire amount of the Secured Obligations shall be paid and discharged as and when the same become due and payable and if the Mortgagor shall also pay or cause to be paid all other sums payable hereunder by the Mortgagor, then this Mortgage and the lien, rights and interest hereby granted shall cease, determine and become null and void. In addition, this Mortgage may be released as provided in the Indenture (including without limitation Articles IV and IX thereof). Upon such defeasance or release, the Mortgagee shall, at the request and expense of the Mortgagor, execute and deliver such instrument or instruments of satisfaction as may be necessary to satisfy and discharge the lien hereof, and forthwith the estate, right, title and interest of the Mortgagee in and to all property subject to this Mortgage shall thereupon cease, determine and become null and void. -17- IN WITNESS WHEREOF, the Mortgagor has caused this First Preferred Ship Mortgage to be duly executed and delivered and its corporate seal to be hereunto affixed as of day and year first above written. [NAME OF MORTGAGOR], [CORPORATE SEAL] a _______ corporation By:____________________________ Name:__________________________ Title:_________________________ Attest: ___________________________________ Secretary ACKNOWLEDGMENT STATE OF ILLINOIS ) ) ss. COUNTY OF COOK ) The foregoing instrument was acknowledged before me this ____ day of June, 1996, by ________________________ the _______________________ of [NAME OF MORTGAGOR], a _______ corporation, on behalf of the corporation. Notary Public EX-4.11 12 EXHIBIT 4.11 Missouri FORM OF DEED OF TRUST, ASSIGNMENT OF LEASES AND RENTS AND SECURITY AGREEMENT Dated: June 5, 1996 Among ARGOSY GAMING COMPANY, a Delaware corporation CHICAGO TITLE INSURANCE COMPANY, a Missouri corporation and FIRST NATIONAL BANK OF COMMERCE, a national banking association Platte County, Missouri Recording requested by and after recording return to: Skadden, Arps, Slate, Meagher & Flom 333 West Wacker Drive Chicago, Illinois 60606 Attn: David S. McCarthy, Esq. This instrument was prepared by: Winston & Strawn 35 West Wacker Drive Chicago, Illinois 60601 Attn: Reed W. Ramsay, Esq. - ------------------------------------------------------------------------------- THIS DEED OF TRUST SECURES FUTURE ADVANCES AND FUTURE OBLIGATIONS AT ANY TIME OUTSTANDING UP TO A MAXIMUM PRINCIPAL AMOUNT OF $235,000,000, AND BENEFICIARY SHALL RECEIVE THE BENEFITS OF R.S. MO. - Section-443.055 DEED OF TRUST, ASSIGNMENT OF LEASES AND RENTS AND SECURITY AGREEMENT June 5, 1996 THIS DEED OF TRUST, ASSIGNMENT OF LEASES AND RENTS AND SECURITY AGREEMENT (this "INSTRUMENT") is entered into as of the day set forth above by and between ARGOSY GAMING COMPANY, a Delaware corporation (referred to herein as either "GRANTOR" or "BORROWER") whose chief executive office is located at 219 Piasa Street, Alton, Illinois 62002-6232 and CHICAGO TITLE INSURANCE COMPANY, a Missouri corporation ("TRUSTEE") having an office at 1100 Main Street, Suite 500, Kansas City, Missouri 64105 and FIRST NATIONAL BANK OF COMMERCE, a national banking association, as trustee under the Indenture (as hereinafter defined), ("BENEFICIARY"), whose address is 210 Baronne Street, New Orleans, Louisiana 70112. WHEREAS, the Grantor, Beneficiary, and certain other parties have entered into that certain Indenture dated as of June 5, 1996 (as amended, restated, supplemented or otherwise modified from time to time, the "INDENTURE"), pursuant to which, among other things, the Grantor has issued its 13 1/4% First Mortgage Notes due 2004 (the "Original Notes"); and WHEREAS, pursuant to a Registration Rights Agreement between the Grantor and certain other parties, the Grantor will file a registration statement with respect to an offer to exchange the Original Notes for a new series of 13 1/4% First Mortgage Notes due 2004 registered under the Securities Act of 1933, as amended, with terms substantially identical to those of the Original Notes (the "SERIES B NOTES" and together with the Original Notes, the "Notes"); and WHEREAS, execution of this Instrument is a condition precedent to the closing on the Indenture. Capitalized terms used herein but not described herein have the meanings ascribed such terms in the Indenture. NOW, THEREFORE, KNOW ALL MEN BY THESE PRESENTS that in order to secure to Beneficiary (a) the repayment of the indebtedness evidenced by the Notes to the Holders with interest thereon, and all other Indenture Obligations, together with all renewals, extensions and modifications thereof; (b) the payment of all other sums with interest thereon advanced in accordance herewith to protect the security of this Instrument; and (c) the performance of the covenants and agreements of Grantor herein contained and contained in the Indenture and the Security Documents (collectively, the "INDEBTEDNESS"), Grantor hereby irrevocably grants, bargains, sells, conveys, confirms, assigns, transfers and sets over to the TRUSTEE IN TRUST, WITH THE POWER OF SALE the premises described in EXHIBIT 1 attached hereto and made a part hereof (the premises described in EXHIBIT 1 are hereinafter individually and collectively referred to as the "PREMISES") together with: (a) all buildings, improvements, and tenements now or hereafter erected on the Premises, and all heretofore or hereafter vacated alleys and streets abutting the Premises; and (b) all easements, rights of way, rights, appurtenances, rents, issues, profits, royalties, mineral, oil and gas rights and profits, water, water rights, and water stock appurtenant to the Premises; and (c) all fixtures, personal property, machinery, equipment, engines, boilers, incinerators, building materials, appliances and goods of every nature whatsoever now or hereafter located in, or on, or used, or intended to be used in connection with the Premises, including, but not limited to, those for the purposes of supplying or distributing heating, cooling, electricity, gas, water, air and light; and (d) all elevators, and related machinery and equipment, fire prevention and extinguishing apparatus, security and access control apparatus, plumbing, bathtubs, water heaters, water closets, sinks, ranges, stoves, refrigerators, dishwashers, disposals, washers, dryers, awnings, storm windows, storm doors, screens, blinds, shades, curtains and curtain rods, mirrors, cabinets, paneling, rugs, attached floor coverings, furniture, fixtures, equipment used in connection with the Premises; and (e) all other property now owned or hereafter acquired and used in, on or about the Premises; and (f) all leasehold estates, right, title and interest of Grantor in and to all ground leases, leases, subleases covering the Premises or any portion thereof now or hereafter existing or entered into (herein "LEASES") and all right, title and interest of Grantor thereunder, including without limitation all guaranties thereof, all cash, security deposits, advance rentals, and all deposits or payments of a similar nature; and (g) all right, title and interest of Grantor into and under all plans, specifications, maps, surveys, studies, reports, permits, licenses (excluding Gaming Licenses (as defined in the Indenture) or any other governmental approval or payment, to the extent that, under the terms and conditions of such approval or under applicable law, such approvals cannot be subjected to a Lien in favor of Beneficiary), architectural, engineering and construction contracts, books, accounts, insurance policies, title insurance policies and other documents of whatever kind or character, relating to the use, construction, occupancy, leasing, sale or operation of the Premises; and (h) all fixtures and personal property described in EXHIBIT 2; and (i) all interests, estates or other claims or demands, in law and in equity which Grantor now has or may hereafter acquire, in the Property (hereinafter defined) and all estate, interest, right, title, other claim or demand, both in law and in equity including claims or demands with respect to proceeds of insurance relating thereto, which Grantor now has or may hereafter acquire in the Premises or any other property, or any portion thereof or interest therein; and -2- (j) all awards made for the taking by eminent domain or by any proceeding or purchase in lieu thereof of the whole or any part of the Property, including without limitation, any award resulting from a change of any streets (whether as to grade accession otherwise) and any award for severance damages all of which, including all appurtenances, replacements, betterments, renewals, substitutions and additions thereto, shall be deemed to be and remain a part of the real property covered by this Instrument. All of the foregoing, together with said Premises, individually and collectively, are herein referred to as the "Property." Grantor covenants to Trustee and Beneficiary that Grantor is lawfully seized of the estate hereby conveyed and has the right to grant, bargain, sell, convey, confirm, assign, transfer and set over the Property, that the Property is unencumbered and free of all mortgages, pledges, liens, charges, other encumbrances, adverse claims and other defects of title whatsoever except for easements of record that do not materially interfere with the use of the Property for the operation of Missouri Gaming Company, liens and other encumbrances permitted by the Indenture, and that Grantor will forever warrant and defend the title to the Property and the validity and priority of the lien of this Instrument to Trustee and Beneficiary and their respective successors and assigns against all claims and demands, whatsoever. TO HAVE AND TO HOLD the Property unto the Trustee forever, the Grantor hereby binds itself and Grantor, Trustee and Beneficiary covenant and agree as follows: 1. PAYMENT OF PRINCIPAL AND INTEREST. Grantor shall pay when due the principal of and interest on the Indebtedness evidenced by the Notes, any prepayment and late charges provided in the Notes, and all other Indebtedness secured by this Instrument all without relief from valuation and appraisement laws. 2. FUNDS FOR TAXES, INSURANCE AND OTHER CHARGES. Upon default in payment of any of the following described items, or upon the occurrence of any other Event of Default as defined in the Indenture, Beneficiary shall have the right at its option, to require Grantor to pay to Beneficiary, every month, until the Indebtedness is paid in full, a sum (herein "FUNDS") equal to one-twelfth of (a) the yearly water and sewer rates and assessments, all taxes, liens, impositions, public charges and all general, special ordinary charges and assessments which may be levied on the Property; (b) the yearly ground rents, if any; and (c) the yearly premium installments for fire and other hazard insurance, general liability, rent loss insurance and such other insurance covering the Property as Beneficiary may require pursuant to Paragraph 5 hereof, all as reasonably estimated initially and from time to time by Beneficiary on the basis of assessments and bills and reasonable estimates thereof. Any waiver by Beneficiary of a requirement that Grantor pay such Funds may be revoked by Beneficiary, in Beneficiary's sole discretion, at any time upon notice in writing to Grantor. Beneficiary may require Grantor to pay to Beneficiary, in advance, such other Funds for other taxes, charges, premiums, assessments and impositions in connection with Grantor or the Property which Beneficiary shall reasonably deem necessary to protect Beneficiary's interests (herein "OTHER IMPOSITIONS"). Unless otherwise provided by applicable law, Beneficiary, at -3- Beneficiary's option, may require Funds for Other Impositions to be paid by Grantor in a lump sum or in periodic installments. Beneficiary shall apply the Funds to pay said rates, rents, taxes, assessments, insurance premiums and Other Impositions so long as Grantor is not in breach of any covenant or agreement of Grantor in this Instrument or the Indenture. Beneficiary shall make no charge for so holding and applying the Funds, analyzing said account or for verifying and compiling said assessments and bills, unless Beneficiary pays Grantor interest, earnings or profits on the Funds and applicable law permits Beneficiary to make such a charge. Unless such agreement is made or applicable law requires interest, earnings or profits on the Funds to be paid, Beneficiary shall not be required to pay Grantor any interest, earnings or profits on the Funds. Beneficiary shall give to Grantor, without charge, an annual accounting of the Funds in Beneficiary's normal format showing credits and debits to the Funds and the purpose for which each debit to other Funds was made. The Funds are pledged as additional security for the Indebtedness secured by this Instrument and shall be subject to the right of set off. If the amount of the Funds held by Beneficiary at the time of the annual accounting thereof shall exceed the amount deemed necessary by Beneficiary to provide for the payment of water and sewer rates, taxes, assessments, finance premiums, rents and Other Impositions, as they fall due, such excess may be credited to Grantor on the next monthly instrument or installments of Funds due or may be applied to the outstanding balance of the Indebtedness secured hereby, within the sole discretion of the Beneficiary. If at any time the amount of the Funds held by Beneficiary shall be less than the amount deemed necessary by Beneficiary to pay water and sewer rates, taxes, assessments, insurance premiums, rents and Other Impositions, as they fall due, Grantor shall pay to Beneficiary any amount necessary to make up the deficiency immediately after notice from Beneficiary to Grantor requesting payment thereof. Upon Grantor's breach of any covenant or agreement of Grantor in this Instrument or upon the occurrence of an Event of Default under the Indenture, Beneficiary may apply, in any amount and in any order as Beneficiary shall determine in Beneficiary's sole discretion, any Funds held by Beneficiary at the time of application (a) to pay rates, rents, taxes, assessments, insurance premiums and Other Impositions which are now or will hereafter become due or (b) pay interest or principal on the Indebtedness evidenced by the Notes or as a credit against any Indebtedness secured by this Instrument. Upon payment in full of the Indebtedness secured by this Instrument or release of this Instrument as provided for in the Indenture, Beneficiary shall promptly refund to Grantor any Funds held by Beneficiary. 3. APPLICATION OF PAYMENTS. Unless applicable law provides otherwise, and except as otherwise provided herein, all payments received by Beneficiary from Grantor under this Instrument shall be applied by Beneficiary in the following order of priority: (a) amounts payable to Beneficiary by Grantor under Paragraph 2 hereof; (b) interest payable on the Notes; (c) principal of the Notes; (d) interest payable on advances made pursuant to Paragraph 8 hereof; (e) principal of advances made pursuant to Paragraph 8 hereof; and (f) any other Indebtedness secured by this Instrument in such order as Beneficiary, at Beneficiary's option, may -4- determine; PROVIDED, HOWEVER, that Beneficiary may, at Beneficiary's option, apply any sums payable pursuant to Paragraph 8 hereof prior to interest on and principal of the Notes, but such application shall not otherwise affect the order of priority of application specified in this Paragraph 3 and that Beneficiary, at Beneficiary's option, may apply payments received and applied to payment of principal or interest on the Notes among the Notes in such order as Beneficiary, in Beneficiary's sole discretion, may determine. 4. CHARGES, LIENS. Grantor shall pay all water and sewer rates, rents, taxes (not being diligently contested in good faith by Grantor in a timely manner), assessments, premiums, and Other Impositions attributable to the Property. Except as otherwise permitted under the Indenture, Grantor shall immediately discharge any Lien upon the Property, and Grantor shall pay when due or bond-over the claims of all persons supplying labor or materials to or in connection with the Property. Without Beneficiary's prior written permission, Grantor shall not allow or permit or by any act or failure to act, acquiesce or allow to be created any lien, encumbrance, or other interest in the Property to be placed, created or perfected against the Property. 5. INSURANCE. Grantor will insure each individual Property against such perils and hazards, and in such amounts and with such limits, as Beneficiary may reasonably require from time to time, and in any event, will continuously maintain the following described policies of insurance (the "INSURANCE POLICIES"): (a) Casualty insurance against loss and damage by all risks of physical loss or damage, including fire, windstorm, flood, earthquake and other risks covered by the so-called extended coverage endorsement or all risk insurance in amounts not less than the eighty percent (80%) of the full insurable replacement value of all improvements, fixtures and equipment from time to time on the Property and bearing a replacement cost agreed amount endorsement; (b) Comprehensive public and product liability insurance against death, bodily injury and property damage in an amount not less than One Million Dollars ($1,000,000.00); (c) Rental or business interruption insurance in amounts sufficient to pay, for a period of up to one (1) year, all amounts required to be paid by Grantor pursuant to the Notes and this Instrument (or as otherwise approved by Beneficiary); (d) If the Federal Insurance Administration (FIA) has designated the Property to be in a special flood hazard area and has designated the community in which the Property is located eligible for sale of subsidized insurance, first and second layer flood insurance when and as available; and (e) The types and amounts of coverage as are customarily maintained by owners or operators of like properties in similar corresponding geographic areas. -5- All insurance policies and renewals thereof shall be in a form reasonably acceptable to Beneficiary and shall include a standard mortgage clause in favor of and in form acceptable to Beneficiary. Beneficiary shall be listed as a mortgagee, loss payee and additional insured of all such policies as its interests may appear. Beneficiary shall have the right to hold the policies, and Grantor shall promptly furnish to Beneficiary all renewal notices and all receipts of paid premiums. At least thirty days prior to the expiration date of a policy, Grantor shall deliver to Beneficiary a renewal policy in form satisfactory to Beneficiary. In the event of any Event of Loss with respect to the Property, Grantor shall give immediate written notice to the insurance carrier and to Beneficiary. Grantor hereby authorizes and empowers Beneficiary as attorney-in-fact for Grantor to make proof of loss, to adjust and compromise any claim under the insurance policies, to appear in and prosecute any action arising from such insurance policies, to collect and receive insurance proceeds, and to deduct therefrom Beneficiary's expenses actually incurred in the collection of such proceeds; provided, however, that nothing contained in this Paragraph 5 shall require Grantor to incur any expense or take any action hereunder. In the event of such Event of Loss, the Net Cash Proceeds shall be disbursed as provided in the Indenture. If the Net Cash Proceeds are held by Beneficiary to reimburse Grantor for the cost of restoration and repair of the Property, Grantor shall commence and shall continue to restore and repair the Property to the equivalent of its original condition. If the cost of such restoration shall exceed the sum of One Million Dollars ($1,000,000) or if the restoration to be done may materially impair the structural integrity of a material portion of the buildings on the Premises, disbursement of said proceeds shall be conditioned on Beneficiary's receipt of plans and specifications of an architect, contractor's cost estimates, architect's certificates, waivers of lien, sworn statements of mechanics and materialmen and such other evidence of costs, percentage completion of construction, application of payments, and satisfaction of liens and such other conditions and requirements as Beneficiary may require. If the Net Cash Proceeds are applied to the payment of the Indebtedness secured by this Instrument, any such application of proceeds to principal shall not extend or postpone the due dates of the installments payable under the Indenture or change the amounts of such installments. Notwithstanding the foregoing, if the Property is sold pursuant to the terms and provisions of this Instrument or if Beneficiary acquires title to the Property, Beneficiary shall have all of the right, title and interest of Grantor in and to any insurance policies and unearned premiums thereon and in and to the proceeds resulting from any damage to the Property prior to such sale or acquisition. Wherever a provision is made in this Instrument for insurance policies to bear mortgage clauses or other loss payable clauses or endorsements in favor of Beneficiary, or to confer authority upon Beneficiary to settle or participate in the settlement of losses under policies of insurance or to hold and disburse or otherwise control use of insurance proceeds, from and after the entry of judgment of foreclosure, all such rights and powers of the Beneficiary shall continue in the Beneficiary as judgment creditor or mortgagee until confirmation of sale. -6- 6. PRESERVATION AND MAINTENANCE OF PROPERTY. Grantor (a) shall not commit waste or permit impairment or deterioration of the Property; (b) shall not abandon the Property; (c) shall restore or repair promptly and in a good and workmanlike manner all or any part of the Property to the equivalent of its original condition, or such other condition as Beneficiary may, in its reasonable discretion, approve in writing, in the event of any damage, injury or loss thereto, whether or not insurance proceeds are available to cover in whole or in part the costs of such restoration or repair unless the improvements constituting the Property are totally destroyed, insurance has been maintained thereon as required by this Instrument and Beneficiary applies the proceeds of said insurance to payment of the Indebtedness secured by this Instrument; (d) shall keep the Property, including improvements, fixtures, equipment, machinery and appliances thereon in good repair and shall replace fixtures, equipment, machinery and appliances on the Property when necessary to keep such items in good repair; (e) shall comply with all laws, ordinances, regulations, zoning ordinances and requirements of any governmental body applicable to the Property; and (f) shall give notice in writing to Beneficiary, appear in and defend any action or proceeding purporting to affect the Property, the security of this Instrument or the rights or powers of Beneficiary. Neither Grantor nor any tenant or other person shall remove, demolish or alter any improvement now existing or hereafter erected on the Property or any fixture (other than trade fixtures), equipment, machinery or appliance in or on the Property except when incident to the replacement of fixtures, equipment, machinery and appliances with items of like kind. 7. USE OF PROPERTY. (a) Unless required by applicable law or unless Beneficiary has otherwise agreed in writing, Grantor shall not allow changes in the use for which all or any part of the Property was intended at the time this Instrument was executed. Grantor shall not initiate or acquiesce to a change in the zoning classification of the Property without Beneficiary's prior written consent (which consent shall not be unreasonably withheld). Grantor shall have the right to enter into easements for ingress, egress and utilities which serve and benefit the Property, without the consent of Beneficiary. If at any time Grantor desires that Beneficiary release the lien of this Instrument from the parcel described in EXHIBIT 3 attached hereto (the "Specified Parcel"), which constitutes part of the Premises owned by Grantor, Grantor shall notify Beneficiary in writing (a "RELEASE NOTICE") not less than fifteen (15) days prior to the date of the desired release. Grantor shall provide Beneficiary with a legal description of the Specified Parcel and evidence of proper subdivision thereof if required, and separate tax identification if required (or, that proper application therefor has been made) prior to the desired release. Beneficiary agrees to cause Trustee to execute and deliver to Grantor, within fifteen (15) days after receipt of the Release Notice, an appropriate release document upon payment by Grantor to Beneficiary of a release price of One Dollar ($1.00). Notwithstanding anything to the contrary contained in the foregoing, upon the occurrence and during the continuance of a Default, no release of the Specified Parcel shall be permitted. (b) Provided Grantor delivers to Beneficiary and Trustee the certification hereinafter described, Grantor shall have the right, without the consent of Beneficiary or Trustee, to grant, reserve, dedicate or create easements on, over, across, through and under portions of the Property reasonably necessary for the purposes of (i) ingress to and egress from the Specified Parcel, (ii) utilities, including, but not limited to sewer, water, gas, electric and telephone, and (iii) parking, in connection with the development of the Specified Parcel, provided, however, that no such easement -7- shall materially interfere with the use and operation of the Property (the easements contained in (i), (ii) and (iii) are collectively referred to as the "Easements"). Prior to any grant, reservation, dedication or creation of any Easements, Grantor shall deliver to Trustee and Beneficiary a written certification stating that: (w) the Easements will not cause the Property or any portion thereof to fail to comply in any material respects with the terms of this Instrument and any applicable law, ordinances or regulation; (x) all governmental consents or approvals required in connection with the Easements have been applied for or obtained; (y) the Easements are for the purposes described in clauses (i) through (iii) above; and (z) the Easements will not adversely affect the value, utility or useful life of the Property. At the request of Grantor, Beneficiary shall cause Trustee to execute and deliver to Grantor an agreement pursuant to which the lien of this Instrument shall be subordinated to the Easements. 8. PROTECTION OF BENEFICIARY'S SECURITY. If Grantor fails to perform the covenants and agreements contained in this Instrument, or if any action or proceeding is commenced which affects the Property or title thereto or the interest of Beneficiary therein, including, but not limited to, eminent domain, insolvency, code enforcement, or arrangements or proceedings involving a bankrupt or decedent, then, after the running of applicable grace periods, if any, Beneficiary at Beneficiary's option may make such appearances, disburse such sums and take such action as Beneficiary deems necessary, in its sole discretion, to protect Beneficiary's interests, including, but not limited to: (a) disbursement of reasonable attorneys' fees; (b) entry upon the Property to make repairs; and (c) procurement of satisfactory insurance as provided in Paragraph 5 hereof. Any amounts disbursed by Beneficiary pursuant to this Paragraph 8, with interest thereon, shall be added to the Indebtedness of Grantor secured by this Instrument. Unless Grantor and Beneficiary agree to other terms of payment, such amounts shall be immediately due and payable and shall bear interest from the date of disbursement at the rate stated in the Notes unless collection from Grantor of interest at such rate would be contrary to applicable law, in which event such amounts shall bear interest at the highest rate which may be collected from Grantor under applicable law. Grantor hereby covenants and agrees that Beneficiary shall be subrogated to the lien of any mortgage or other lien discharged, in whole or in part, by the Indebtedness secured hereby. Nothing contained in this Paragraph 8 shall require Beneficiary to incur any expense or take any action hereunder. 9. INSPECTION. Beneficiary may make or cause to be made reasonable entries upon and inspections of the Property. 10. BOOKS AND RECORDS. Grantor shall keep and maintain at all times complete and accurate books of account and records adequate to reflect correctly the results of the operation of the Property and copies of all written contracts, leases and other instruments which affect the Property. Such books, records, contracts, leases, subleases and other instruments shall be subject to examination and inspection at any reasonable time by Beneficiary. -8- 11. CONDEMNATION AND EMINENT DOMAIN. All awards made to the present, or any subsequent, owner of the Property, by any governmental or other lawful authority for the taking, by condemnation or eminent domain, of all or any part of the Property (the "AWARDS") are hereby assigned by Grantor to Beneficiary, and shall be held and applied in accordance with the terms and provisions of the Indenture. Grantor shall immediately notify Beneficiary of the actual or threatened commencement of any condemnation or eminent domain proceedings affecting any part of the Property and shall deliver to Beneficiary copies of all papers served in connection with any such proceedings. Grantor shall make, execute and deliver to Beneficiary, at any time upon request, free of any encumbrance, any further assignments and other instruments deemed necessary by Beneficiary for the purpose of assigning the Awards to Beneficiary. After deducting from the Award for such taking all of its expenses incurred in the collection and administration of the Award, including attorneys' fees, unless otherwise permitted by prior written consent of the Beneficiary, the Award shall be applied as provided in the Indenture. 12. GRANTOR AND LIEN NOT RELEASED. From time to time, Beneficiary may, at Beneficiary's option, subject to the terms of the Indenture, without giving notice to or obtaining the consent of Grantor, Grantor's successors, or assigns or of any junior lienholder or guarantors, without liability on Beneficiary's part and notwithstanding Grantor's breach of any covenant or agreement of Grantor in this Instrument, extend the time for payment of the Indebtedness secured by this Instrument or any part thereof, reduce the payments thereon, release one or more persons or entities liable on any of said Indebtedness, accept a renewal note or notes therefor, release from the lien of this Instrument any part of the Property, take or release other or additional security, reconvey any part of the Property, consent to any map or plat of the Property, consent to the granting of any easement, join in any extension or subordination agreement, agree in writing with Grantor to modify the rate of interest or period of amortization of the Notes or either of them, or change the amount of the installments payable thereunder. Any actions taken by Beneficiary pursuant to the terms of this Paragraph 12 shall not affect the obligation of Grantor or Grantor's successors or assigns to pay the Indebtedness secured by this Instrument and to observe the covenants of Grantor contained herein, shall not affect the guaranty of any person, corporation, partnership or other entity for payment of the Indebtedness secured hereby, and shall not affect the lien or priority of lien hereof on the Property. Grantor shall pay Beneficiary a reasonable service charge, together with such title insurance premiums and attorneys' fees as may be incurred at Beneficiary's option for any such action if taken at Grantor's request. 13. FORBEARANCE BY BENEFICIARY NOT A WAIVER. Any forbearance by Beneficiary in exercising any right to remedy hereunder, or otherwise afforded by applicable law, shall not be a waiver of or preclude the exercise of any right or remedy. The acceptance by Beneficiary of payment of any sum secured by this Instrument after the due date of such payment shall not be a waiver of Beneficiary's right to either require prompt payment when due of all other sums to secured or to declare a default for failure to make prompt payment. The procurement of insurance or the payment of taxes or other liens or charges by Beneficiary shall not be a waiver of Beneficiary's right to accelerate the maturity of the Indebtedness secured by this Instrument. Beneficiary's receipt of any Awards, proceeds or damages under Paragraphs 5 and 11 -9- hereof shall not operate to cure or waive Grantor's default in payment of sums secured by this Instrument. 14. ESTOPPEL CERTIFICATE. Grantor shall, within ten days of a written request from Beneficiary, furnish Beneficiary with a written statement, duly acknowledged, setting forth the Indebtedness secured by this Instrument and any right of set-off, counterclaim or other defense which Grantor is aware exists against such sums and the obligations of this Instrument and provide such other information as Beneficiary may reasonably request. 15. UNIFORM COMMERCIAL CODE SECURITY AGREEMENT. In addition to being a deed of trust and assignment of leases and rents, this Instrument is intended to be a security agreement pursuant to the Uniform Commercial Code for any of the items specified herein above as part of the Property which under applicable law, may be subject to a security interest pursuant to the Uniform Commercial Code, and Grantor hereby grants Beneficiary a security interest in said items and a security interest shall hereby attach thereto for the benefit of Beneficiary to further secure the Indebtedness. Grantor shall file this Instrument, or a reproduction thereof, in the real estate records or other appropriate index, as a financing statement for any of the items specified above as part of the Property. Any reproduction of this Instrument or of any other security agreement or financing statement shall be sufficient as a financing statement. In addition, Grantor shall execute and file all financing statements, extensions, renewals and amendments thereof, and reproductions of this Instrument in such form as may be required to perfect and continue a security interest with respect to said items. Grantor shall pay all costs of filing such financing statements and any extensions, renewals, amendments and releases thereof, and shall pay all reasonable costs and expenses of any record searches for financing statements Beneficiary may reasonably require. Without the prior written consent of Beneficiary, Grantor shall not create or suffer to be created pursuant to the Uniform Commercial Code any other security interest in said items, including replacements and additions thereto. If any Default hereunder or Event of Default (as defined in the Indenture) occurs or if Beneficiary declares the Indebtedness secured hereby immediately due and payable in accordance with Paragraph 25 hereof or pursuant to any other provision of this Instrument, the Indenture, or the other Security Documents, Beneficiary shall have the remedies of a secured party under the Uniform Commercial Code and, at Beneficiary's option, may also invoke any remedies provided in this Instrument. In exercising any of said remedies, Beneficiary may proceed against the items of real property and any items of personal property specified above as part of the Property separately or together and in any order whatsoever, without in any way affecting the availability of Beneficiary's remedies under the Uniform Commercial Code or of the remedies provided in Paragraph 25 hereof. 16. LEASES OF THE PROPERTY. Grantor shall comply with and observe Grantor's obligations as landlord under the Leases. Grantor, at Beneficiary's request, shall furnish Beneficiary with executed copies of all leases and guaranties now existing or hereafter made of all or any part of the Property. Grantor may, without the consent of Beneficiary, enter into, modify and/or cancel any of the Leases in the ordinary course of business. Grantor may, from time to time, request Trustee and Beneficiary, not individually, but solely in its capacity as Trustee, to execute a form of subordination agreement, substantially in the form of EXHIBIT 4 attached hereto, provided -10- that together with such request, Grantor shall submit a certificate of one of its officers that the lease which is the subject of the subordination agreement is at market rates, and contains market terms. Provided Grantor satisfies the conditions contained in this paragraph, Trustee and Beneficiary, not individually, but solely in its capacity as Trustee, shall execute said subordination agreement within thirty (30) days after receipt of such request. Grantor does hereby assign to Beneficiary all Leases and all security deposits made by tenants in connection with such leases of the Property. All security deposits shall be held in a separate account if required by law. Grantor does hereby assign to Beneficiary Grantor's interests in all leases of equipment related to the Property. Beneficiary shall have all of the rights and powers possessed by Grantor prior to such assignment. 17. REMEDIES CUMULATIVE. Each remedy provided in this Instrument is distinct and cumulative to all other rights or remedies under this Instrument or afforded by law or equity, and may be exercised concurrently, independently, or successively, in any order whatsoever. No delay or omission of the Beneficiary or Trustee in exercising any right or power arising upon any Default shall impair any such right, power, or remedy of Beneficiary or Trustee, or shall be construed to be a waiver of any Default, or acquiescence therein. 18. NOTICE. Except for any notice required under applicable law to be given in another manner, all notices provided for in this Instrument shall be given and shall be deemed to be given as set forth in the Indenture. 19. SUCCESSORS AND ASSIGNS BOUND; JOINT AND SEVERAL LIABILITY; AGENTS; CAPTIONS. The covenants and agreements herein contained shall bind, and the rights hereunder shall inure to, the respective successors and assigns of Beneficiary and Grantor, subject to the provisions of the Indenture. All covenants and agreements of Grantor are subject to the provisions of the Indenture. All covenants and agreements of Grantor shall be joint and several. In exercising any rights hereunder or taking any actions provided for herein, Beneficiary may act through its employees, agents or independent contractors as authorized by Beneficiary. The captions and headings of the Paragraphs of this Instrument are for convenience only and are not to be used to interpret or define the provisions hereof. 20. GOVERNING LAW; SEVERABILITY. This Instrument shall be governed by the law of the jurisdiction in which the Property is located. In the event that any provision of this Instrument conflicts with applicable law, such conflict shall not affect other provisions of this Instrument which can be given effect without the conflicting provisions, and to this end the provisions of this Instrument are declared to be severable. 21. WAIVER OF STATUTE OF LIMITATIONS RIGHT OF REDEMPTION AND OTHER RIGHTS. To the full extent permitted by law, Grantor hereby waives the right to assert any statute of limitations as a bar to the enforcement of the lien of this Instrument or to any action brought to enforce the Notes or any other obligation secured by this Instrument. To the full extent permitted by law, Grantor agrees that it will not at any time or in any -11- manner whatsoever take any advantage of any stay, exemption or extension law or any so-called "Moratorium Law" now or at any time hereafter in force, nor take any advantage of any law now or hereafter in force providing for the valuation or appraisement of the Property, or any part thereof, prior to any sale thereof to be made pursuant to any provisions herein contained, or to any decree, judgment or order of any court of competent jurisdiction; or claim or exercise any rights under any statute now or hereafter in force to redeem the Property or any part thereof, or relating to the marshalling thereof, on foreclosure sale or other enforcement hereof. To the full extent permitted by law, Grantor hereby expressly waives any and all rights it may have to require that the Property be sold as separate tracts or units in the event of foreclosure. To the full extent permitted by law, Grantor hereby expressly waives any and all rights to redemption and reinstatement under applicable law, on its own behalf, on behalf of all persons claiming or having an interest (direct or indirect) by, through or under Grantor and on behalf of each and every person acquiring any interest in or title to the Property subsequent to the date hereof, it being the intent hereof that any and all such rights of redemption of Grantor and such other persons are and shall be deemed to be hereby waived to the full extent permitted by applicable law. To the full extent permitted by law, Grantor agrees that, by invoking or utilizing any applicable law or laws or otherwise, it will not hinder, delay or impede the exercise of any right, power or remedy herein or otherwise granted or delegated to Beneficiary, but will permit the exercise of every such right, power and remedy as though no such law or laws have been or will have been made or enacted. To the full extent permitted by law, Grantor hereby agrees that no action for the enforcement of the lien or any provision hereof shall be subject to any defense which would not be good and valid in any action at law upon the Notes. 22. WAIVER OF MARSHALLING. Notwithstanding the existence of any other security interests in the Property held by Beneficiary or by any other party, Beneficiary shall have the right to determine the order in which any or all of the Property shall be subjected to the remedies provided herein. Beneficiary shall have the right to determine the order in which any or all portions of the Indebtedness secured hereby are satisfied from the proceeds realized upon the exercise of the remedies provided herein. Grantor, any party who consents to this Instrument, and any party who now or hereafter acquires a security interest in the Property and who has actual or constructive notice hereof, hereby waives any and all right to require the marshalling of assets in connection with the exercise of any of the remedies permitted by applicable law or provided herein. 23. INDENTURE PROVISIONS. Grantor agrees to comply with the covenants and conditions of the Indenture which are hereby incorporated by reference in and made a part of this Instrument. Initial capitalized terms used herein not otherwise defined shall have the meaning ascribed to them in the Indenture. To the extent any provision of this Instrument conflicts or is inconsistent with the provisions of the Indenture, the provisions of the Indenture shall control. 24. ASSIGNMENT OF RENTS; APPOINTMENT OF RECEIVER; BENEFICIARY IN POSSESSION. As part of the consideration for the Indebtedness served by this Instrument, Grantor hereby absolutely and unconditionally assigns and transfers to Beneficiary all the rents, income, profits and revenues of the Property, including those now due, past due, or to become due by virtue of any lease or other agreement for the occupancy or use of all or any part of the Property and including without limitation any room rents, concession fees and other amounts -12- paid for use of all or any part of the Property, regardless of to whom the rents and revenues of the Property are payable. Grantor hereby authorizes Beneficiary or Beneficiary's agents to collect the aforesaid rents and revenues and hereby directs each tenant of the Property to pay such rents to Beneficiary or Beneficiary's agents; provided, however, that prior to written notice given by Beneficiary to Grantor of the breach by Grantor of any covenant or agreement of Grantor, in this Instrument, Grantor may receive all rents, income, profits and revenues of the Property as trustee for the benefit of Beneficiary and Grantor; it being intended by Grantor and Beneficiary that this assignment be additional security for the performance of its obligations under this Instrument. Upon delivery of written notice by Beneficiary to Grantor of a breach by Grantor of any covenant or agreement of Grantor in this Instrument or upon a Default or Event of Default, and without the necessity of Beneficiary entering upon and taking and maintaining full control of the Property in person, by agent or by a court-appointed receiver, Beneficiary shall immediately be entitled to possession of all rents, income, profits and revenues of the Property as specified in this Paragraph 24 as the same become due and payable, including but not limited to rents then due and unpaid, and all such rents shall immediately upon delivery of such notice be held by Grantor as trustee for the benefit of Beneficiary only. Grantor agrees that commencing upon delivery of such written notice of Grantor's breach by Beneficiary to Grantor each tenant of the Property shall make such rents payable to and pay such rents to Beneficiary or Beneficiary's agents on Beneficiary's written demand to each tenant therefor, delivered to each tenant personally, by mail or delivering such demand to each rental unit, without any liability on the part of such tenant to inquire further as to the existence of a default by Grantor. Grantor hereby covenants that Grantor has not executed any prior assignment of said rents, that Grantor has not performed, and will not perform, any acts or has not executed, and will not execute, any instrument which would prevent Beneficiary from exercising its rights under this Paragraph 24, and that at the time of execution of this Instrument there has been no anticipation or prepayment to Grantor of any of the rent of the Property for more than one month prior to the due date of such rent. Grantor covenants that Grantor will not hereafter collect or accept payment of any rents of the Property more than one month prior to the due dates of such rents. Grantor further covenants that Grantor will execute and deliver to Beneficiary such further assignments of rents, income, profits and revenues of the Property as Beneficiary may from time to time request. Upon Grantor's breach of any covenant or agreement of Grantor in this Instrument or upon a Default or Event of Default, Beneficiary may in person, by agent, or by a court-appointed receiver, regardless of the adequacy of Beneficiary's security, enter upon and take and maintain full control of the Property in order to perform all acts necessary and appropriate for the operation and maintenance thereof including, but not limited to, the execution, cancellation or modification of leases, the collection of all rents and revenues of the Property, the making of repairs to the Property and the execution or termination of contracts providing for the management or maintenance of the Property, all of such terms as are deemed best to protect the security of this Instrument. In the event Beneficiary elects to seek the appointment of a receiver for the Property upon Grantor's breach of any covenant or agreement of Grantor in this Instrument, Grantor hereby expressly consents to the appointment of such receiver. Beneficiary or the receiver shall be entitled to receive a reasonable fee for so managing the Property. -13- All rents and revenues collected subsequent to delivery of written notice by Beneficiary to Grantor of a breach by Grantor of any covenant or agreement of Grantor in this Instrument shall be applied first to the costs, if any, of taking control of and managing the Property and collecting the premiums on receiver's bonds, costs of repairs to the Property, premiums on insurance policies, taxes, assessments and other charges on the Property, and the costs of discharging any obligation or liability of Grantor as lessor or landlord of the Property and then to Indebtedness secured by this Instrument. Beneficiary or the receiver shall have access to the books and records used in the operation and maintenance of the Property and shall be liable to account only for those rents actually received. Beneficiary shall not be liable to Grantor, anyone claiming under or through Grantor or anyone having an interest in the Property by reason of anything done or left undone by Beneficiary under this Paragraph 24. If the rents of the Property are not sufficient to meet the costs, if any, of taking control and managing the Property and collecting the rents, any funds expended by Beneficiary for such purposes shall become Indebtedness of Grantor to Beneficiary secured by this Instrument pursuant to Paragraph 8 hereof. Unless Beneficiary and Grantor agree in writing to other terms of payment, such amounts shall be payable upon notice from Beneficiary to Grantor requesting payment thereof and shall bear interest from the date of disbursement at the rate stated in the Notes. Any entering upon and taking and maintaining of control of the Property by Beneficiary or the receiver and any application of rents as provided herein shall not cure or waive any default hereunder or invalidate any other right or remedy of Beneficiary under applicable law or as provided herein. This assignment of rents shall terminate at such time as this Instrument ceases to secure Indebtedness held by Beneficiary. 25. DEFAULTS. The occurrence of one or more of the following events shall constitute a default ("DEFAULT") under this Instrument: (a) Grantor fails to pay any amount payable pursuant to this Instrument when due and payable in accordance with the provisions hereof, and such failure continues for thirty (30) days. (b) A breach by Grantor of any of the obligations, provisions, or covenants of the Indebtedness or this Instrument. (c) A default in or breach of any obligations, provision, or covenant of the Indebtedness secured by this Instrument. (d) If Grantor should become insolvent or apply to a bankruptcy court to be adjudicated a voluntary bankrupt, or should proceedings be taken against Grantor looking to the appointment of a receiver or placing Grantor in involuntary bankruptcy, or should any applications for a reorganization be made. -14- (e) If all or any part of the Property is seized under any work or process of court. (f) Except as provided herein, or in the Indenture, if all or any part of the Property is sold, transferred, mortgaged or otherwise encumbered without the prior, written consent of Beneficiary. (g) Upon destruction or substantial damage to the Improvements on the Property by the fault of Grantor. (h) An Event of Default as defined in the Indenture. Upon a Default, Beneficiary, at its option and without affecting the lien hereby created or the priority of said lien or any other right of Beneficiary hereunder, may declare, without further notice, all Indebtedness immediately due whether or not such Default is thereafter remedied by Grantor, and Beneficiary may immediately proceed to foreclose this Instrument and to exercise any right provided by this Instrument, the Indenture, the Notes, the other Security Documents or otherwise. 26. FORECLOSURE. (a) Upon the occurrence of one or more Defaults or after the occurrence of one or more Defaults, Beneficiary and/or Trustee may institute an action of mortgage foreclosure, or take such other action as the law may allow, at law or in equity, for the enforcement hereof and realization on the Property or any other security which is herein or elsewhere provided for, and proceed thereon to final judgment and execution thereon for the entire principal then outstanding under the Notes at the rate stipulated in the applicable Notes to the date of default and thereafter at the rate stipulated in the event of a default thereunder (the "DEFAULT RATE") together with all other Indebtedness secured by this Instrument, including all sums which may have been advanced by Beneficiary to Grantor after the date of this Instrument, and all sums which may have been advanced by Beneficiary for taxes, water or sewer rents, charges or claims, payment of prior liens, insurance or repairs to the Property, all costs of suit, including, without limitation, the expenses which are described in Paragraph 46 hereof, and interest at the Default Rate on any judgment obtained by Beneficiary from and after the date of any sale of the Property until actual payment of the full amount due Beneficiary and Beneficiary and/or Trustee may sell for cash or upon credit the Property or any part thereof and all estate, claim, demand, right, title and interest of the Grantor therein and rights of redemption thereof, pursuant to power of sale or otherwise, and any and every part thereof, en masse or in parcels, at public venue to the highest bidder for cash in hand at the door or on the steps of the courthouse or court building customarily used for such purposes in the county where the Premises are located, first giving notice of the time and place of sale and description of the property to be sold by advertisement published as is provided by the laws of the State of Missouri then in effect, and upon such sale shall execute and deliver a deed of conveyance of the property sold to the purchaser or purchasers thereof, and in the event of a sale, by foreclosure or otherwise, of less than all of the -15- Property, this Instrument shall continue as a lien on the remaining portion of the Property. At any sale of the Property (by power of sale or otherwise) Beneficiary may bid for and acquire the Property or any part thereof and in lieu of paying cash therefor may make settlement for the purchase price by crediting upon the principal then outstanding under the Notes with interest thereon and other obligations of Grantor secured by this Instrument the net sales price after deducting therefrom the expenses of the sale and the costs of the action and any other sums which beneficiary is authorized to deduct under this Instrument. Upon the request of Beneficiary and to the extent not prohibited by applicable law, Grantor shall execute and file with the clerk of the court a legally sufficient waiver of any statutory waiting period with respect to the execution of a judgment obtained by Beneficiary in connection with any foreclosure proceedings. The obligation of Grantor to so execute and file such waiver shall survive the termination of this Instrument. (b) Upon the occurrence of a Default and the election of the Beneficiary to effect a trustee's sale of the Property in lieu of judicial foreclosure, then the Beneficiary may instruct the Trustee to commence such sale and consummate such sale in the following manner: The Trustee shall deliver to the purchaser at any such trustee's sale its deed, without warranty, which shall convey to the purchaser the interest in the Property which the Grantor has or has the power to convey at the time of the execution of this Instrument, and such as it may have acquired hereafter. The Trustee's deed shall recite the facts showing that the sale was conducted in compliance with all the requirements of law and of this Instrument, which recital shall be prima facie evidence of such compliance and conclusive evidence thereof in favor of bona fide purchasers and encumbrances for value. (c) Beneficiary may at any time or from time to time sell or dispose of any part of the Property constituting personalty at public or private sale at Grantor's or Beneficiary's place of business or otherwise in such order as Beneficiary may elect. If any notice of intended sale or disposition of any of such personal property is required by law, such notice shall be deemed reasonable and proper if mailed at least ten (10) days before such sale or disposition, postage prepaid, by certified mail, return receipt requested, addressed to Grantor at Grantor's most recent address as shown in Beneficiary's records, whether or not actually received by Grantor. (d) Upon the completion of any sale or sales made by the Trustee under or by virtue of this Instrument, the Trustee, or an officer of any court empowered to do so, shall execute and deliver to the accepted purchaser or purchasers a good and sufficient instrument, or good and sufficient instruments, conveying, assigning and transferring all estate, right, title and interest in and to the property and rights sold. The Trustee is hereby irrevocably appointed the true and lawful attorney of the Grantor, in its name and stead, to make all necessary conveyances, assignments, transfers and deliveries of the Property and rights so -16- sold and for that purpose the Trustee may execute all necessary instruments of conveyance, assignment and transfer, and may substitute one or more persons with like power, the Grantor hereby ratifying and confirming all that said attorney or such substitute or substitutes shall lawfully do by virtue hereof. The foregoing appointment is coupled with an interest and may not be revoked as long as the Indebtedness or any portion thereof remains unpaid. Beneficiary shall not exercise its rights under this Paragraph until a Default has occurred. Any such sale or sales made under or by virtue of this Instrument, whether made under the power of sale herein granted or under or by virtue of judicial proceedings or of a judgment or decree of foreclosure and sale, shall operate to divest all the estate, right, title, interest, claim and demand whatsoever, whether at law or in equity, of the Grantor in and to the properties and rights so sold, and shall be a perpetual bar both at law and in equity against the Grantor and against any and all persons claiming or who may claim the same, or any part thereof from, through or under the Grantor. (e) In case of a sale under this Instrument, the said Property, real, personal and mixed may be sold in one part as an entirety or in separate parts and in such order as may be determined by the Beneficiary in its discretion, and the Grantor hereby waives and releases any right to have the Property or any part thereof marshalled upon foreclosure sale or otherwise. (f) In the event that the Grantor has an equity of redemption and the Property is sold pursuant to the power of sale or otherwise under or by virtue of this Instrument, the purchaser may during any redemption period allowed, make such repairs or alterations on said property as may be reasonably necessary for the proper operation, care, preservation, protection and insuring thereof. Any sums so paid together with interest thereon from the time of such expenditure at the Default Rate (if not prohibited by law, otherwise at the highest lawful contract rate) shall be added to and become a part of the amount required to be paid for redemption from such sale. (g) The Trustee may adjourn from time to time any sale by it to be made under or by virtue of this Instrument by announcement at the time and place appointed for such sale or for such adjourned sale or sales; and, except as otherwise provided by any applicable provision of law, the Beneficiary, without further notice or publication, may make such sale at the time and place to which the same shall be so adjourned. 27. SALE IN PARCELS. In the event of a foreclosure of this Instrument or upon any sale under this Instrument pursuant to judicial proceedings or otherwise, the Property may be sold in one parcel and as an entirety or in such parcels, manner or order as permitted by law. 28. RIGHT OF POSSESSION. Upon the occurrence of one or more Default or when the Indebtedness shall become due, whether by acceleration or otherwise, or if Beneficiary has a right to institute foreclosure proceedings, Grantor shall surrender to Beneficiary, forthwith upon demand of Beneficiary, and Beneficiary shall be entitled to be placed in possession of the Property as provided, and Beneficiary, in its discretion and pursuant to court order, may enter upon -17- and take and maintain possession of all or any part of the Property, together with all documents, books, records, papers and accounts of Grantor or the then owner of the Property relating thereto, and may exclude Grantor, such owner, and any agents and servants thereof wholly therefrom and, on behalf of Grantor or such owner, or in its own name as Beneficiary and under the powers herein granted may: (a) hold, operate, manage and control all or any part of the Property and conduct the business, if any, thereof, either personally or by its agents, with full power to use such measures, legal or equitable, as Beneficiary may deem necessary to enforce the payment or security of the rents, issues, deposits, profits and avails of the Property, including, without limitation, actions for recovery of rent, actions in forcible detainer, and actions in distress for rent, all without notice to Grantor; (b) cancel or terminate the Leases for any cause or on any ground that would entitle Grantor to cancel the same; (c) elect to disaffirm the Leases made subsequent to this Instrument without Beneficiary's prior written consent; (d) extend or modify the Leases and make new leases of all or any part of the Property, which extensions, modifications, and new leases may provide for terms to expire, or for options to lessees to extend or review terms to expire, beyond the maturity date of the loan evidenced by the Notes and the issuance of a deed to a purchaser at a foreclosure sale, it being understood and agreed that any such leases, and the options or other such provisions to be contained therein, shall be binding upon Grantor, all persons whose interests in the Property are subject to the lien hereof, and the purchaser at any foreclosure sale, notwithstanding any redemption from sale, reinstatement, discharge of the Indebtedness, satisfaction of any foreclosure decree, or issuance of any certificate of sale or deed to any such purchaser; (e) make all necessary or proper repairs, decoration renewals, replacements, alterations, additions, betterments and improvements in connection with the Property as may seem judicious to Beneficiary, to insure and reinsure the Property and all risks incidental to Beneficiary's possession, operation, and management thereof, and to receive all rents, issues, deposits, profits and avails therefrom; and (f) apply the net income, after allowing a reasonable fee for the collection thereof and for the management of the Property, to the payment of taxes, premiums and other charges applicable to the Property, or in reduction of the Indebtedness in such order and manner as Beneficiary shall select. Without limiting the generality of the foregoing, Beneficiary shall have all power, authority and duties as provided under applicable law. Nothing herein contained shall be construed as constituting -18- Beneficiary a mortgagee in possession in the absence of the actual taking of possession of the Property. 29. RECEIVER. Upon the occurrence of one or more Defaults, Beneficiary may apply for the appointment of a receiver of the rents, issues, and profits of all or any part of the Property, without notice to or demand upon Grantor or any person claiming through or under Grantor, and Beneficiary shall be entitled to the appointment of such receiver as a matter of right, to the extent not prohibited by applicable law, without notice to or demand upon Grantor or any person claiming through or under Grantor and without consideration of the value of the Property as security for the amounts due to Beneficiary or the solvency of any person liable for the payment of such amounts. Grantor specifically waives the right to object to the appointment of a receiver as aforesaid and hereby expressly agrees that such appointment may be made ex parte and without notice to Grantor and as a matter of absolute right to Beneficiary. In order to maintain and preserve the Property and to prevent waste or impairment of its security, Beneficiary may, at its option, advance monies to the receiver and all such sums advanced shall become secured obligations and shall bear interest at the Default Rate. 30. FORECLOSURE SALE. Except to the extent otherwise required by applicable law, the proceeds of any foreclosure sale of the Property shall be distributed and applied in the following order of priority: first, all items which under the terms hereof constitute Indebtedness additional to the principal and interest evidenced by the Notes in such order as Beneficiary shall elect with interest thereon as herein provided including, without limitation, all costs and expenses of such sale, including compensation to Beneficiary, its agents and counsel, and any judicial proceeding wherein the same may be made and all expenses, costs, liabilities and advances made or incurred by Beneficiary (including attorneys' fees and expenses) and to the payment of reasonable charges of the Trustee, an amount as may be agreed upon between the Beneficiary and the Trustee; and second, all principal and interest remaining unpaid on the Notes in such order as Beneficiary shall elect; and lastly, any surplus to Grantor and its successors and assigns, as their rights may appear. 31. POWER OF SALE. Trustee is hereby granted a power of sale and may sell the Property or such part or parts thereof or interest therein as Beneficiary may select pursuant to the applicable provisions of the laws of the state in which the Premises is located, and upon such sale and compliance with the law relating thereto, to convey title to the purchaser. The proceeds of such sale shall be applied in the same manner as proceeds are applied pursuant to Paragraph 3 to the extent permitted by applicable law. 32. INSURANCE DURING FORECLOSURE. All rights and powers of Beneficiary under Paragraphs 2 and 5 hereof, from and after the entry of judgment of foreclosure, shall continue in the Beneficiary as decree creditor until confirmation of sale. In case of an insured loss after foreclosure proceedings have be instituted, the proceeds of any Insurance Policy, if not applied in rebuilding or restoring the Property, as aforesaid, shall be used to pay the amount due in accordance with any decree of foreclosure that may be entered in any such proceeding, and the balance, if any, shall be paid as the court may direct. The foreclosure decree may provide that the -19- mortgagee's clause attached to each of the casualty Insurance Policies may be cancelled and that the decree creditor may cause a new loss clause to be attached to each of said casualty Insurance Policies making the loss thereunder payable to said decree creditors. In the event of foreclosure sale, Beneficiary, without the consent of Grantor, may assign any Insurance Policies to the purchaser at the sale, or take such other steps as Beneficiary may deem advisable to protect the interest of such purchaser. 33. RELEASE. Upon payment of all sums secured by this Instrument or as otherwise provided in the Indenture, Beneficiary shall cancel this Instrument. Grantor shall pay Beneficiary's reasonable costs incurred in discharging this Instrument. 34. SUCCESSORS AND ASSIGNS. (a) Holders of the Notes. This Instrument and each provision hereof shall be binding upon Grantor and its successors and assigns (including, without limitation, each and every record owner from time to time of the Premises or any other person having an interest therein), and shall inure to the benefit of Beneficiary and its successors and assigns. Wherever herein Beneficiary is referred to, such reference shall be deemed to include the Holders from time to time of the Notes; and each such Holder of the Notes shall have all of the rights afforded hereby, and may enforce the provisions hereof, as fully as if Beneficiary had designated such Holder of the Notes herein by name. (b) Covenants Run With Land; Successor Owners. All of the covenants of this Instrument shall run with the Land and be binding on any successor owners of the Land. If the ownership of the Premises or any portion thereof becomes vested in a person other than Grantor, Beneficiary, without notice to Grantor, may deal with such person with reference to this Instrument and the Indebtedness in the same manner as with Grantor without in any way releasing Grantor from its obligations hereunder. Grantor will give immediate written notice to Beneficiary of any conveyance, transfer or change of ownership of the Premises, but nothing in this Paragraph shall vary the effectiveness of the provisions of Paragraphs 16, 19 and 25 hereof or any provision of the Indenture. 35. LIMITATIONS OF GAMING REGULATIONS. The rights and remedies of Beneficiary and Trustee with respect to the Property upon Default are subject to the limitations and restrictions of applicable gaming statutes, rules and regulations. 36. EFFECT OF EXTENSIONS AND AMENDMENTS. If the payment of the Indebtedness, or any part thereof, is extended or varied, or if any part of the security or guarantees therefor are released, all persons now or at any time hereafter liable therefor, or interested in the Property, shall be held to assent to such extension, variation or release, and their liability, and the lien, and all provisions hereof, shall continue in full force and effect; the right of recourse against all such persons being expressly reserved by Beneficiary, notwithstanding any such extension, variation or release. Any person, firm or corporation taking a junior mortgage, or other lien upon the Property or any part thereof or any interest therein, shall take said lien subject to the rights of -20- Beneficiary to amend, modify, extend or release the Indenture, the Notes, this Instrument or any other Security Document, in each case without obtaining the consent of the holder of such junior lien and without the lien of this Instrument losing its priority over the rights of any such junior lien. 37. ENVIRONMENTAL MATTERS. (a) Grantor represents and warrants that it conducts in the ordinary course of business a review of the effect of existing Environmental Laws and existing Environmental Claims on the Premises and as a result thereof Grantor has reasonably concluded that, except as specifically disclosed in that certain Phase One Environmental Assessment dated March 2, 1994, prepared by McKinney Associates and D.G. Purdy & Associates, Inc. (the "Environmental Report"), such Environmental Laws and Environmental Claims could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. (b) Except as disclosed in the Environmental Report, (i) neither Grantor nor, to the best of Grantor's knowledge, any other Person has ever caused or permitted any Hazardous Material to be released, or disposed of on, under or at the Premises, in any amount or manner which would require remedial action under Environmental Laws, (ii) the Premises has never been used by Grantor, or to the best of Grantor's knowledge, by any other Person as a dump site for any Hazardous Material or a permanent storage site for any Hazardous Material, and (iii) neither Grantor nor any of its predecessors has received written notice from any Governmental Authority or any third party that it may be responsible for the release of any Hazardous Material at any location. (c) Except in compliance with Environmental Laws, and except as disclosed in the Environmental Report, neither the Grantor nor, to the best of Grantor's knowledge, any other Person has ever caused or permitted any Hazardous Material to be treated or stored on, under or at the Premises. (d) Grantor shall conduct its operations and keep and maintain its property in compliance with all Environmental Laws and obtain and comply with and maintain any and all licenses, approvals, notifications, registrations or permits required by applicable Environmental Laws, except such non-compliance as could not result in liability to Grantor (individually or together with the Borrower or any Subsidiary) in excess of $100,000 or otherwise have a Material Adverse Effect. Without limiting the foregoing, (i) Grantor shall comply in a reasonable and cost-effective manner with any valid Federal or state judicial or administrative order requiring the performance at the Premises of activities in response to the release or threatened release of a Hazardous Material except for the period of time that Grantor is diligently in good faith contesting such order; (ii) notify the Beneficiary within five days of the Grantor's receipt for any written claim, demand, proceeding, action, or notice of liability by any Person arising out of or relating to the release or threatened release of a Hazardous Material; and (iii) notify the Beneficiary within five days of any release or threat of release of Hazardous Material reported to any Governmental Authority occurring at the Premises. Furthermore, Grantor shall not commence disposal of any Hazardous Material -21- into or onto the Premises except in compliance with Environmental Laws on or allow any Lien imposed pursuant to any Environmental Law relating to Hazardous Material or the disposal thereof to remain on such real property. For purposes of this Instrument, "disposal" means the intentional placement of Hazardous Materials with no intention of retrieval. (e) Grantor shall protect, indemnify, save, defend, and hold harmless Beneficiary, its officers, directors, stockholders, partners, employees, successors and assigns (collectively, the "INDEMNIFIED ENVIRONMENTAL PARTIES") from and against any and all liability, loss, damage, actions, causes of action, costs or expenses whatsoever (including, without limitation, reasonable attorneys' fees and expenses) and any and all claims, suits and judgments which any Indemnified Environmental Party may suffer, as a result of or with respect to: (i) any Environmental Claim relating to or arising from the Property; (ii) violation of any Environmental Law in connection with the Property; (iii) any release, spill, or the presence of any Hazardous Materials affecting the Property; and (iv) the presence at, in, on or under, or the release, escape, seepage, leakage, discharge or migration at or from, the Property of any Hazardous Materials, whether or not such condition was known or unknown to Grantor provided that in each case, Grantor may be relieved of its obligation under this subsection if it demonstrates, by a preponderance of the evidence, that any of the matters referred to in clauses (i) through (iv) above did not occur (but need not have been discovered) prior to (x) the foreclosure of this Instrument with respect to the Property, (y) the delivery by Grantor to Beneficiary of a deed-in-lieu of foreclosure with respect to such property or (z) Beneficiary's taking possession and control of the Property after the occurrence and during the continuance of a Default hereunder or an Event of Default under the Indenture. Promptly after Beneficiary receives notice of the commencement of any Environmental Claim in respect of which indemnification is sought hereunder, Beneficiary shall notify Grantor in writing thereof; but the omission so to notify Grantor shall not relieve Grantor from any obligation hereunder provided that Grantor has not been materially prejudiced by such failure by Beneficiary to notify Grantor. If any such action or other proceeding shall be brought against Beneficiary, upon written notice (given reasonably promptly following Beneficiary's notice to Grantor of such action or proceeding), Grantor shall be entitled to assume the defense thereof, at Grantor's expense, with counsel reasonably acceptable to Beneficiary; provided, however, Beneficiary may, at its own expense, retain separate counsel to participate in such defense, but such participation shall not be deemed to give Beneficiary a right to control such defense, which right Grantor expressly retains. Notwithstanding the foregoing, Beneficiary shall have the right to employ separate counsel at Grantor's expense if, in the reasonable opinion of legal counsel, conflict or potential conflict exists between Beneficiary and Grantor that would make such separate representation advisable; provided, however, in no event shall Grantor be required to pay reasonable fees and expenses actually incurred under this indemnity for more than one separate firm of attorneys for Beneficiary in any one legal action. For the purposes of this Instrument the following terms shall have the meanings asset forth herein: -22- "ENVIRONMENTAL CLAIMS" shall mean all claims, however asserted, by any Governmental Authority or other Person alleging potential liability or responsibility for violation of any Environmental Law, or for release or injury to the environment; "ENVIRONMENTAL LAWS" shall mean all federal, state or local laws, statutes, rules, regulations, ordinances and codes, together with all administrative orders, licenses, authorizations and permits of, and agreements with, any Governmental Authorities, in each case relating to environmental, health and safety matters; "GOVERNMENTAL AUTHORITY" shall mean any nation or government, any state or other political subdivision thereof, any central bank (or similar monetary or regulatory authority) thereof, any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government, and any corporation or other entity owned or controlled, through stock or capital ownership or otherwise, by any of the foregoing; "HAZARDOUS MATERIAL" shall mean (a) any "hazardous substance" as now defined pursuant to the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. Sec. 9601(14) as amended by the Superfund Amendments and Reauthorization Act, and including the judicial interpretation thereof; (b) any "pollutant or contaminant" as defined in 42 U.S.C. Sec. 9601(33); (c) any material now defined as "hazardous waste" pursuant to 40 C.F.R. part 261; (d) any petroleum, including crude oil and any fraction thereof; (e) natural gas, natural gas liquids, liquefied natural gas, or synthetic gas useable for fuel; (f) any "hazardous chemicals" as defined pursuant to 29 C.F.R. Part 1910; (g) any asbestos, polychlorinated biphenyl (PCB), or isomer or dioxin; and (h) any other substance, regardless of physical form, that is regulated under any Environmental Law; "MATERIAL ADVERSE EFFECT" shall mean (a) a material adverse change in, or a material adverse effect upon, the business, assets, operations, properties or condition (financial or otherwise) of Grantor or Grantor and any Affiliate, taken as a whole or any material adverse change in, or material adverse effect upon, the obligations under the Indenture, this Mortgage or the Security Documents of any such Person or Persons which could reasonably be expected to result in any of the foregoing; (b) a material impairment of the ability of Grantor or any Affiliate to perform under any provision of the Indenture or any Security Document; or (c) a material adverse effect upon the legality, validity, binding effect or enforceability against Grantor or an Affiliate of the Indenture or any Security Document; and, "PERSON" shall mean any individual, limited liability company, corporation, partnership, joint venture, association, joint stock company, trust, unincorporated organization or government or other agency or political subdivision thereof. 38. FUTURE ADVANCES. At all times, regardless of whether any loan proceeds have been disbursed, this Instrument secures as part of the Indebtedness the payment of all loan commissions, service charges, liquidated damages, attorneys' fees, expenses and advances -23- due to or incurred by Beneficiary in connection with the Indebtedness, all in accordance with the Indenture, the Notes, this Instrument, and the other Security Documents. 39. OPTION TO SUBORDINATE. At the option of Beneficiary, this Instrument shall become subject and subordinate, in whole or in part (but not with respect to priority of entitlement to insurance proceeds or any award in condemnation) to any and all leases of all or any part of the Premises upon the execution by Beneficiary and recording thereof, at any time hereafter, in the Office of the Recorder of Deeds for the county wherein the Premises are situated or other appropriate location, of a unilateral declaration to that effect. 40. SEPARABILITY. If all or any portion of any provision of this Instrument, the Indenture, the Notes or the Security Documents shall be held to be invalid, illegal or unenforceable in any respect, then such invalidity, illegality or unenforceability shall not affect any other provision hereof or thereof, and such provision shall be limited and construed in such jurisdiction as if such invalid, illegal or unenforceable provision or portion thereof were not contained herein or therein. 41. ANTI-FORFEITURE. Grantor hereby expressly represents and warrants to Beneficiary that there has not been committed by Grantor or, to the best of Grantor's knowledge, any other Person involved with the Property any act or omission affording the federal government or any state or local government the right of forfeiture as against the Property or any part thereof or any monies paid in performance of its obligations under the Indenture, the Notes, this Instrument or under any of the other Security Documents, and Grantor hereby covenants and agrees not to commit, permit or suffer to exist any act or omission affording such right of forfeiture. In furtherance thereof, Grantor agrees to indemnify, defend with counsel reasonably acceptable to Beneficiary (at Grantor's sole cost) and hold Beneficiary harmless from and against any claim or other cost (including, without limitation, reasonable attorneys' fees and costs incurred by Beneficiary), damage, liability or injury by reason of the breach of the covenants and agreements or the warranties and representations set forth in the preceding sentence. Without limiting the generality of the foregoing, the filing of formal charges or the commencement of proceedings against Grantor, the Beneficiary or all or any part of the Property under any federal or state law in which forfeiture of the Premises or any part thereof or of any monies paid in performance of Grantor's obligations under the Indenture, the Notes, or the Security Documents is a potential result, at the election of Beneficiary, shall constitute a Default hereunder. 42. JURY TRIAL WAIVER. Grantor waives, to the extent permitted by law, trial by jury in any actions brought by either Grantor or Beneficiary in connection with the Indebtedness. 43. NO MERGER. It is the desire and intention of the parties hereto that this Instrument and the lien hereof shall not merge in fee simple title to the Premises, unless a contrary intent is ever manifested by Beneficiary as evidenced by an express statement to that effect in an appropriate document duly recorded. Therefore, it is hereby understood and agreed that should Beneficiary acquire any additional or other interests in or to the Premises or the ownership thereof, -24- then this Instrument and the lien hereof shall not merge in the fee simple title, toward the end that this Instrument may be foreclosed as if owned by a stranger to the fee simple title. 44. INDEMNITY. Grantor agrees to indemnify and hold harmless Beneficiary from and against any and all losses, liabilities, suits, obligations, fines, damages, judgments, penalties, claims, charges, costs and expenses (including attorneys' fees and disbursements) which may be imposed on, incurred or paid by or assessed against Beneficiary by reason or on account of, or in connection with, (i) any Default or Event of Default by Grantor hereunder or under the Indenture or the other Security Documents, (ii) Beneficiary's exercise of any of its rights and remedies, or the performance of any of its duties, hereunder or under the Indenture or the other Security Documents to which Grantor is a party, (iii) the construction, reconstruction or alteration of the Property or any part thereof, (iv) any negligence or willful misconduct of Grantor, any lessee of the Property, or any of their respective agents, contractors, subcontractors, servants, employees, licensees, guests or invitees, (v) any accident, injury, death or damage to any Person or property occurring in, on or about the Property or any street, drive, sidewalk, curb or passageway adjacent thereto, or (vi) any other transaction arising out of or in any way connected with the Property (or any part thereof) or the Indenture or any of the Security Documents, except for the willful misconduct or gross negligence of the indemnified Person. The above indemnity shall not apply to liabilities incurred by Beneficiary as a result of Beneficiary's acts or omissions in connection with the Property (or parts thereof) within the possession and control of Beneficiary arising during such period of time as such Property is actually within the possession and control of Beneficiary, except those liabilities arising either directly or indirectly as a result of any Default or Event of Default by Grantor under this Instrument or the Indenture or any act or omission of Grantor, any lessees or sublessees of the Property or any of their respective agents, contractors, subcontractors, servants, employees, licensees, guests or invitees. Any amount payable to Beneficiary under this Paragraph shall be deemed a demand obligation, shall be part of the Indebtedness, shall bear interest at the Default Rate and shall be secured by this Instrument. Grantor's obligations under this Paragraph shall not be affected by the absence or unavailability of insurance covering the same or by the failure or refusal by any insurance carrier to perform any obligation on its part under any such policy of covering insurance and shall survive the repayment or cancellation of the Indebtedness and the release, discharge, satisfaction or cancellation of this Instrument. If any claim, action or proceeding is made or brought against Beneficiary which is subject to the indemnity set forth in this Paragraph, Grantor shall resist or defend against the same, if necessary in the name of Beneficiary by attorneys for Grantor's insurance carrier (if the same is covered by insurance) or otherwise by attorneys approved by Beneficiary. Notwithstanding the foregoing, Beneficiary, in its reasonable discretion, may engage its own attorneys to resist or defend, or assist therein, and Grantor shall pay, or, on demand, shall reimburse Beneficiary for the payment of, the reasonable fees and disbursements of said attorneys. 45. CONTEMPORANEOUS MORTGAGES. THIS INSTRUMENT IS MADE CONTEMPORANEOUSLY WITH ANOTHER MORTGAGE OF EVEN DATE HEREWITH GIVEN BY GRANTOR'S AFFILIATE TO OR FOR THE BENEFIT OF BENEFICIARY COVERING PROPERTY LOCATED IN THE STATE OF LOUISIANA (the "CONTEMPORANEOUS MORTGAGE"). The Contemporaneous Mortgage secures the Indebtedness and the -25- performance of the other covenants and agreements of Grantor set forth in the Indenture and the Security Documents. Upon the occurrence of a Default herein, or upon the occurrence of an Event of Default as defined in the Indenture, Trustee and/or Beneficiary may proceed under this Instrument and/or the Contemporaneous Mortgage against any of such property and/or the Property in one or more parcels and in such manner and order as Trustee and/or Beneficiary shall elect. Grantor hereby irrevocably waives and releases, to the extent permitted by law, and whether now or hereafter in force, any right to have the Property and/or the property covered by the Contemporaneous Mortgage marshalled upon any foreclosure of this Instrument or the Contemporaneous Mortgage. 46. EXPENSES OF BENEFICIARY. All sums (including reasonable attorneys' fees, costs, expenses and disbursements, to the extent permitted by law) paid by Beneficiary or Trustee in connection with any litigation to prosecute or defend the rights and obligations created by this Instrument, with interest thereon from the time, shall, on demand, be immediately due from Grantor to Beneficiary or Trustee, as the case may be, and shall be added to and included in the Indebtedness and shall be secured by this Instrument. 47. PARTIAL FORECLOSURE. Beneficiary may from time to time, if permitted by law, take action to recover any sums, whether interest, principal or any other sums, required to be paid under this Instrument or the Notes, the Indenture or any other Security Documents as the same become due, without prejudice to the right of the Beneficiary thereafter to bring an action of foreclosure, or any other action, for a default or defaults by Grantor existing when such earlier action was commenced. Beneficiary may also foreclose this Instrument for any sums due under this Instrument or the Notes, the Indenture or any other Security Documents and the lien of this Instrument shall continue to secure the balance of the Indebtedness. 48. LEASE OF PREMISES TO GRANTOR. The Trustee hereby lets the Premises to Grantor until a Default or a release of this Instrument upon the following terms and conditions, to-wit: Grantor and each and every Person claiming or possessing the Premises, or any part thereof, by, through or under them shall pay rent therefor during such term at the rate of one cent (1 cent) per month, payable monthly upon demand, and shall surrender immediate peaceable possession of the Premises, and any and every part thereof, sold pursuant to Paragraphs 26, 27, 28, 29, 30, 31 or 46, to the purchaser thereof, under such sale, without notice or demand therefor. 49. TITLE ACTS BY TRUSTEE. At any time upon written request of the Beneficiary, payment of its fees and presentation of this Instrument and said Note for endorsement (in case of full reconveyance, for cancellation and retention), without affecting the liability of any Person for the payment of the Indebtedness, the Trustee may (a) consent to the making of any map or plat of the Premises, (b) join in granting any easement or creating any restriction thereon, (c) join in any subordination or other agreement affecting this Instrument or the lien or charge thereof, (d) reconvey, without warranty, all or any part of the Premises. The grantee in any reconveyance may be described as the "person or persons legally entitled thereto," and the recitals therein of any matters or facts shall be conclusive proof of the truthfulness thereof. The Grantor agrees to pay a reasonable Trustee's fee for full or partial reconveyance, together with a recording fee if the Trustee, at its option, elects to record said reconveyance. -26- 50. SUCCESSOR TRUSTEE. At the option of the Beneficiary, with or without any reason, a successor or substitute trustee may be appointed by the Beneficiary without any formality other than a designation in writing of a successor or substitute trustee, who shall thereupon become vested with and succeed to all the powers and duties given to the Trustee herein named, the same as if the successor or substitute trustee had been named the original trustee herein; and such right to appoint a successor or substitute trustee shall exist as often and whenever the Beneficiary desires. THIS MISSOURI DEED OF TRUST SECURES ADVANCES AND FUTURE OBLIGATIONS AT ANY TIME OUTSTANDING AND SHALL BE GOVERNED BY SECTION 443.055 R-S. MO. AS AMENDED. THE TOTAL PRINCIPAL AMOUNT OF THE PRESENT AND FUTURE ADVANCES AND OBLIGATIONS AT ANY TIME OUTSTANDING WHICH MAY BE SECURED HEREBY IS $235,000,00. [Signature Page Follows] -27- IN WITNESS WHEREOF, Grantor has executed this Instrument as of the day and year first set forth above. ARGOSY GAMING COMPANY a Delaware corporation By:___________________________ Name:__________________________ Title:__________________________ STATE OF ILLINOIS ) ) ss: COUNTY OF COOK ) On this ___ day of___________, 1996, before me, the undersigned, a Notary Public in and for the State of Illinois, personally appeared _____________________ to me personally known, who being by me duly sworn, did say that he is ___________________ of said corporation executing the within and foregoing instrument; that no seal has been procured by the said corporation that said instrument was signed and sealed on behalf of said corporation by authority of its Board of Directors; and that the said _____________________ acknowledged the execution of said instrument to be the voluntary act and deed of said corporation, by it and by them voluntarily executed. _______________________________ Notary Public This Instrument was prepared by: Reed W. Ramsay Winston & Strawn 35 West Wacker Drive Chicago, Illinois 60601 -28- EXHIBIT 1 LEGAL DESCRIPTION [See attached] -29- EXHIBIT 2 DESCRIPTION OF COLLATERAL All of the following property now or at any time hereafter owned by Grantor or in which the Grantor may now or at any time hereafter have any interest or rights, together with all of Grantor's right, title and interest therein: A. All fixtures and personal property now or hereafter owned by, Grantor and attached to or contained in or used or useful in connection with the Premises or any of the improvements now or hereafter located thereon, including without limitation any and all air conditioners, antennae, appliances, apparatus, awnings, basins, bathtubs, bidets, boilers, bookcases, cabinets, carpets, coolers, curtains, dehumidifiers, disposals, doors, drapes, dryers, ducts, dynamos, elevators, engines, equipment, escalators, fans, fittings, floor coverings, furnaces, furnishings, furniture, hardware, heaters, humidifiers, incinerators, kitchen equipment and utensils, lighting, machinery, motors, ovens, pipes, plumbing, pumps, radiators, ranges, recreational facilities, refrigerators, screens, security systems, shades, shelving, sinks, sprinklers, stokers, stoves, toilets, ventilators, wall coverings, washers, windows, window coverings, wiring, all renewals or replacements thereof or articles in substitution therefor, and all property owned by Grantor and now or hereafter used for similar purposes on the Premises; B. Articles or parts now or hereafter affixed to the property described in Paragraph A of this Exhibit or used in connection with such property, any and all replacements for such property, and all other property of a similar type or used for such purposes now or hereafter in or on the Premises or any of the improvements now or hereafter located thereon; C. Grantor's right, title and interest in all personal property used or to be used in connection with the operation of the Premises or the conduct of business thereon, including without limitation business equipment and inventories located on the Premises or elsewhere, together with files, books of account, and other records, wherever located; D. Grantor's right, title, and interest in and to any and all contracts now or hereafter relating to the Premises executed by any architects, engineers, or contractors, including all amendments, supplements, and revisions thereof, together with all Grantor's rights and remedies thereunder and the benefit of all covenants and warranties thereon and also together with all drawings, designs, estimates, layouts, surveys, plats, plans, specifications and test results prepared by any architect, engineer, or contractor, including any amendments, supplements, and revisions thereof and the right to use and enjoy the same, as well as all building permits, environmental permits, approvals and licenses, other governmental or administrative permits, licenses, agreements and rights relating to construction on the Premises; E. Grantor's right, title and interest in and to any and all contracts now or hereafter relating to the operation of the Premises or the conduct of business thereon, including without limitation all -30- management and other service contracts, the books and records, and the right to appropriate and use any and all trade names used or to be used in connection with such business; F. Grantor's right, title and interest in the rents, issues, deposits (including security deposits and utility deposits), and profits in connection with all leases, contracts, and other agreements made or agreed to by any Person or entity (including without limitation Grantor and Beneficiary under the powers granted by the Deed of Trust, Assignment of Leases and Rents and Security Agreement and the Security Documents made between Grantor and Beneficiary and the other loan documents) with any Person or entity pertaining to all or any part of the Premises, whether such agreements have been heretofore or are hereafter made; G. Grantor's right, title and interest in all sale contracts, earnest money deposits, proceeds of sale contracts, accounts receivable, and general intangibles relating to the Premises (but not including the Grantor's gaming license to the extent Missouri law (as of the date hereof) prohibits the Debtor from granting a lien thereon (the Beneficiary hereby acknowledges that Missouri law does not presently allow any transfers of gaming licenses issued under the Missouri Riverboat Gambling Act or any security interest to attach to such license; however, in the event that Missouri law should ever be amended to allow transfers of gaming licenses issued under the Missouri Riverboat Gambling Act, any proceeds a transfer of such license shall be included)); H. All rights in and proceeds from all fire and hazard, loss-of-income, and other non-liability insurance policies now or hereafter covering improvements now or hereafter located on the Premises or described in the Deed of Trust, Assignment of Leases and Rents and Security Agreement, the use or occupancy thereof, or the business conducted thereon; I. All Grantor's rights in and to awards or payments, including interest thereon, that may be made with respect to the Premises, whether from the right of the exercise of eminent domain (including any transfer made in lieu of the exercise of said right) or for any other injury to or decreased in volume of the Premises; and J. All Grantor's rights in and to proceeds from the sale, transfer, or pledge of any or all of the foregoing property. -31- EXHIBIT 3 SPECIFIED PARCEL -32- EXHIBIT 4 FORM OF NONDISTURBANCE AGREEMENT -33- EX-4.12 13 EXHIBIT 4.12 EXHIBIT 4.12 LOUISIANA Recording Requested by, and after recording return to: Skadden, Arps, Slate, Meagher & Flom 333 West Wacker Drive Chicago, Illinois 60606 Attn: David S. McCarthy, Esq. Prepared by: Reed W. Ramsay, Esq. Winston & Strawn 35 West Wacker Drive Chicago, Illinois 60601 FORM OF MORTGAGE OF JAZZ ENTERPRISES, INC. AND CATFISH QUEEN PARTNERSHIP IN COMMENDAM TO SECURE PRESENT AND FUTURE INDEBTEDNESS, ASSIGNMENT OF LEASES AND RENTS AND SECURITY AGREEMENT ("MORTGAGE") STATE OF ILLINOIS COUNTY OF COOK On this 5th day of June, 1996, before the undersigned Notary Public, and in the presence of the respective undersigned competent witnesses, personally came and appeared collectively as MORTGAGOR: Jazz Enterprises, Inc., a Louisiana corporation, and Catfish Queen Partnership in Commendam, a Louisiana partnership (collectively, "MORTGAGOR"), each owned either directly or indirectly by Argosy Gaming Company, whose Tax Identification Numbers the MORTGAGOR declared to be 72-1214771 and 72-1274791, respectively. MORTGAGOR further declared that: (A) ARGOSY GAMING COMPANY, a Delaware corporation ("BORROWER"), whose chief executive office is located at 219 Piasa Street, Alton, Illinois 62002-6232, has entered into that certain Indenture dated as of June 5, 1996 (as said Indenture may be amended, restated, supplemented or otherwise modified from time to time, the "Indenture") by and among: BORROWER, certain other parties named therein, and FIRST NATIONAL BANK OF COMMERCE, a national banking association, as trustee under the Indenture, whose chief executive office is located at 210 Baronne Street, New Orleans, Louisiana 70112, and whose tax identification number is 72-0269760. (B) Pursuant to the Indenture, among other things, BORROWER has issued its 13 1/4% First Mortgage Notes due 2004 (the "ORIGINAL NOTES"). (C) Pursuant to a Registration Rights Agreement between BORROWER and certain other parties, BORROWER will file a registration statement with respect to an offer to exchange the Original Notes for a new series of 13 1/4% First Mortgage Notes due 2004 registered under the Securities Act of 1933, as amended, with terms substantially identical to those of the Original Notes (the "SERIES B Notes" and together with the Original Notes, the "NOTES"). (D) MORTGAGOR, being wholly owned by BORROWER, shall benefit from the issuance of the Notes. (E) Execution of this Mortgage by MORTGAGOR is a condition precedent to the closing on the Indenture. (F) The term MORTGAGEE as used in this Mortgage shall mean and include FIRST NATIONAL BANK OF COMMERCE, as trustee under the Indenture, and its successors and assigns, as said Indenture may be modified and/or amended. (G) Capitalized terms used herein which are not defined herein, but which are defined in the Indenture, shall have the meanings as defined in the Indenture. MORTGAGOR further declared that: 1. MORTGAGOR desires, pursuant to Article 3298 of the Louisiana Civil Code and also pursuant to other provisions of law, to secure all Indebtedness (as hereinafter defined) MORTGAGOR and/or BORROWER currently have or may incur in the future to MORTGAGEE. This Mortgage secures future advances and future obligations incurred under the Indenture. The maximum principal amount of indebtedness at any time outstanding secured by this Mortgage is limited to $235,000,000, and notwithstanding any contrary provisions, if any, the maximum total indebtedness (including principal, interest, costs, fees and damages) secured by this Mortgage is limited to $235,000,000. 2. The term "Indebtedness," as used in this Mortgage, shall include, but not be limited to, any and all indebtedness and/or obligations of MORTGAGOR and/or of BORROWER to MORTGAGEE, whether such indebtedness and/or obligations arose in the past, exits presently, or may occur at any time in the future, whether direct or contingent, primary or secondary, whether represented by notes, drafts, bills, letters of credit, overdrafts, invoices, guarantees, suretyship agreements, pledges, security agreements, assignments, endorsements, financing statements, agreements, documents, instruments or otherwise; and whether incurred for advances made for the purposes of constructing erecting, repairing, improving, altering works or property in -2- connection with the Louisiana Private Works Act, R.S. 9:4801, et seq., or otherwise, and in particular the term "Indebtedness" includes all Notes (as defined in the Indenture) with interest thereon and all other indebtedness and/or obligations due and/or to be due hereunder and under the Indenture. The term "Indebtedness" also includes any and all Indebtedness and/or obligations arising by renewals, modifications, amendments or extensions of any indebtedness, together with all interest, costs of collection, and attorneys' fees. 3. This Mortgage is granted for the purpose of being used as security by MORTGAGOR for any Indebtedness due MORTGAGEE. This Mortgage will remain in effect until canceled under a written mortgage cancellation instrument signed by MORTGAGEE, or its successors or assigns. MORTGAGOR may request such a written mortgage cancellation instrument from MORTGAGEE only after all of the Indebtedness and obligations have been fully paid and satisfied and there is no obligation or commitment on MORTGAGEE's part to fund or permit any additional Indebtedness to be incurred or to exist. MORTGAGOR may request such a mortgage cancellation instrument by writing to MORTGAGEE at its address set forth hereinabove, or at such other address as MORTGAGEE may furnish to MORTGAGOR in the future. MORTGAGEE may delay providing such a mortgage cancellation instrument for up to sixty (60) days following its receipt of such written notice of request. 4. This Mortgage need not, but may, be signed by MORTGAGEE whose consent and acceptance is hereby acknowledged by MORTGAGOR. 5. In order to secure the full and final payment of the Indebtedness, including principal, interest, costs, and attorneys' fees, up to the maximum amount set forth in Paragraph 1 above, MORTGAGOR now specially mortgages to MORTGAGEE, and grants to MORTGAGEE a security interest in, the following property, together with all buildings, improvements, appurtenances, servitudes, rights of way, privileges, prescriptions and advantages (all collectively referred to as the "Property"), located in the State of Louisiana, to wit: I All of that immovable property described on Exhibit 1 attached hereto and made a part hereof. II All improvements, structures, buildings, fixtures, additions, enlargements, extensions, modifications or repairs now or hereafter located on or in the said immovable property described on Exhibit 1 referred to hereinabove or thereunto belonging or appertaining, which may from time to time be owned by MORTGAGOR, or which may be used or usable in connection with any present or future use or operations of said MORTGAGOR and the Property's business, or any part thereof, whether now owned or hereafter acquired by MORTGAGOR or others, and together with all replacements thereof, substitutions therefor and additions thereto, and with respect to all of the foregoing and hereinafter described property, this Mortgage shall also constitute a security agreement under Chapter 9 of Title 10 of the Louisiana Revised Statutes of 1950, as amended (hereinafter sometimes called the "Commercial Laws - Secured Transactions"), and pursuant thereto a security -3- interest is granted in said property. In order to secure the repayment of any and all Indebtedness and the performance of any and all obligations described or otherwise undertaken herein and under the Indenture and the other Security Documents, all of which are intended to be secured under this Mortgage and under the security interests herein granted under the said Commercial Laws - Secured Transactions, the said security interests shall apply to all of the proceeds (cash and non-cash) thereof, including the proceeds of any and all insurance policies in connection therewith, MORTGAGEE to have all of the rights and remedies of a secured party under the said Commercial Laws - Secured Transactions. Said security interests shall also apply to, and there is hereby granted a security interest in, any and all judgments, awards of damages (including but not limited to severance and consequential damages), payments, proceeds, settlements or other compensation heretofore or hereafter made including interest thereon, and the right to receive the same as a result of, in connection with, or in lieu of (a) any taking of the said property or any part thereof under power of expropriation or eminent domain, either temporarily or permanently; (b) any change or alteration of the grade of any street; and (c) any other injury or damage to, or decrease in value of, the said property or any part thereof. The security interest granted herein also covers all stored or extracted oil, gas and other minerals of every kind and character, and/or products of oil, gas and other minerals, wherever located, stored or maintained, and also covers all of the proceeds (cash and noncash) and accessions of the property described in this paragraph and in the above and also the following paragraphs of this Mortgage. Provided, however, the Property shall not include Gaming Licenses (as defined in the Indenture) or any other governmental approval or payment, to the extent that under the terms and conditions of such approval or under applicable law, the same cannot be subjected to a Lien in favor of MORTGAGEE. The maximum principal amount of Indebtedness at any time outstanding secured by this Mortgage is limited to $235,000,000, and notwithstanding any contrary provisions, if any, the maximum total indebtedness (including principal, interest, costs, fees and damages) secured by this Mortgage is limited to $235,000,000. 6. As further security for the full and final payment of the Indebtedness up to the maximum amount set forth above, including principal, interest, costs and attorneys' fees, MORTGAGOR now grants a security interest in and collaterally transfers, pledges and assigns to MORTGAGEE: (A) All current and future rents, profits, revenues, royalties, bonuses, rights and benefits under any and all oil, gas, geothermal or mineral leases concerning the above described immovable property or any part of it, with the right to receive and receipt for these items and to apply those items to the Indebtedness secured by this Mortgage. MORTGAGEE may demand, sue for and recover any such payments but shall not be required to do so. -4- (B) All other current and future rents, issues and profit of the above-described immovable property or any part of it whether under leases or tenancies now existing or created in the future. At its option, upon default of any Indebtedness secured by this Mortgage, MORTGAGEE is authorized to collect rentals and apply them to MORTGAGOR'S Indebtedness after deduction of collection charges, and any lessee or future lessee is directed to pay to MORTGAGEE, upon demand by MORTGAGEE, all rentals become due under any lease or rental contract on all or any portion of the said immovable property. By accepting this transfer, assignment, and pledge, however, MORTGAGEE does not assume any obligations of MORTGAGOR under any such lease or rental contract. (C) All leasehold estates, right, title and interest of MORTGAGOR in and to all ground leases, leases, subleases covering the Property or any portion thereof now or hereafter existing or entered into (herein "Leases") and all right, title and interest of MORTGAGOR thereunder, including without limitation all guaranties thereof, all cash, or security deposits, advance rentals, and all deposits or payments of a similar nature. MORTGAGOR shall comply with and observe MORTGAGOR'S obligations as landlord or tenant, as applicable, under the Leases. MORTGAGOR, at MORTGAGEE's request, shall furnish MORTGAGEE with executed copies of all Leases and guaranties now existing or hereafter made of all or any part of the Property. MORTGAGOR may, without the consent of MORTGAGEE, enter into, modify and/or cancel any of the Leases in the ordinary course of business. MORTGAGOR may, from time to time, request MORTGAGEE, not individually, but solely in its capacity as Trustee, to execute a form of subordination agreement, substantially in the form of Exhibit 4 attached hereto, provided that together with such request, MORTGAGOR shall submit a certificate of one of its officers that the lease which is the subject of the subordination agreement is at market rates, and contains market terms. Provided MORTGAGOR satisfies the conditions contained in this paragraph, MORTGAGEE, not individually, but solely in its capacity as Trustee, shall execute said subordination agreement within thirty (30) days after receipt of such request. (D) MORTGAGOR does hereby collaterally assign to MORTGAGEE all Leases and all security deposits made by tenants in connection with such Leases of the Property. All security deposits shall be held in a separate account if required by law. MORTGAGOR does hereby collaterally assign to MORTGAGEE MORTGAGOR'S interests in all leases of equipment related to the Property. MORTGAGEE shall have all of the rights and powers possessed by MORTGAGOR prior to such assignment. (E) All of the property described on Exhibit 2 hereto. All of the property in paragraphs 5 and 6 shall hereinafter be referred to as the "Property". -5- 7. If any Indebtedness secured by this Mortgage is not paid punctually at its maturity and according to its tenor, then at the option of MORTGAGEE the Property or any portion(s) thereof may be seized and sold under executory and/or any other process issued by any court of competent jurisdiction, with or without appraisement, to the highest bidder, for cash. 8. MORTGAGOR expressly confesses judgment for purposes of executory process in favor of MORTGAGEE for the full amount of the Indebtedness secured hereby, all in conformity with R.S. 9:3590. Time being of the essence, MORTGAGOR further expressly waives demand, putting in default, citation and all notices and delays, including the three-day notice provided by Article 2639 of the Louisiana Code of Civil Procedure. MORTGAGOR further expressly consents to the use of executory process to enforce this Mortgage, and consents to the immediate seizure and sale of the Property with or without appraisal. 9. (a) The Property shall remain mortgaged and subject to the security interests granted hereinabove until the cancellation of this Mortgage by written instrument. Except as otherwise provided in the Indenture, the Property shall not be sold, alienated, or encumbered to the prejudice of MORTGAGEE without MORTGAGEE'S prior written consent. MORTGAGOR agrees that, unless there has been prior written approval obtained from MORTGAGEE, should any of the Property be encumbered, mortgaged, sold or transferred, either with or without the assumption of the Indebtedness and this Mortgage, such sale, transfer, encumbrance, or mortgage shall constitute a breach of this Mortgage. Such an event, at the option of MORTGAGEE, shall constitute a default in and at MORTGAGEE'S option shall automatically make payable the Indebtedness secured by this Mortgage, without any demand or putting in default. In such an event it shall be lawful for MORTGAGEE to proceed with enforcement of this Mortgage by executory process, ordinary process, or otherwise. Notwithstanding the foregoing, MORTGAGOR shall have the right, without the consent of MORTGAGEE, to enter into easements or servitudes for ingress, egress, utilities and the like which benefit the Property. If at any time MORTGAGOR desires that MORTGAGEE release the lien of this Mortgage from the parcel described in Exhibit 3 attached hereto (the "Specified Parcel"), which constitutes part of the Property owned by MORTGAGOR, MORTGAGOR shall notify MORTGAGEE in writing (a "RELEASE NOTICE") not less than fifteen (15) days prior to the date of the desired release. MORTGAGOR shall provide MORTGAGEE with a legal description of the Specified Parcel and evidence of proper subdivision thereof if required by governmental authority, separate tax identification if required by governmental authority, (or, that proper application therefore has been made) prior to the desired release. MORTGAGEE agrees to execute and deliver to Mortgagor, within fifteen (15) days after receipt of the Release Notice, an appropriate release document upon payment by MORTGAGOR to MORTGAGEE of a release price of One Dollar ($1.00). Notwithstanding anything to the contrary contained in the foregoing, upon the occurrence and during the continuance of a Default, no release of the Specified Parcel shall be permitted. (b) Provided MORTGAGOR delivers to MORTGAGEE the certification hereinafter described, MORTGAGOR shall have the right, without the consent of MORTGAGEE, to grant, reserve or create easements or servitudes on, over, across, through and under portions of the Property reasonably necessary for the purposes of (i) ingress to and egress from the Specified Parcel, -6- (ii) utilities, including, but not limited to sewer, water, gas, electric and telephone, and (iii) parking, in connection with the development of the Specified Parcel (the easements contained in (i), (ii) and (iii) are collectively referred to as the "Easements"). Prior to any grant, reservation, dedication or creation of any Easements, MORTGAGOR shall deliver to MORTGAGEE a written certification stating that: (w) the Easements will not cause the Property or any portion thereof to fail to comply in any material respect with the terms of this Instrument and any applicable law, ordinance or regulation; (x) all governmental consents or approvals required in connection with the Easements have been applied for or obtained; (y) the Easements are for the purposes described in clauses (i) through (iii) above; and (z) the Easements will not adversely affect the value, utility or useful life of the Property. At the request of MORTGAGOR, MORTGAGEE shall execute and deliver to MORTGAGOR an agreement pursuant to which the lien of this Mortgage shall be subordinated to the Easements. 10. MORTGAGOR shall not abandon the Property. 11. At all reasonable times MORTGAGEE shall have access to and the right to inspect the Property. 12. MORTGAGOR shall observe and comply with all lawful rules and regulations of legally constituted authorities relating to the Property. 13. MORTGAGOR will insure the Property against such perils and hazards, and in such amounts and with such limits, as MORTGAGEE may require from time to time, and in any event, will continuously maintain the following described policies of insurance (the "INSURANCE POLICIES"): (A) Casualty insurance against loss and damage by all risks of physical loss or damage, including fire, windstorm, flood, earthquake and other risks covered by the so-called extended coverage endorsement or all risk insurance in amounts not less than the eighty percent (80%) of the full insurable replacement value of all improvements, fixtures and equipment from time to time on the Property and bearing a replacement cost agreed amount endorsement; (B) Comprehensive public and product liability insurance against death, bodily injury and property damage in an amount not less than One Million Dollars ($1,000,000.00); (C) Rental or business interruption insurance in amounts sufficient to pay, for a period of up to one (1) year, all amounts required to be paid by MORTGAGOR pursuant to the Notes and this Mortgage (or as otherwise approved by MORTGAGEE); (D) If the Federal Insurance Administration (FIA) has designated the Property to be in a special flood hazard area and has designated the community in which the Property are located eligible for sale of subsidized insurance, first and second layer flood insurance when and as available; and -7- (E) The types and amounts of coverage as are customarily maintained by owners or operators of like properties in similar corresponding geographic areas. All insurance policies and renewals thereof shall be in a form acceptable to MORTGAGEE and shall include a standard mortgage clause in favor of and in form acceptable to MORTGAGEE. MORTGAGEE shall be listed as a mortgagee, loss payee and additional insured of all such policies as its interests may appear. MORTGAGEE shall have the right to hold the policies, and MORTGAGOR shall promptly furnish to MORTGAGEE all renewal notices and all receipts of paid premiums. At least thirty days prior to the expiration date of a policy, MORTGAGOR shall deliver to MORTGAGEE a renewal policy in form satisfactory to MORTGAGEE. In the event of any Event of Loss with respect to the Property, MORTGAGOR shall give immediate written notice to the insurance carrier and to MORTGAGEE. MORTGAGOR hereby authorizes and empowers MORTGAGEE as attorney-in-fact for MORTGAGOR to make proof of loss, to adjust and compromise any claim under the insurance policies, to appear in and prosecute any action arising from such insurance policies, to collect and receive insurance proceeds, and to deduct therefrom MORTGAGEE's expenses actually incurred in the collection of such proceeds; PROVIDED, HOWEVER, nothing contained in this Paragraph 13 shall require MORTGAGEE to incur any expense or take any action hereunder. In the event of such Event of Loss, the Net Cash Proceeds shall be disbursed as provided in the Indenture. If the Net Cash Proceeds are held by MORTGAGEE to reimburse MORTGAGOR for the cost of restoration and repair of the Property, MORTGAGOR shall commence and shall continue to restore and repair the Property to the equivalent of its original condition. If the cost of such restoration shall exceed the sum of One Million Dollars ($1,000,000) or if the restoration to be done may materially impair the structural integrity of a material portion of the buildings on the Property, disbursement of said proceeds shall be conditioned on MORTGAGEE's receipt of plans and specifications of an architect, contractor's cost estimates, architect's certificates, waivers of lien, sworn statements of mechanics and materialmen and such other evidence of costs, percentage completion of construction, application of payments, and satisfaction of liens and such other conditions and requirements as MORTGAGOR may require. If the Net Cash Proceeds are applied to the payment of the Indebtedness secured by this Mortgage, any such application of proceeds to principal shall not extend or postpone the due dates of the installments payable under the Indenture or change the amounts of such installments. Notwithstanding the foregoing, if the Property is sold pursuant to the terms and provisions of this Mortgage or if MORTGAGEE acquires title to the Property, MORTGAGEE shall have all of the right, title and interest of MORTGAGOR in and to any insurance policies and unearned premiums thereon and in and to the proceeds resulting from any damage to the Property prior to such sale or acquisition. Wherever a provision is made in this Mortgage for insurance policies to bear mortgage clauses or other loss payable clauses or endorsements in favor of MORTGAGEE, or to confer authority upon MORTGAGEE to settle or participate in the settlement of losses under policies of insurance or to hold and disburse or otherwise control use of insurance proceeds, from and after the seizure of the Property and/or the entry of judgement of foreclosure, all such rights and powers of MORTGAGEE shall continue in MORTGAGEE as judgment creditor or MORTGAGEE until confirmation of sale. -8- 14. MORTGAGOR shall pay all water and sewer rates, rents, taxes (not being diligently contested by MORTGAGOR in a timely manner), assessments, premiums, and Other Impositions (as defined in Paragraph 15 hereof) attributable to the Property. Except as otherwise permitted under the Indenture, MORTGAGOR shall immediately discharge any lien upon the Property, and MORTGAGOR shall pay when due or bond-over the claims of all persons supplying labor or materials to or in connection with the Property. Without MORTGAGEE'S prior written permission, MORTGAGOR shall not allow or permit or by any act or failure to act, acquiesce or allow to be created any lien, encumbrance, or other interest in the Property to be placed, created or perfected against the Property, except for the "Permitted Liens" as defined in the Indenture, and any other Liens permitted thereunder. 15. Upon default in payment of any of the following described items, or upon the occurrence of any other Event of Default as defined in the Indenture, MORTGAGEE shall have the right, at its option, to require MORTGAGOR to pay to MORTGAGEE, every month, until the Indebtedness is paid in full, a sum (herein "FUNDS") equal to one-twelfth of (a) the yearly water and sewer rates and assessments, all taxes, liens, impositions, public charges and all general, special ordinary charges and assessments which may be levied on the Property; (b) the yearly ground rents, if any; and (c) the yearly premium installments for fire and other hazard insurance, general liability, rent loss insurance and such other insurance covering the Property as MORTGAGEE may require pursuant to Paragraph 13 hereof, all as reasonably estimated initially and from time to time by MORTGAGEE on the basis of assessments and bills and reasonable estimates thereof. Any waiver by MORTGAGEE of a requirement that MORTGAGOR pay such Funds may be revoked by MORTGAGEE, in MORTGAGEE's sole discretion, at any time upon notice in writing to MORTGAGOR. MORTGAGEE may require MORTGAGOR to pay to MORTGAGEE, in advance, such other Funds for other taxes, charges, premiums, assessments and impositions in connection with MORTGAGOR or the Property with MORTGAGEE shall reasonably deem necessary to protect MORTGAGEE's interests (herein "OTHER IMPOSITIONS"). Unless otherwise provided by applicable law, MORTGAGEE, at MORTGAGEE's option, may require Funds for Other Impositions to be paid by MORTGAGOR in a lump sum or in periodic installments. MORTGAGEE shall apply the Funds to pay said rates, rents, taxes, assessments, insurance premiums and Other Impositions so long as MORTGAGOR is not in breach of any covenant or agreement of MORTGAGOR in this Mortgage or the Indenture. MORTGAGEE shall make no charge for so holding and applying the Funds, analyzing said account or for verifying and compiling said assessments and bills, unless MORTGAGEE pays MORTGAGOR interest, earnings or profits on the Funds and applicable law permits MORTGAGEE to make such a charge. Unless such agreement is made or applicable law requires interest, earnings or profits on the Funds to be paid, MORTGAGEE shall not be required to pay MORTGAGOR any interest, earnings or profits on the Funds. MORTGAGEE shall give to MORTGAGOR, without charge, an annual accounting of the Funds in MORTGAGEE'S normal format showing credits and debits to the Funds and the purpose for which each debit to other Funds was made. The Funds are pledged and a security interest granted therein to MORTGAGEE as additional security for the indebtedness secured by this Mortgage and shall be subject to the right of set off. -9- If the amount of the Funds held by MORTGAGEE at the time of the annual accounting thereof shall exceed the amount deemed necessary by MORTGAGEE to provide for the payment of water and sewer rates, taxes, assessments, insurance premiums, rents and Other Impositions, as they fall due, such excess may be credited to MORTGAGOR on the next monthly installment or installments of Funds due or may be applied to the outstanding balance of the Indebtedness secured hereby, within the sole discretion of MORTGAGEE. If at any time the amount of the Funds held by MORTGAGEE shall be less than the amount deemed necessary by MORTGAGEE to pay water and sewer rates, taxes, assessments, insurance premiums, rents and Other Impositions, as they fall due, MORTGAGOR shall pay to MORTGAGEE any amount necessary to make up the deficiency immediately after notice from MORTGAGEE to MORTGAGOR requesting payment thereof. Upon MORTGAGOR'S breach of any covenant or agreement of MORTGAGOR in this Mortgage or upon the occurrence of a Default or an Event of Default under the Indenture, MORTGAGEE may apply, in any amount and in any order as MORTGAGEE shall determine in MORTGAGEE'S sole discretion, any Funds held by MORTGAGEE at the time of application (a) to pay rates, rents, taxes, assessments, insurance premiums and Other Impositions which are now or will hereafter become due or (b) pay interest or principal on the Indebtedness evidenced by the Notes or as a credit against any Indebtedness secured by this Mortgage. Upon payment in full of the Indebtedness secured by this Mortgage or release of this Mortgage as provided for in the Indenture, MORTGAGEE shall promptly refund to MORTGAGOR any Funds held by MORTGAGEE. 16. MORTGAGOR (a) shall not commit waste or permit impairment or deterioration of the Property; (b) shall not abandon the Property; (c) shall restore or repair promptly and in a good and workmanlike manner all or any part of the Property to the equivalent of its original condition, or such other conditions as MORTGAGEE may approve in writing, in the event of any damage, injury or loss thereto, whether or not insurance proceeds are available to cover in whole or in part the cost of such restoration or repair unless the improvements constituting the Property are totally destroyed, insurance has been maintained thereon as required by this Mortgage and MORTGAGEE applies the proceeds of said insurance to payment of the Indebtedness secured by this Mortgage; (d) shall keep the Property, including Improvements, fixtures, equipment, machinery and appliances thereon in good repair and shall replace fixtures, equipment, machinery and appliances on the Property when necessary to keep such items in good repair; (e) shall comply with all law, ordinances, regulations, zoning ordinances and requirements of any governmental body applicable to the Property; and (f) shall give notice in writing to MORTGAGEE, appear in and defend any action or proceeding purporting to affect the Property, the security of this Mortgage or the rights or powers of MORTGAGEE. Neither MORTGAGOR nor any tenant or other person shall remove, demolish or alter any improvement now existing or hereafter erected on the Property or any fixture (other than trade fixtures), equipment, machinery or appliance in or on the Property except when incident to the replacement of fixtures, equipment, machinery and appliances with items of like kind. -10- 17. Unless required by applicable law or unless MORTGAGEE has otherwise agreed in writing, MORTGAGOR shall not allow changes in the use for which all or any part of the Property was intended at the time this Mortgage was executed. MORTGAGOR shall not initiate or acquiesce to a change in the zoning classification of the Property without MORTGAGEE'S prior written consent 18. MORTGAGEE may make or cause to be made reasonable entries upon and inspections of the Property. 19. MORTGAGOR shall keep and maintain at all times complete and accurate books of account and records adequate to reflect correctly the results of the operations of the Property and copies of all written contracts, leases and other instruments which affect the Property. Such books, records, contracts, leases, subleases and other instruments shall be subject to examination and inspection at any reasonable time by MORTGAGEE. 20. If MORTGAGOR fails to perform the covenants and agreements contained in this Mortgage, or if any action or proceeding is commenced which affects the Property or title thereto or the interest of MORTGAGEE therein, including, but not limited to, eminent domain, insolvency, code enforcement, or arrangements or proceedings involving a bankrupt or decedent, then, after the running of applicable grace periods, if any, MORTGAGEE at MORTGAGEE's option may make such appearances, disburse such sums and take such action as MORTGAGEE deems necessary, in its sole discretion, to protect MORTGAGEE's interests, including, but not limited to: (a) disbursement of reasonable attorneys' fees; (b) entry upon the Property to make repairs; and (c) procurement of satisfactory insurance as provided in Paragraph 13 hereof. Any amounts disbursed by MORTGAGEE pursuant to this Paragraph 20, with interest thereon, shall be added to the Indebtedness of MORTGAGOR secured by this Mortgage. Unless MORTGAGOR and MORTGAGEE agree to other terms of payment, such amounts shall be immediately due and payable and shall bear interest from the date of disbursement at the rate stated in the Notes unless collection from MORTGAGOR of interest at such rate would be contrary to applicable law, in which event such amounts shall bear interest at the highest rate which may be collected from MORTGAGOR under applicable law. MORTGAGOR hereby covenants and agrees that MORTGAGEE shall be subrogated to the lien of any mortgage or other lien discharged, in whole or in part, by the Indebtedness secured hereby. Nothing contained in this Paragraph 20 shall require MORTGAGEE to incur any expense or take any action hereunder. 21. Any one of the following shall constitute a default in the Indebtedness secured by this Mortgage and a default under this Mortgage, and shall, at MORTGAGEE's option, automatically accelerate all such Indebtedness and make it payable immediately without any demand or putting in default: -11- (A) MORTGAGOR fails to pay any amount payable pursuant to this Mortgage when due and payable in accordance with the provisions hereof, and such failure continues for thirty (30) days. (B) A breach by MORTGAGOR of any of the obligations, provisions, or covenants of the Indebtedness or this Mortgage. (C) A default in or breach of any obligations, provision, or covenant of the Indebtedness secured by this Mortgage. (D) If MORTGAGOR should become insolvent or apply to a bankruptcy court to be adjudicated a voluntary bankrupt, or should proceedings be taken against MORTGAGOR looking to the appointment of a receiver or placing MORTGAGOR in involuntary bankruptcy, or should any applications for a reorganization be made. (E) If all or any part of the Property is seized under any work or process of court. (F) Except as provided herein, or in the Indenture, if all or any part of the Property is sold, transferred, mortgaged or otherwise encumbered without the prior, written consent of MORTGAGEE. (G) Upon destruction or substantial damage to the Improvements on the Property by the fault of MORTGAGOR. (H) An Event of Default as defined in the Indenture. 22. Upon any default whether MORTGAGEE accelerates the maturity of the Indebtedness secured by this Mortgage, or whether MORTGAGEE institutes foreclosure proceedings, MORTGAGEE at its option may have a receiver appointed by the court to take possession of the Property to manage or operate it and conserve the value thereof, and to collect its rents, issues and profits. The receiver may also take possession of and for these purposes use any and all personal property contained on the Property and used by MORTGAGOR in the occupancy, use, rental or leasing of all or any part of the Property. The right to enter and take possession of the Property and use personal property, to manage, operate and preserve the Property, and to collect the rents, issues, and profits, shall be in addition to all other rights or remedies of MORTGAGEE. After paying costs of collection and any other expenses incurred, the proceeds shall be applied to the payment of the Indebtedness secured by this Mortgage in any order that MORTGAGEE shall elect. MORTGAGEE shall not be liable to account to MORTGAGOR for any of these actions other than to account for any rents or other revenues from the operation of the Property actually received by MORTGAGEE. MORTGAGEE shall have the option, at its discretion, of appointing itself or its agent as keeper of the Property pursuant to the provisions of R.S. 9:5136, et seq. The keeper appointed pursuant to these provisions shall have all the powers, duties, and compensation provided for in R.S. 9:5138, and shall not be required to provide any bond otherwise than as required by law in such proceedings, pursuant to R.S. 9:5139. Such keeper shall be entitled to reimbursement for all reasonable out of pocket expenses and for a reasonable fee for its services. -12- 23. (a) MORTGAGOR warrants that it will sign and record all necessary documents or instruments and take all necessary actions to interrupt prescription on the Indebtedness and to reinscribe this Mortgage. Failure of MORTGAGOR to do so shall constitute a default under the Indebtedness and this Mortgage. Nothing shall require MORTGAGEE to reinscribe this Mortgage, and the failure of MORTGAGEE to reinscribe it shall not be grounds for any cause of action, either by MORTGAGOR or by any assignee (including future holders of any Indebtedness) of MORTGAGEE. (b) Without limiting any of the provisions of this Mortgage, MORTGAGOR expressly grants unto MORTGAGEE, as a Secured Party, a security interest in all of the Property described in this Mortgage (including both that now existing and that hereafter arising) to the full extent that the said Property may be subject to the said Commercial Laws - Secured Transactions. MORTGAGOR warrants that it shall execute and file with the offices of the Secretary of State of the State of Louisiana, and/or any appropriate filing office in any other jurisdiction, federal or state, all financing statements or other statements or instruments as required in order to perfect the security interests granted hereby or to continue the effectiveness of the same. 24. From time to time, MORTGAGEE may, at MORTGAGEE's option, without giving notice to or obtaining the consent of MORTGAGOR, MORTGAGOR'S successors, or assigns or of any junior lienholder or guarantors, without liability on MORTGAGEE's part and notwithstanding MORTGAGOR'S breach of any covenant or agreement of MORTGAGOR in this Mortgage, extend the time for payment of the Indebtedness secured by this Mortgage or any part thereof, reduce the payments thereon, release one or more persons or entities liable on any of said Indebtedness, accept a renewal note or notes therefor, release from the lien of this Mortgage any part of the Property, take or release other or additional security, reconvey any part of the Property, consent to any map or plat of the Property, consent to the granting of any easement, join in any extension or subordination agreement, agree in writing with MORTGAGOR to modify the rate of interest or period of amortization of the Notes or either of them, or change the amount of the installments payable thereunder. Any actions taken by MORTGAGEE pursuant to the terms of this Paragraph 24 shall not affect the obligation of MORTGAGOR or MORTGAGOR'S successors or assigns to pay the Indebtedness secured by this Mortgage and to observe the covenants of MORTGAGOR contained herein, shall not affect the guaranty of any person, corporation, partnership or other entity for payment of the Indebtedness secured hereby, and shall not affect the lien or priority of lien hereof on the Property. MORTGAGOR shall pay MORTGAGEE a reasonable service charge, together with such title insurance premiums and attorneys' fees as may be incurred at MORTGAGEE's option for any such action if taken at MORTGAGOR'S request. 25. No delay by MORTGAGEE in enforcing any rights or remedies, whether provided or created under the Indebtedness, this Mortgage, or by law, shall be a waiver of that right or remedy or preclude MORTGAGEE from exercising the right or remedy at any time, during the continuance of MORTGAGOR'S default or otherwise. -13- 26. MORTGAGEE acknowledges and agrees to the requirement of the Riverboat Gaming Enforcement Division, Office of State Police, Department of Public Safety and Corrections, State of Louisiana (the "Division") and/or its successor, that, within five (5) days of the commencement of the exercise of any remedy(ies) in favor of MORTGAGEE pursuant hereto, MORTGAGEE shall notify the Division or its successor, in writing, of the date, nature and scope of the exercise of such remedy(ies) and further acknowledges that the exercise of such remedy(ies) and any transfer or proposed transfer of any ownership interest or economic interest resulting therefrom or related thereto shall require compliance with any applicable provisions of Title 4, Section 528 of the Louisiana Revised Statutes and all regulations promulgated pursuant thereto, and/or Title 27, Section 1 ET. SEQ. of the Louisiana Revised Statutes and any regulations promulgated pursuant thereto. 27. All awards made to the present, or any subsequent, owner of the Property, by any governmental or other lawful authority for the taking, by condemnation or eminent domain, of all or any part of the Property (the "Awards") are hereby assigned by, and a security interest therein granted by, MORTGAGOR to MORTGAGEE, and shall be held and applied in accordance with the terms and provisions of the Indenture. MORTGAGOR shall immediately notify MORTGAGEE of the actual or threatened commencement of any condemnation or eminent domain proceedings affecting any part of the Property and shall deliver to MORTGAGEE copies of all papers served in connection with any such proceedings. MORTGAGOR shall make, execute and deliver to MORTGAGEE at any time upon request, free of any encumbrance, any further assignments and other instruments deemed necessary by MORTGAGEE for the purpose of assigning the Awards to MORTGAGEE. After deducting from the Award all of its expenses incurred in the collection and administration of the Award, including attorneys' fees, unless otherwise permitted by prior written consent of MORTGAGEE, the Award shall be applied as a mandatory prepayment against the Indebtedness as provided in the Indenture. 28. THIS MORTGAGE IS MADE CONTEMPORANEOUSLY WITH A DEED OF TRUST OF EVEN DATE HEREWITH GIVEN BY BORROWER TO OR FOR THE BENEFIT OF MORTGAGEE COVERING PROPERTY LOCATED IN THE STATE OF MISSOURI (the "Contemporaneous Mortgage"). The Contemporaneous Mortgage secures the Indebtedness and the performance of the other covenants and agreements of Borrower set forth in the Indenture and the Security Documents. Upon the occurrence of a default herein, or upon the occurrence of an Event of Default as defined in the Indenture, MORTGAGEE may proceed under this Mortgage and/or the Contemporaneous Mortgage against any of such property and/or the Property in one or more parcels and in such manner and order as MORTGAGEE shall elect. MORTGAGOR hereby irrevocably waives and releases, to the extent permitted by law, and whether now or hereafter in force, any right to have the Property and/or the property covered by the Contemporaneous Mortgage marshalled upon any foreclosure of this Mortgage or the Contemporaneous Mortgage. 29. All the agreements and stipulations herein contained and all the obligations assumed in this Mortgage shall inure to the benefit of and be binding upon the heirs, successors and assigns (including future holder of any Indebtedness secured under this Mortgage) of the respective parties. All rights granted in this Mortgage to MORTGAGEE shall inure to the benefit of, and may be enforced and executed by, all future holders of any Indebtedness secured by this Mortgage. All future holders of any Indebtedness acquired under this Mortgage shall be entitled to all of the rights and benefits granted to MORTGAGEE in this Mortgage with respect to any such Indebtedness acquired by such future holder and any subsequently arising Indebtedness of MORTGAGOR and/or Borrower to such future holder. All parties signing this Mortgage have declared themselves to be of full legal capacity. -14- 30. At any time, without notice to or consent by that MORTGAGOR, and without either affecting the liability of any other person, partnership, corporation or entity not expressly released in writing or affecting the rights of MORTGAGEE to any security not expressly released in writing, MORTGAGEE may: (A) Release any person, corporation, or entity for all or any part of any Indebtedness secured by this Mortgage. (B) Extend, modify or alter the time or terms of payment of all or any part of any Indebtedness secured by this Mortgage. (C) Accept additional security. (D) Release, subordinate, or modify any consensual or nonconsensual security device (including, but not limited to, any form of mortgage, future advance mortgage, mortgage to secure present and future Indebtedness, construction mortgage, collateral mortgage, chattel mortgage, collateral chattel mortgage, lien, privileges pledge, security agreement or assignment) on any property, immovable or movable, corporeal or incorporeal (including, but not limited to, the Property that is described in this Mortgage). 31. As used in this Mortgage, the term "shall" is mandatory, not discretionary, the term "may" is discretionary, not mandatory. 32. The parties to this Mortgage dispense with any certificate of mortgage and agree to hold me, Notary, harmless for the nonproduction thereof. 33. MORTGAGOR declared that with respect to the Property hereby mortgaged, it does expressly waive and renounce in favor of MORTGAGEE any and all homestead exemptions and other exemptions from seizure and/or sale or claims thereto, whether existing or arising under or by virtue of the Constitution and laws of the State of Louisiana or otherwise. 34. MORTGAGOR waives, to the extent permitted by law, trial by jury in any actions brought by either MORTGAGOR or MORTGAGEE in connection with the Indebtedness. 35. All sums (including reasonable attorneys' fees, costs, expenses and disbursements, to the extent permitted by law) paid by MORTGAGEE in connection with any litigation to prosecute or defend the rights and obligations created by this Mortgage, with interest thereon from the time, shall, on demand, be immediately due from MORTGAGOR to MORTGAGEE, and shall be added to and included in the Indebtedness and shall be secured by this Mortgage. -15- 36. Wherever the word "MORTGAGEE" or the word "holder" occurs in this Mortgage, it shall be construed as singular or plural, as the case may be and shall mean and include MORTGAGEE individually and/or, as applicable, as trustee for each of the Holders under the Indenture. 37. (A) MORTGAGOR represents and warrants that it conducts in the ordinary course of business a review of the effect of existing Environmental Laws and existing Environmental Claims on the Property and as a result thereof MORTGAGOR has reasonably concluded that, except as specifically disclosed in that certain Environmental Report dated June of 1993 prepared by Walk, Haydel & Associates, Inc. (the "Environmental Report"), such Environmental Laws and Environmental Claims could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. (B) Except as disclosed in the Environmental Report, (i) neither MORTGAGOR nor, to the best of MORTGAGOR'S knowledge, any other Person has ever caused or permitted any Hazardous Material to be released, or disposed of on, under or at the Property, in any amount or manner which would require remedial action under Environmental Laws, (ii) the Property has never been used by MORTGAGOR, or to the best of MORTGAGOR'S knowledge, by any other Person as a dump site for any Hazardous Material or a permanent storage site for any Hazardous Material, and (iii) neither MORTGAGOR nor any of its predecessors has received written notice from any Governmental Authority or any third party that it may be responsible for the release of any Hazardous Material at any location. (C) Except in compliance with Environmental Laws, and except as disclosed in the Environmental Report, neither MORTGAGOR nor, to the best of MORTGAGOR'S knowledge, any other Person has ever caused or permitted any Hazardous Material to be treated or stored on, under or at the Property. (D) MORTGAGOR shall conduct its operations and keep and maintain its property in compliance with all Environmental Laws and obtain and comply with and maintain any and all licenses, approvals, notifications, registrations or permits required by applicable Environmental Laws, except such non-compliance as could not result in liability to MORTGAGOR (individually or together with the Borrower or any Subsidiary) in excess of $100,000 or otherwise have a Material Adverse Effect. Without limiting the foregoing, (i) MORTGAGOR shall comply in a reasonable and cost-effective manner with any valid Federal or state judicial or administrative order requiring the performance at the Property of activities in response to the release or threatened release of a Hazardous Material except for the period of time that MORTGAGOR is diligently in good faith contesting such order; (ii) notify MORTGAGEE within five days of MORTGAGOR'S receipt for any written claim, demand, proceeding, action, or notice of liability by any Person arising out of or relating to the release or threatened release of a Hazardous Material; and (iii) notify MORTGAGEE within five days of any release or threat of release of Hazardous Material reported to any Governmental Authority occurring at the Property. Furthermore, MORTGAGOR shall not commence disposal of any Hazardous Material into or onto the Property except in compliance with Environmental Laws on or allow any Lien imposed pursuant to any Environmental Law relating to Hazardous Material or the disposal thereof to remain on such real property. For purposes of this Mortgage, "disposal" means the intentional placement of Hazardous Materials with no intention of retrieval. -16- (E) MORTGAGOR shall protect, indemnify, save, defend, and hold harmless MORTGAGEE, its officers, directors, stockholders, partners, employees, successors and assigns (collectively, the "INDEMNIFIED ENVIRONMENTAL PARTIES") from and against any and all liability, loss, damage, actions, causes of action, costs or expenses whatsoever (including, without limitation, reasonable attorneys' fees and expenses) and any and all claims, suits and judgments which any Indemnified Environmental Party may suffer, as a result of or with respect to: (i) any Environmental Claim relating to or arising from the Property; (ii) violation of any Environmental Law in connection with the Property; (iii) any release, spill, or the presence of any Hazardous Materials affecting the Property; and (iv) the presence at, in, on or under, or the release, escape, seepage, leakage, discharge or migration at or from, the Property of any Hazardous Materials, whether or not such condition was known or unknown to MORTGAGOR provided that in each case, MORTGAGOR may be relieved of its obligation under this subsection if it demonstrates, by a preponderance of the evidence, that any of the matters referred to in clauses (i) through (iv) above did not occur (but need not have been discovered) prior to (x) the foreclosure of this Mortgage with respect to the Property, (y) the delivery by MORTGAGOR to MORTGAGEE of a deed-in-lieu of foreclosure with respect to such property or (z) MORTGAGEE's taking possession and control of the Property after the occurrence and during the continuance of a Default hereunder or an Event of Default under the Indenture. Promptly after MORTGAGEE receives notice of the commencement of any Environmental Claim in respect of which indemnification is sought hereunder, MORTGAGEE shall notify MORTGAGOR in writing thereof; but the omission so to notify MORTGAGOR shall not relieve MORTGAGOR from any obligation hereunder provided that MORTGAGOR has not been materially prejudiced by such failure by MORTGAGEE to notify MORTGAGOR. If any such action or other proceeding shall be brought against MORTGAGEE, upon written notice (given reasonably promptly following MORTGAGEE's notice to MORTGAGOR of such action or proceeding), MORTGAGOR shall be entitled to assume the defense thereof, at MORTGAGOR'S expense, with counsel reasonably acceptable to MORTGAGEE; provided, however, MORTGAGEE may, at its own expense, retain separate counsel to participate in such defense, but such participation shall not be deemed to give MORTGAGEE a right to control such defense, which right MORTGAGOR expressly retains. Notwithstanding the foregoing, MORTGAGEE shall have the right to employ separate counsel at MORTGAGOR'S expense if, in the reasonable opinion of legal counsel, conflict or potential conflict exists between MORTGAGEE and MORTGAGOR that would make such separate representation advisable; provided, however, in no event shall MORTGAGOR be required to pay reasonable fees and expenses actually incurred under this indemnity for more than one separate firm of attorneys for MORTGAGEE in any one legal action. For the purposes of this Mortgage the following terms shall have the meanings as set forth herein: -17- "ENVIRONMENTAL CLAIMS" shall mean all claims, however asserted, by any Governmental Authority or other Person alleging potential liability or responsibility for violation of any Environmental Law, or for release or injury to the environment; "ENVIRONMENTAL LAWS" shall mean all federal, state or local laws, statutes, rules, regulations, ordinances and codes, together with all administrative orders, licenses, authorizations and permits of, and agreements with, any Governmental Authorities, in each case relating to environmental, health and safety matters; "GOVERNMENTAL AUTHORITY" shall mean any nation or government, any state or other political subdivision thereof, any central bank (or similar monetary or regulatory authority) thereof, any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government, and any corporation or other entity owned or controlled, through stock or capital ownership or otherwise, by any of the foregoing; "HAZARDOUS MATERIAL" shall mean (a) any "hazardous substance" as now defined pursuant to the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. Sec. 9601(14) as amended by the Superfund Amendments and Reauthorization Act, and including the judicial interpretation thereof; (b) any "pollutant or contaminant" as defined in 42 U.S.C. Sec. 9601(33); (c) any material now defined as "hazardous waste" pursuant to 40 C.F.R. part 261; (d) any petroleum, including crude oil and any fraction thereof; (e) natural gas, natural gas liquids, liquefied natural gas, or synthetic gas useable for fuel; (f) any "hazardous chemicals" as defined pursuant to 29 C.F.R. Part 1910; (g) any asbestos, polychlorinated biphenyl (PCB), or isomer or dioxin; and (h) any other substance, regardless of physical form, that is regulated under any Environmental Law; "MATERIAL ADVERSE EFFECT" shall mean (a) a material adverse change in, or a material adverse effect upon, the business, assets, operations, properties or condition (financial or otherwise) of MORTGAGOR or MORTGAGOR and any Affiliate, taken as a whole or any material adverse change in, or material adverse effect upon, the obligations under the Indenture, this Mortgage or the Security Documents of any such Person or Persons which could reasonably be expected to result in any of the foregoing; (b) a material impairment of the ability of MORTGAGOR or any Affiliate to perform under any provision of the Indenture or any Security Document; or (c) a material adverse effect upon the legality, validity, binding effect or enforceability against MORTGAGOR or an Affiliate of the Indenture or any Security Document; and, "PERSON" shall mean any individual, limited liability company, corporation, partnership, joint venture, association, joint stock company, trust, unincorporated organization or government or other agency or political subdivision thereof. 38. MORTGAGOR agrees to indemnify and hold harmless MORTGAGEE from and against any and all losses, liabilities, suits, obligations, fines, damages, judgments, penalties, claims, charges, costs and expenses (including attorneys' fees and disbursements) which may be imposed -18- on, incurred or paid by or assessed against MORTGAGEE by reason or on account of, or in connection with, (i) any Default or Event of Default by MORTGAGOR hereunder or under the Indenture or the other Security Documents, (ii) MORTGAGEE's exercise of any of its rights and remedies, or the performance of any of its duties, hereunder or under the Indenture or the other Security Documents to which MORTGAGOR is a party, (iii) the construction, reconstruction or alteration of the Property or any part thereof, (iv) any negligence or willful misconduct of MORTGAGOR, any lessee of the Property, or any of their respective agents, contractors, subcontractors, servants, employees, licensees, guests or invitees, (v) any accident, injury, death or damage to any Person or property occurring in, on or about the Property or any street, drive, sidewalk, curb or passageway adjacent thereto, or (vi) any other transaction arising out of or in any way connected with the Property (or any part thereof) or the Indenture or any of the Security Documents, except for the willful misconduct or gross negligence of the indemnified Person. The above indemnity shall not apply to liabilities incurred by MORTGAGEE as a result of MORTGAGEE's acts or omissions in connection with the Property (or parts thereof) within the possession and control of MORTGAGEE arising during such period of time as such Property is actually within the possession and control of MORTGAGEE, except those liabilities arising either directly or indirectly as a result of any Default or Event of Default by MORTGAGOR under this Mortgage or the Indenture or any act or omission of MORTGAGOR, any lessees or sublessees of the Property or any of their respective agents, contractors, subcontractors, servants, employees, licensees, guests or invitees. Any amount payable to MORTGAGEE under this Paragraph shall be deemed a demand obligation, shall be part of the Indebtedness, shall bear interest at the rate stated in the Notes unless collection from MORTGAGOR of interest at such rate would be contrary to applicable law, in which event such amounts shall bear interest at the highest rate which may be collected from MORTGAGOR under applicable law (the "Default Rate") ( and shall be secured by this Mortgage. MORTGAGOR'S obligations under this Paragraph shall not be affected by the absence or unavailability of insurance covering the same or by the failure or refusal by any insurance carrier to perform any obligation on its part under any such policy of covering insurance and shall survive the repayment or cancellation of the Indebtedness and the release, discharge, satisfaction or cancellation of this Mortgage. If any claim, action or proceeding is made or brought against MORTGAGEE which is subject to the indemnity set forth in this Paragraph, MORTGAGOR shall resist or defend against the same, if necessary in the name of MORTGAGEE by attorneys for MORTGAGOR'S insurance carrier (if the same is covered by insurance) or otherwise by attorneys approved by MORTGAGEE. Notwithstanding the foregoing, MORTGAGEE, in its reasonable discretion, may engage its own attorneys to resist or defend, or assist therein, and MORTGAGOR shall pay, or, on demand, shall reimburse MORTGAGEE for the payment of, the reasonable fees and disbursements of said attorneys. 39. Attached hereto are certified resolutions of the Board of Directors of Jazz Enterprises, Inc. and of Argosy of Louisiana, Inc., a Louisiana corporation, General Partner of Catfish Queen Partnership in Commendam, a Louisiana partnership, authorizing the execution of this Mortgage for the purposes of Louisiana executory process. [Signature Page Follows] -19- THUS DONE, READ AND SIGNED by MORTGAGOR in Cook County, Illinois on the date set forth above, in the presence of me, Notary, and the undersigned competent witnesses, after a due reading of the whole. WITNESSES: MORTGAGOR _______________________________ Jazz Enterprises, Inc. _______________________________ By:____________________ Duly Authorized Catfish Queen Partnership in Commendam By: Argosy of Louisiana, Inc. A Louisiana partnership, _______________________________ General Partner _______________________________ By:_________________________________ Duly Authorized ___________________ NOTARY PUBLIC THUS DONE, READ AND SIGNED by MORTGAGEE in ____________ County, Illinois on the date set forth above, in the presence of me, Notary, and the undersigned competent witnesses, after a due reading of the whole. WITNESSES: MORTGAGEE FIRST NATIONAL BANK OF COMMERCE, as Trustee _______________________________ _______________________________ By: ____________________________ ___________________ NOTARY PUBLIC -20- EXHIBIT 1 [See attached] -21- EXHIBIT 2 DESCRIPTION OF COLLATERAL All of the following property now or at any time hereafter owned by MORTGAGOR or in which MORTGAGOR may now or at any time hereafter have any interest or rights, together with all of MORTGAGOR'S right, title and interest therein: i. All fixtures and personal property now or hereafter owned by MORTGAGOR and attached to or contained in or used or useful in connection with the Property or any of the improvements now or hereafter located thereon, including without limitation any and all air conditioners, antennae, appliances, apparatus, awnings, basins, bathtubs, bidets, boilers, bookcases, cabinets, carpets, coolers, curtains, dehumidifiers, disposals, doors, drapes, dryers, ducts, dynamos, elevators, engines, equipment, escalators, fans, fittings, floor coverings, furnaces, furnishings, furniture, hardware, heaters, humidifiers, incinerators, kitchen equipment and utensils, lighting, machinery, motors, ovens, pipes, plumbing, pumps, radiators, ranges, recreational facilities, refrigerators, screens, security systems, shades, shelving. sinks, sprinklers, stokers, stoves, toilets, ventilators, wall coverings, washers, windows, window coverings, wiring, all renewals or replacements thereof or articles in substitution therefor, and all property owned by MORTGAGOR and now or hereafter used for similar purposes in or on the Property; ii. Articles or parts now or hereafter affixed to the property described in Paragraph A of this Exhibit or used in connection with such property, any and all replacements for such property, and all other property of a similar type or used for similar purposes now or hereafter in or on the Property or any of the improvements now or hereafter located thereon; iii. MORTGAGOR'S right, title and interest in all personal property used or to be used in connection with the operation of the Property or the conduct of business thereon, including without limitation business equipment and inventories located on the Property or elsewhere, together with files, books of account, and other records, wherever located; iv. MORTGAGOR'S right, title and interest in and to any and all contracts now or hereafter relating to the Property executed by any architects, engineers, or contractors, including all amendments, supplements, and revisions thereof, together with all MORTGAGOR'S rights and remedies thereunder and the benefit of all covenants and warranties thereon and also together with all drawings, designs, estimates, layouts, surveys, plats, plans, specifications and test results prepared by any architect, engineer, or contractor, including any amendments, supplements, and revisions thereof and the right to use and enjoy the same, as well as all building permits, environmental permits, approvals and licenses (excluding Gaming Licenses (as defined in the Indenture) or any other governmental approval or payment, to the extent that, under the terms and conditions of such approval or under applicable law, cannot be subjected to a Lien in favor of MORTGAGEE), other governmental or administrative permits, licenses, agreements and rights relating to construction on the Property; v. MORTGAGOR'S right, title and interest in and to any and all contracts now or hereafter relating to the operation of the Property or the conduct of business thereon, including without limitation all management and other service contracts, the books and records, and the right to appropriate and use any and all trade names used or to be used in connection with such business; vi. MORTGAGOR'S right, title and interest in the rents, issues, proceeds, deposits (including security deposits and utility deposits), and profits in connection with all leases, contracts, and other agreements made or agreed to by any person or entity (including without limitation MORTGAGOR and MORTGAGEE under the powers granted by the Mortgage made between MORTGAGOR and MORTGAGEE and the other Security Documents) with any person or entity pertaining to all or any part of the Property, whether such agreements have been heretofore or are hereafter made; vii. MORTGAGOR'S right, title and interest in all sale contracts, earnest money deposits, proceeds of sale contracts, accounts receivable, and general intangibles relating to the Property; viii. All rights in and proceeds from all fire and hazard, loss-of-income, and other non-liability insurance policies now or hereafter covering improvements now or hereafter located on the Property or described in the Mortgage, Assignment of Leases and Rents and Security Agreement, the use or occupancy thereof, or the business conducted thereon; ix. All MORTGAGOR'S rights in and to awards or payments, including interest thereon, that may be made with respect to the Property, whether from the right of the exercise of eminent domain (including any transfer made in lieu of the exercise of said right) or for any other injury to or decreed in volume of the Property; and x. All MORTGAGOR'S rights in and to proceeds from the sale, transfer, or pledge of any or all of the foregoing property. -2- EXHIBIT 3 SPECIFIED PARCEL -3- EXHIBIT 4 FORM OF NONDISTURBANCE AGREEMENT -4- Document Number: EX-4-12.WP 6-27-96/:44a -5- EX-12.1 14 EXHIBIT 12.1 EXHIBIT 12.1 EXHIBIT 12.1 RATIO OF EARNINGS TO FIXED CHARGES COMPUTATION ARGOSY GAMING COMPANY
PRO FORMA PRO FORMA THREE MONTHS ENDED THREE MONTHS YEARS ENDED DECEMBER 31, YEAR ENDED ----------------------- ENDED ----------------------------------------------------------- DECEMBER 31, MARCH 31, MARCH 31, MARCH 31, 1991 1992 1993 1994 1995 1995 1995 1996 1996 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ------------- EARNINGS: Actual . . . . . . $ 693,000 $15,552,000 $14,781,000 $15,893,000 $13,390,000 $11,831,000 $ 2,377,000 $(2,209,000) $(2,209,000) Proforma interest expense. . . -- -- -- -- -- 1,099,000 -- -- (560,000) ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Income from operations . . . . 693,000 15,552,000 14,781,000 15,893,000 13,390,000 10,732,000 2,377,000 (2,209,000) (2,769,000) Fixed charges (see below). . . 2,202,000 7,913,000 985,000 10,587,000 19,560,000 21,431,000 4,484,000 6,022,000 6,582,000 Interest capitalized . . (325,000) -- -- (1,665,000) (3,203,000) (3,203,000) (130,000) (1,358,000) (1,358,000) ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Adjusted earnings. . $ 2,570,000 $23,465,000 $15,766,000 $24,815,000 $29,747,000 $28,960,000 $ 6,731,000 $ 2,455,000 $ 2,455,000 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- FIXED CHARGES: Interest expense . $ 1,877,000 $ 7,882,000 $ 800,000 $ 8,182,000 $14,708,000 $16,579,000 $ 3,942,000 $ 4,211,000 $ 4,771,000 1/3 Rental expense 31,000 185,000 1,665,000 3,203,000 1,649,000 412,000 453,000 1,358,000 Interest capitaliz ed . . 325,000 -- -- 740,000 1,649,000 3,203,000 130,000 1,358,000 453,000 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Fixed charges. . . . $ 2,202,000 $ 7,913,000 $ 985,000 $10,587,000 $19,560,000 $21,431,000 $ 4,484,000 $ 6,022,000 $ 6,582,000 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ------------ ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ------------ ----------- Ratio of earnings to fixed charges. . 1.2 3.0 16.0 2.3 1.5 1.4 1.5 -- -- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
EX-21 15 EXHIBIT 21 EXHIBIT 21 EXHIBIT 21 LIST OF SIGNIFICANT SUBSIDIARIES The following is a list of the significant subsidiaries of the Registrant: STATE OF PERCENTAGE INCORPORATION OWNERSHIP NAME OF SIGNIFICANT SUBSIDIARY OR ORGANIZATION OF ENTITY - ------------------------------ --------------- --------- Alton Gaming Company Illinois corporation 100% The Missouri Gaming Company Missouri corporation 100% The St. Louis Gaming Company Missouri corporation 100% The Indiana Gaming Company Indiana corporation 100% Iowa Gaming Company Iowa corporation 100% Iowa Development Corp. Iowa corporation 100% Argosy of Louisiana, Inc. Louisiana corporation 100% Jazz Enterprises, Inc. Louisiana corporation 100% Catfish Queen Partnership in Commendam Louisiana partnership 100% Indiana Gaming Company, L.P. Indiana limited partnership 57.5% Belle of Sioux City, L.P. Iowa limited partnership 70% EX-23.1 16 EXHIBIT 23.1 EXHIBIT 23.1 EXHIBIT 23.1 [Letterhead of Ernst & Young LLP] CONSENT OF INDEPENDENT AUDITORS We consent to the reference to our firm under the captions "Selected Consolidated Financial Data" and "Experts" and to the use of our report dated January 26, 1996 (except Note 13 as to which the date is July 1, 1996) in the Registration Statement (Form S-4) and the related Prospectus of Argosy Gaming Company for the registration of $235,000,000 of 13-1/4% First Mortgage Notes due 2004. /s/ Ernst & Young LLP Chicago, Illinois July 1, 1996 EX-23.2 17 EXHIBIT 23.2 EXHIBIT 23.2 EXHIBIT 23.2 [Letterhead of Grant Thornton LLP] CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS We have issued our report dated July 10, 1995, accompanying the financial statements of Jazz Enterprises, Inc. contained in the Registration Statement. We consent to the use of the aforementioned report in the Registration Statement, and to the use of our name as it appears under the caption "Experts". /s/ Grant Thornton LLP Reno, Nevada June 28, 1996 EX-24 18 EXHIBIT 24 EXHIBIT 24 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director of Argosy Gaming Company, a Delaware corporation, in connection with its exchange offer for its 13-1/4% First Mortgage Notes due 2004 is about to file with the Securities and Exchange Commission under the provisions of the Securities Act of 1933, as amended, a Registration Statement on Form S-4, hereby constitutes and appoints J. Thomas Long and Joseph G. Uram, and each of them, his true and lawful attorneys-in-fact and agents, with full power to act without the other, to sign such Registration Statement and to file such Registration Statement and the exhibits thereto and sign and file any and all amendments thereto and other documents in connection therewith with the Securities and Exchange Commission, and to do and perform any and all acts and things requisite and necessary to be done in connection with the foregoing as fully as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or either of them, may lawfully do or cause to be done by virtue hereof. Dated: June 28, 1996 /s/F. LANCE CALLIS ---------------- ------------------------------ (Signature) F. LANCE CALLIS ------------------------------ (Print Name) POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director of Argosy Gaming Company, a Delaware corporation, in connection with its exchange offer for its 13-1/4% First Mortgage Notes due 2004 is about to file with the Securities and Exchange Commission under the provisions of the Securities Act of 1933, as amended, a Registration Statement on Form S-4, hereby constitutes and appoints J. Thomas Long and Joseph G. Uram, and each of them, his true and lawful attorneys-in-fact and agents, with full power to act without the other, to sign such Registration Statement and to file such Registration Statement and the exhibits thereto and sign and file any and all amendments thereto and other documents in connection therewith with the Securities and Exchange Commission, and to do and perform any and all acts and things requisite and necessary to be done in connection with the foregoing as fully as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or either of them, may lawfully do or cause to be done by virtue hereof. Dated: June 28, 1996 /s/WILLIAM F. CELLINI ---------------- ------------------------------ (Signature) WILLIAM F. CELLINI ------------------------------ (Print Name) POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director of Argosy Gaming Company, a Delaware corporation, in connection with its exchange offer for its 13-1/4% First Mortgage Notes due 2004 is about to file with the Securities and Exchange Commission under the provisions of the Securities Act of 1933, as amended, a Registration Statement on Form S-4, hereby constitutes and appoints J. Thomas Long and Joseph G. Uram, and each of them, his true and lawful attorneys-in-fact and agents, with full power to act without the other, to sign such Registration Statement and to file such Registration Statement and the exhibits thereto and sign and file any and all amendments thereto and other documents in connection therewith with the Securities and Exchange Commission, and to do and perform any and all acts and things requisite and necessary to be done in connection with the foregoing as fully as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or either of them, may lawfully do or cause to be done by virtue hereof. Dated: June 28, 1996 /s/GEORGE L. BRISTOL ---------------- ------------------------------ (Signature) GEORGE L. BRISTOL ------------------------------- (Print Name) POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director of Argosy Gaming Company, a Delaware corporation, in connection with its exchange offer for its 13-1/4% First Mortgage Notes due 2004 is about to file with the Securities and Exchange Commission under the provisions of the Securities Act of 1933, as amended, a Registration Statement on Form S-4, hereby constitutes and appoints J. Thomas Long and Joseph G. Uram, and each of them, his true and lawful attorneys-in-fact and agents, with full power to act without the other, to sign such Registration Statement and to file such Registration Statement and the exhibits thereto and sign and file any and all amendments thereto and other documents in connection therewith with the Securities and Exchange Commission, and to do and perform any and all acts and things requisite and necessary to be done in connection with the foregoing as fully as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or either of them, may lawfully do or cause to be done by virtue hereof. Dated: June 28, 1996 /s/JIMMY F. GALLAGHER ---------------- ------------------------------ (Signature) JIMMY F. GALLAGHER ------------------------------ (Print Name) POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director of Argosy Gaming Company, a Delaware corporation, in connection with its exchange offer for its 13-1/4% First Mortgage Notes due 2004 is about to file with the Securities and Exchange Commission under the provisions of the Securities Act of 1933, as amended, a Registration Statement on Form S-4, hereby constitutes and appoints J. Thomas Long and Joseph G. Uram, and each of them, his true and lawful attorneys-in-fact and agents, with full power to act without the other, to sign such Registration Statement and to file such Registration Statement and the exhibits thereto and sign and file any and all amendments thereto and other documents in connection therewith with the Securities and Exchange Commission, and to do and perform any and all acts and things requisite and necessary to be done in connection with the foregoing as fully as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or either of them, may lawfully do or cause to be done by virtue hereof. Dated: June 28, 1996 /s/JOHN B. PRATT, SR. ---------------- ------------------------------ (Signature) JOHN B. PRATT, SR. ------------------------------ (Print Name) POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director of Argosy Gaming Company, a Delaware corporation, in connection with its exchange offer for its 13-1/4% First Mortgage Notes due 2004 is about to file with the Securities and Exchange Commission under the provisions of the Securities Act of 1933, as amended, a Registration Statement on Form S-4, hereby constitutes and appoints J. Thomas Long and Joseph G. Uram, and each of them, his true and lawful attorneys-in-fact and agents, with full power to act without the other, to sign such Registration Statement and to file such Registration Statement and the exhibits thereto and sign and file any and all amendments thereto and other documents in connection therewith with the Securities and Exchange Commission, and to do and perform any and all acts and things requisite and necessary to be done in connection with the foregoing as fully as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or either of them, may lawfully do or cause to be done by virtue hereof. Dated: June 28, 1996 /s/WILLIAM McENERY ---------------- ------------------------------ (Signature) WILLIAM McENERY ------------------------------ (Print Name) POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director of Argosy Gaming Company, a Delaware corporation, in connection with its exchange offer for its 13-1/4% First Mortgage Notes due 2004 is about to file with the Securities and Exchange Commission under the provisions of the Securities Act of 1933, as amended, a Registration Statement on Form S-4, hereby constitutes and appoints J. Thomas Long and Joseph G. Uram, and each of them, his true and lawful attorneys-in-fact and agents, with full power to act without the other, to sign such Registration Statement and to file such Registration Statement and the exhibits thereto and sign and file any and all amendments thereto and other documents in connection therewith with the Securities and Exchange Commission, and to do and perform any and all acts and things requisite and necessary to be done in connection with the foregoing as fully as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or either of them, may lawfully do or cause to be done by virtue hereof. Dated: June 28, 1996 /s/EDWARD F. BRENNAN ---------------- ------------------------------ (Signature) EDWARD F. BRENNAN ------------------------------ (Print Name) EX-25.1 19 EXHIBIT 25.1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Filed by Registration No. Form T-1 STATEMENT OF ELIGIBILITY AND QUALIFICATION UNDER THE TRUST INDENTURE ACT OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305(B)(2)________ FIRST NATIONAL BANK OF COMMERCE (Exact name of Trustee as specified in its charter) N/A 210 Baronne Street 72-0269760 (Jurisdiction of incorporation New Orleans, Louisiana 70112 (I.R.S. Employer or organization if not a U.S. (Address, including zip code Identification National Bank) of principal executive Number) offices) FIRST NATIONAL BANK OF COMMERCE 210 Baronne Street New Orleans, Louisiana 70112 Telephone: 504-623-1610 (Name, address and telephone number of agent for service) ARGOSY GAMING COMPANY (Exact name of Obligor as specified in its charter) DELAWARE 219 Piasa Street 37-1304247 (State of other jurisdiction of Alton, Illinois 62002-6232 (I.R.S. Employer incorporation or organization) (Address of principal Identification executive offices) Number) FIRST MORTGAGE NOTES DUE 2004 (Title of Indenture Securities) 1. GENERAL INFORMATION. Furnish the following information as to the Trustee: (a) Name and address of each examining or supervising authority to which it is subject. Comptroller of the Currency, Washington, D.C. Federal Deposit Insurance Corporation, Washington, D.C. The Board of Governors of the Federal Reserve System, Washington, D.C. (b) Whether it is authorized to exercise corporate trust powers. The Trustee is authorized to exercise corporate trust powers. 2. AFFILIATIONS WITH OBLIGOR AND UNDERWRITERS. If the obligor or any underwriter for the obligor is an affiliate of the Trustee, describe such affiliation. No such affiliation exists. 12. INDEBTEDNESS OF THE OBLIGOR TO THE TRUSTEE. The Obligor is not currently indebted to the Trustee. A credit facility with the Obligor was paid in full on June 5, 1996. 16. LIST OF EXHIBITS. List below all exhibits filed as part of this statement of eligibility and qualification. * 1. A copy of the articles of incorporation of the Trustee as now in effect. ** 2. A copy of the certificate of authority of the Trustee to commence business. ** 3. A copy of the certificate of authorization of the Trustee to exercise corporate trust powers issued by the Board of Governors of the Federal Reserve System under date of May 20, 1933. * 4. A copy of the existing bylaws of the Trustee. 5. Not applicable. 6. The consent of the Trustee required by Section 321(b) of the Act. 7. A copy of the latest report of condition of the Trustee published pursuant to law or to requirements of its supervising or examining authority. _______________ * Incorporated by reference to Exhibit bearing the same Exhibit number submitted with the Trustee's Form T-1 (File No. 22-20536). ** Incorporated by reference to Exhibit bearing the same Exhibit number submitted with the Trustee's Form T-1 (File No. 2-32069). SIGNATURE Pursuant to the requirements of the Trust Indenture Act of 1939 as amended to November 15, 1990, the Trustee, First National Bank of Commerce, a national banking association organized and existing under the laws of the United States of America, has duly caused this statement of eligibility and qualification to be signed on its behalf by the undersigned, thereunto duly authorized, all in the City of New Orleans, and State of Louisiana on the 18th day of June, 1996. FIRST NATIONAL BANK OF COMMERCE By: Denis L. Milliner -------------------------------- Name: Denis L. Milliner Title: Vice President and Trust Officer Exhibit 6 Consent of Trustee Required by Section 321(b) of the Trust Indenture Act of 1939 In connection with the Indenture referred to in the Form T-1 of even date herewith between Argosy Gaming Company and First National Bank of Commerce in New Orleans, as Trustee pursuant to Section 321(b) of the Trust Indenture Act of 1939 as amended to November 15, 1990, hereby consents that reports of examinations by Federal, State, Territorial or District authorities may be furnished by such authorities to the Securities and Exchange Commission upon request thereof. Dated as of June 18, 1996 FIRST NATIONAL BANK OF COMMERCE By: Denis L. Milliner -------------------------------- Name: Denis L. Milliner Title: Vice President and Trust Officer Exhibit 7 EX-99.1 20 EXHIBIT 99.1 THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON , 1996, UNLESS EXTENDED (THE "EXPIRATION DATE"). TENDERS MAY BE WITHDRAWN PRIOR TO 5:00 P.M., EASTERN STANDARD TIME, ON THE EXPIRATION DATE. ARGOSY GAMING COMPANY 219 Piasa Street Alton, Illinois 62002 LETTER OF TRANSMITTAL TO EXCHANGE 13 1/4% FIRST MORTGAGE NOTES DUE 2004 Exchange Agent: FIRST NATIONAL BANK OF COMMERCE To: First National Bank of Commerce FACSIMILE TRANSMISSION: (504) 623-1095 CONFIRM BY TELEPHONE TO: (504) 623-7581 BY MAIL: BY HAND DELIVERY/OVERNIGHT DELIVERY: Trust Security Services Trust Security Services First National Bank of Commerce 210 Baronne Street P.O. Box 60279 Basement Level New Orleans, Louisiana 70160-0279 New Orleans, Louisiana 70112 Attention: Rebecca Norton Attention: Rebecca Norton
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE A VALID DELIVERY. The undersigned acknowledges receipt of the Prospectus dated , 1996, (as the same may be amended or supplemented from time to time, the "Prospectus") of Argosy Gaming Company, a Delaware corporation (the "Issuer"), and this Letter of Transmittal for 13 1/4% First Mortgage Notes 2004 which may be amended from time to time (this "Letter"), which together constitute the Issuer's offer (the "Exchange Offer") to exchange $1,000 principal amount of its 13 1/4% First Mortgage Notes due 2004 which have been registered under the Securities Act of 1933, as amended (the "Exchange Notes"), for each $1,000 in principal amount of its outstanding 13 1/4% First Mortgage Notes due 2004 (the "Old Notes") that were issued and sold in a transaction (the "Initial Offering") exempt from registration under the Securities Act of 1933, as amended (the "Securities Act"). The undersigned has completed, executed and delivered this Letter to indicate the action he or she desires to take with respect to the Exchange Offer. All holders of Old Notes who wish to tender their Old Notes must, prior to the Expiration Date: (1) complete, sign, date and deliver this Letter, or a facsimile thereof, to the Exchange Agent, in person or to the address set forth above; and (2) tender his or her Old Notes or, if a tender of Old Notes is to be made by book-entry transfer to the account maintained by the Exchange Agent at The Depository Trust Company (the "Book-Entry Transfer Facility"), confirm such book-entry transfer (a "Book-Entry Confirmation"), in each case in accordance with the procedures for tendering described in the Instructions to this Letter. Holders of Old Notes whose certificates are not immediately available, or who are unable to deliver their certificates or Book-Entry Confirmation and all other documents required by this Letter to be delivered to the Exchange Agent on or prior to the Expiration Date, must tender their Old Notes according to the guaranteed delivery procedures set forth under the caption "The Exchange Offer - -- How to Tender" in the Prospectus. (See Instruction 1). Upon the terms and subject to the conditions of the Exchange Offer, the acceptance for exchange of Old Notes validly tendered and not withdrawn and the issuance of the Exchange Notes will be made on the Exchange Date. For the purposes of the Exchange Offer, the Issuer shall be deemed to have accepted for exchange validly tendered Old Notes when, as and if the Issuer has given written notice thereof to the Exchange Agent. The Instructions included with this Letter must be followed in their entirety. Questions and requests for assistance or for additional copies of the Prospectus or this Letter may be directed to the Exchange Agent, at the address listed above, or G. Dan Marshall, Director of Investor Relations of the Issuer, at (618) 474-7666, 219 Piasa Street, Alton, Illinois 62002. PLEASE READ THE ENTIRE LETTER OF TRANSMITTAL, INCLUDING THE INSTRUCTIONS TO THIS LETTER, CAREFULLY BEFORE CHECKING ANY BOX BELOW Capitalized terms used in this Letter and not defined herein shall have the respective meanings ascribed to them in the Prospectus. List in Box 1 below the Old Notes of which you are the holder. If the space provided in Box 1 is inadequate, list the certificate numbers and principal amount of Old Notes on a separate signed schedule and affix that schedule to this Letter. BOX 1 TO BE COMPLETED BY ALL TENDERING HOLDERS PRINCIPAL PRINCIPAL AMOUNT OF NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) CERTIFICATE AMOUNT OF OLD OLD NOTES (PLEASE FILL IN IF BLANK) NUMBER(S) (1) NOTES TENDERED (2) Totals:
(1) Need not be completed if Old Notes are being tendered by book-entry transfer. (2) Unless otherwise indicated, the entire principal amount of Old Notes represented by a certificate or Book-Entry Confirmation delivered to the Exchange Agent will be deemed to have been tendered. Ladies and Gentlemen: Upon the terms and subject to the conditions of the Exchange Offer, the undersigned tenders to the Issuer the principal amount of Old Notes indicated above. Subject to, and effective upon, the acceptance for exchange of the Old Notes tendered with this Letter, the undersigned exchanges, assigns and transfers to, or upon the order of, the Issuer all right, title and interest in and to the Old Notes tendered. The undersigned constitutes and appoints the Exchange Agent as his or her agent and attorney-in-fact (with full knowledge that the Exchange Agent also acts as the agent of the Issuer) with respect to the tendered Old Notes, with full power of substitution, to: (a) deliver certificates for such Old Notes; (b) deliver Old Notes and all accompanying evidence of transfer and authenticity to or upon the order of the Issuer upon receipt by the Exchange Agent, as the undersigned's agent, of the Exchange Notes to which the undersigned is entitled upon the acceptance by the Issuer of the Old Notes tendered under the Exchange Offer; (c) presentation of Old Notes for transfer on the register for such Old Notes; and (d) receive all benefits and otherwise exercise all rights of beneficial ownership of the Old Notes, all in accordance with the terms of the Exchange Offer. The power of attorney granted in this paragraph shall be deemed irrevocable and coupled with an interest. The undersigned hereby represents and warrants that he or she has full power and authority to tender, exchange, assign and transfer the Old Notes tendered hereby and that the Issuer will acquire good and unencumbered title thereto, free and clear of all liens, restrictions, charges and encumbrances and not subject to any adverse claim. The undersigned will, upon request, execute and deliver any additional documents deemed by the Issuer to be necessary or desirable to complete the assignment and transfer of the Old Notes tendered. By tendering Old Notes, the undersigned certifies (a) that it is not an affiliate (as defined in Rule 501 of the Securities Act, an "Affiliate") of the Issuer, that it is not a broker-dealer that owns Old Notes acquired directly from the Issuer or an Affiliate of the Issuer, that it is acquiring the Exchange Notes offered hereby in the ordinary course of the undersigned's business and that the undersigned has no arrangement with any person to participate in the distribution of such Exchange Notes; (b) that it is an Affiliate of the Issuer or of the Initial Purchasers (as defined in the Prospectus) of the Old Notes in the Initial Offering and that it will comply with the registration and prospectus delivery requirements of the Securities Act to the extent applicable to it; or (c) that it is a Participating Broker-Dealer (as defined in the Prospectus) and that it will deliver a prospectus in connection with any resale of the Exchange Notes. The undersigned acknowledges that, if it is a broker-dealer that will receive Exchange Notes for its own account, it will deliver a prospectus in connection with any resale of such Exchange Notes. By so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. The undersigned understands that the Issuer may accept the undersigned's tender by delivering written notice of acceptance to the Exchange Agent, at which time the undersigned's right to withdraw such tender will terminate. All authority conferred or agreed to be conferred by this Letter shall survive the death or incapacity of the undersigned, and every obligation of the undersigned under this Letter shall be binding upon the undersigned's heirs, personal representatives, successors and assigns. Tenders may be withdrawn only in accordance with the procedures set forth in the Instructions contained in this Letter. Unless otherwise indicated under "Special Delivery Instructions" below, the Exchange Agent will deliver Exchange Notes (and, if applicable, a certificate for any Old Notes not tendered but represented by a certificate also encompassing Old Notes which are tendered) to the undersigned at the address set forth in Box 1. The undersigned acknowledges that the Exchange Offer is subject to the more detailed terms set forth in the Prospectus and, in case of any conflict between the terms of the terms of the Prospectus and this Letter, the Prospectus shall prevail. / / CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING: Name of Tendering Institution: __________________________________________ Account Number: _________________________________________________________ Transaction Code Number: ________________________________________________ - -------------------------------------------------------------------------------- / / CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE THE FOLLOWING: Name(s) of Registered Owner(s): _________________________________________ Date of Execution of Notice of Guaranteed Delivery: _____________________ Window Ticket Number (if available): ____________________________________ Name of Institution which Guaranteed Delivery: __________________________ PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY BOX 2 PLEASE SIGN HERE WHETHER OR NOT OLD NOTES ARE BEING PHYSICALLY TENDERED HEREBY This box must be signed by registered holder(s) of Old Notes as their name(s) appear(s) on certificate(s) for Old Notes, or by person(s) authorized to become registered holder(s) by endorsement and documents transmitted with this Letter. If signature is by a trustee, executor, administrator, guardian, officer or other person acting in a fiduciary or representative capacity, such person must set forth his or her full title below. (See Instruction 3) X ______________________________________________________________________________ X ______________________________________________________________________________ Signature(s) of Owner(s) or Authorized Signatory Date: ____________, 1996 Name(s): _______________________________________________________________________ (Please Print) Capacity: ______________________________________________________________________ Address: _______________________________________________________________________ (Include Zip Code) Area Code and Telephone No.: ___________________________________________________ PLEASE COMPLETE SUBSTITUTE FORM W-9 HEREIN SIGNATURE GUARANTEE (SEE INSTRUCTIONS 4 BELOW) CERTAIN SIGNATURES MUST BE GUARANTEED BY AN ELIGIBLE INSTITUTION ________________________________________________________________________________ (Name of Eligible Institution Guaranteeing Signatures) ________________________________________________________________________________ (Address (including zip code) and Telephone Number (including area code) of Firm) ________________________________________________________________________________ (Authorized Signature) ________________________________________________________________________________ (Title) ________________________________________________________________________________ (Printed Name) Date: ____________, 1996 BOX 3 TO BE COMPLETED BY ALL TENDERING HOLDERS PAYOR'S NAME: FIRST NATIONAL BANK OF COMMERCE Part 1 Social Security Number or PLEASE PROVIDE YOUR TIN IN THE BOX AT RIGHT Employer Identification AND CERTIFY BY SIGNING AND DATING BELOW. Number SUBSTITUTE Part 2 / / Form W-9 Department Check the box if you are NOT subject to back-up withholding under the of the Treasury, provisions of Section 2406(a)(1)(C) of the Internal Revenue Code Internal Revenue because (1) you have not been notified that you are subject to back-up Service withholding as a result of failure to report all interest or dividends or (2) the Internal Revenue Service has notified you that you are no longer subject to back-up withholding. Payor's Request for Part 3 / / Taxpayer Check if Identification Awaiting TIN Number (TIN) CERTIFICATION UNDER THE PENALTIES OF PERJURY, I CERTIFY THAT THE INFORMATION PROVIDED ON THIS FORM IS TRUE, CORRECT AND COMPLETE. Signature Date , 1996 Name: (Please Print)
BOX 4 BOX 5 SPECIAL ISSUANCE INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS (See Instructions 3 and 4) (See Instructions 3 and 4) To be completed ONLY if certificates for Old To be completed ONLY if certificates for Old Notes in a principal amount not exchanged, or Notes in a principal amount not exchanged, or Exchange Notes, are to be issued in the name Exchange Notes, are to be sent to someone of someone other than the person whose other than the person whose signature appears signature appears in Box 2, or if Old Notes in Box 2 or to an address other than that delivered by book-entry transfer which are shown in Box 1. not accepted for exchange are to be returned Deliver: by credit to an account maintained at the (check appropriate boxes) Book-Entry Transfer Facility other than the / / Old Notes not tendered account indicated above. / / Exchange Notes, to: Issue and deliver: (Please Print) (check appropriate boxes) Name: / / Old Notes not tendered Address: / / Exchange Notes, to: (Please Print) Name: Address: Please complete the Substitute Form W-9 at Box 3 Tax I.D. or Social Security Number: Please complete the Substitute Form W-9 at Box 3 Tax I.D. or Social Security Number:
INSTRUCTIONS FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER 1. DELIVERY OF THIS LETTER AND CERTIFICATES. Certificates for Old Notes or a Book-Entry Confirmation, as the case may be, as well as a properly completed and duly executed copy of this Letter and any other documents required by this Letter, must be received by the Exchange Agent at one of its addresses set forth herein on or before the Expiration Date. The method of delivery of this Letter, certificates for Old Notes or a Book-Entry Confirmation, as the case may be, and any other required documents is at the election and risk of the tendering holder, but except as otherwise provided below, the delivery will be deemed made when actually received by the Exchange Agent. If delivery is by mail, the use of registered mail with return receipt requested, properly insured, is suggested. If tendered Old Notes are registered in the name of the signer of the Letter of Transmittal and the Exchange Notes to be issued in exchange therefor are to be issued (and any untendered Old Notes are to be reissued) in the name of the registered holder, the signature of such signer need not be guaranteed. In any other case, the tendered Old Notes must be endorsed or accompanied by written instruments of transfer in form satisfactory to the Issuer and duly executed by the registered holder and the signature on the endorsement or instrument of transfer must be guaranteed by a bank, broker, dealer, credit union, savings association, clearing agency or other institution (each an "Eligible Institution") that is a member of a recognized signature guarantee medallion program within the meaning of Rule 17Ad-15 under the Exchange Act of 1934, as amended. If the Exchange Notes and/or Old Notes not exchanged are to be delivered to an address other than that of the registered holder appearing on the note register for the Old Notes, the signature on the Letter of Transmittal must be guaranteed by an Eligible Institution. Any beneficial owner whose Old Notes are registered in the name of a broker, dealer, commercial bank, trust company or other nominee and who wishes to tender Old Notes should contact such holder promptly and instruct such holder to tender Old Notes on such beneficial owner's behalf. If such beneficial owner wishes to tender such Old Notes himself, such beneficial owner must, prior to completing and executing the Letter of Transmittal and delivering such Old Notes, either make appropriate arrangements to register ownership of the Old Notes in such beneficial owner's name or follow the procedures described in the immediately preceding paragraph. The transfer of record ownership may take considerable time. Holders whose Old Notes are not immediately available or who cannot deliver their Old Notes or a Book-Entry Confirmation, as the case may be, and all other required documents to the Exchange Agent on or before the Expiration Date may tender their Old Notes pursuant to the guaranteed delivery procedures set forth in the Prospectus. Pursuant to such procedure: (i) tender must be made by or through an Eligible Institution; (ii) prior to the Expiration Date, the Exchange Agent must have received from the Eligible Institution a properly completed and duly executed Notice of Guaranteed Delivery (by telegram, telex, facsimile transmission, mail or hand delivery) (x) setting forth the name and address of the holder, the description of the Old Notes and the principal amount of Old Notes tendered, (y) stating that the tender is being made thereby and (z) guaranteeing that, within five New York Stock Exchange trading days after the date of execution of such Notice of Guaranteed Delivery, this Letter together with the certificates representing the Old Notes or a Book-Entry Confirmation, as the case may be, and any other documents required by this Letter will be deposited by the Eligible Institution with the Exchange Agent; and (iii) the certificates for all tendered Old Notes or a Book-Entry Confirmation, as the case may be, as well as all other documents required by this Letter, must be received by the Exchange Agent within five New York Stock Exchange trading days after the date of execution of such Notice of Guaranteed Delivery, all as provided in the Prospectus under the caption "The Exchange Offer -- How to Tender." The method of delivery of Old Notes and all other documents is at the election and risk of the holder. If sent by mail, it is recommended that registered mail, return receipt requested, be used, proper insurance be obtained, and the mailing be made sufficiently in advance of the Expiration Date to permit delivery to the Exchange Agent on or before the Expiration Date. Unless an exemption applies under the applicable law and regulations concerning "backup withholding" of federal income tax, the Exchange Agent will be required to withhold, and will withhold, 31% of the gross proceeds otherwise payable to a holder pursuant to the Exchange Offer if the holder does not provide his or her taxpayer identification number (social security number or employer identification number) and certify that such number is correct. Each tendering holder should complete and sign the main signature form and the Substitute Form W-9 included as part of the Letter of Transmittal, so as to provide the information and certification necessary to avoid backup withholding, unless an applicable exemption exists and is proved in a manner satisfactory to the Issuer and the Exchange Agent. If a holder desires to accept the Exchange Offer and time will not permit a Letter of Transmittal or Old Notes to reach the Exchange Agent before the Expiration Date, a tender may be effected if the Exchange Agent has received at its office listed on the back cover hereof on or prior to the Expiration Date a letter, telegram or facsimile transmission from an Eligible Institution setting forth the name and address of the tendering holder, the principal amount of the Old Notes being tendered, the names in which the Old Notes are registered and, if possible, the certificate numbers of the Old Notes to be tendered, and stating that the tender is being made thereby and guaranteeing that within three New York Stock Exchange trading days after the date of execution of such letter, telegram or facsimile transmission by the Eligible Institution, the Old Notes, in proper form for transfer, will be delivered by such Eligible Institution together with a properly completed and duly executed Letter of Transmittal (and any other required documents). Unless Old Notes being tendered by the above-described method (or a timely Book-Entry Confirmation) are deposited with the Exchange Agent within the time period set forth above (accompanied or preceded by a properly completed Letter of Transmittal and any other required documents), the Issuer may, at its option, reject the tender. Copies of a Notice of Guaranteed Delivery which may be used by Eligible Institutions for the purposes described in this paragraph are available from the Exchange Agent. A tender will be deemed to have been received as of the date when the tendering holder's properly completed and duly signed Letter of Transmittal accompanied by the Old Notes (or a timely Book-Entry Confirmation) is received by the Exchange Agent. Issuances of Exchange Notes in exchange for Old Notes tendered pursuant to a Notice of Guaranteed Delivery or letter, telegram or facsimile transmission to similar effect (as provided above) by an Eligible Institution will be made only against deposit of the Letter of Transmittal (and any other required documents) and the tendered Old Notes (or a timely Book-Entry Confirmation). All questions as to the validity, form, eligibility (including time of receipt), acceptance and withdrawal of tendered Old Notes will be determined by the Issuer, whose determination will be final and binding. The Issuer reserves the absolute right to reject any or all tenders that are not in proper form or the acceptance of which, in the opinion of the Issuer's counsel, would be unlawful. The Issuer also reserves the right to waive any irregularities or conditions of tender as to particular Old Notes. All tendering holders, by execution of this Letter, waive any right to receive notice of acceptance of their Old Notes. The Issuer's interpretation of the terms and conditions of the Exchange Offer (including the Letter of Transmittal and the instructions thereto) will be final and binding. Neither the Issuer, the Exchange Agent nor any other person shall be obligated to give notice of defects or irregularities in any tender, nor shall any of them incur any liability for failure to give any such notice. 2. PARTIAL TENDERS; WITHDRAWALS. If less than the entire principal amount of any Old Note evidenced by a submitted certificate or by a Book-Entry Confirmation is tendered, the tendering holder must fill in the principal amount tendered in the fourth column of Box 1 above. All of the Old Notes represented by a certificate or by a Book-Entry Confirmation delivered to the Exchange Agent will be deemed to have been tendered unless otherwise indicated. A certificate for Old Notes not tendered will be sent to the holder, unless otherwise provided in Box 5, as soon as practicable after the Expiration Date, in the event that less than the entire principal amount of Old Notes represented by a submitted certificate is tendered (or, in the case of Old Notes tendered by book-entry transfer, such non-exchanged Old Notes will be credited to an account maintained by the holder with the Book-Entry Transfer Facility). If not yet accepted, a tender pursuant to the Exchange Offer may be withdrawn prior to the Expiration Date. For a withdrawal to be effective, a written or facsimile transmission notice of withdrawal must be timely received by the Exchange Agent at its address set forth on the back cover of the Prospectus prior to the Expiration Date. Any such notice of withdrawal must specify the person named in the Letter of Transmittal as having tendered Old Notes to be withdrawn, the certificate numbers of Old Notes to be withdrawn, the principal amount of Old Notes to be withdrawn, a statement that such holder is withdrawing his election to have such Old Notes exchanged, and the name of the registered holder of such Old Notes, and must be signed by the holder in the same manner as the original signature on the Letter of Transmittal (including any required signature guarantees) or be accompanied by evidence satisfactory to the Issuer that the person withdrawing the tender has succeeded to the beneficial ownership of the Old Notes being withdrawn. The Exchange Agent will return the properly withdrawn Old Notes promptly following receipt of notice of withdrawal. All questions as to the validity of notices of withdrawals, including time of receipt, will be determined by the Issuer, and such determination will be final and binding on all parties. 3. SIGNATURES ON THIS LETTER; ASSIGNMENTS: GUARANTEE OF SIGNATURES. If this Letter is signed by the holder(s) of Old Notes tendered hereby, the signature must correspond with the name(s) as written on the face of the certificate(s) for such Old Notes, without alteration, enlargement or any change whatsoever. If any of the Old Notes tendered hereby are owned by two or more joint owners, all owners must sign this Letter. If any tendered Old Notes are held in different names on several certificates, it will be necessary to complete, sign and submit as many separate copies of this Letter as there are names in which certificates are held. If this Letter is signed by the holder of record and (i) the entire principal amount of the holder's Old Notes are tendered; and/or (ii) untendered Old Notes, if any, are to be issued to the holder of record, then the holder of record need not endorse any certificates for tendered Old Notes, nor provide a separate bond power. In any other case, the holder of record must transmit a separate bond power with this Letter. If this Letter or any certificate or assignment is signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing and proper evidence satisfactory to the Issuer of their authority to so act must be submitted, unless waived by the Issuer. Signatures on this Letter must be guaranteed by an Eligible Institution, unless Old Notes are tendered: (i) by a holder who has not completed the Box entitled "Special Issuance Instructions" or "Special Delivery Instructions" on this Letter; or (ii) for the account of an Eligible Institution. In the event that the signatures in this Letter or a notice of withdrawal, as the case may be, are required to be guaranteed, such guarantees must be by an eligible guarantor institution which is a member of The Securities Transfer Agents Medallion Program (STAMP), The New York Stock Exchanges Medallion Signature Program (MSP) or The Stock Exchanges Medallion Program (SEMP). If Old Notes are registered in the name of a person other than the signer of this Letter, the Old Notes surrendered for exchange must be endorsed by, or be accompanied by a written instrument or instruments of transfer or exchange, in satisfactory form as determined by the Issuer, in its sole discretion, duly executed by the registered holder with the signature thereon guaranteed by an Eligible Institution. 4. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS. Tendering holders should indicate, in Box 4 or 5, as applicable, the name and address to which the Exchange Notes or certificates for Old Notes not exchanged are to be issued or sent, if different from the name and address of the person signing this Letter. In the case of issuance in a different name, the tax identification number of the person named must also be indicated. Holders tendering Old Notes by book-entry transfer may request that Old Notes not exchanged be credited to such account maintained at the Book-Entry Transfer Facility as such holder may designate. 5. TAX IDENTIFICATION NUMBER. Federal income tax law requires that a holder whose tendered Old Notes are accepted for exchange must provide the Exchange Agent (as payor) with his or her correct taxpayer identification number ("TIN"), which, in the case of a holder who is an individual, is his or her social security number. If the Exchange Agent is not provided with the correct TIN, the holder may be subject to a $50 penalty imposed by the Internal Revenue Service. In addition, delivery to the holder of the Exchange Notes pursuant to the Exchange Offer may be subject to back-up withholding. (If withholding results in overpayment of taxes, a refund may be obtained.) Exempt holders (including, among others, all corporations and certain foreign individuals) are not subject to these back-up withholding and reporting requirements. See the enclosed Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 for additional instructions. Under federal income tax laws, payments that may be made by the Issuer on account of Exchange Notes issued pursuant to the Exchange Offer may be subject to back-up withholding at a rate of 31%. In order to prevent back-up withholding, each tendering holder must provide his or her correct TIN by completing the "Substitute Form W-9" referred to above, certifying that the TIN provided is correct (or that the holder is awaiting a TIN) and that: (i) the holder has not been notified by the Internal Revenue Service that he or she is subject to back-up withholding as a result of failure to report all interest or dividends; (ii) the Internal Revenue Service has notified the holder that he or she is no longer subject to back-up withholding; or (iii) in accordance with the Guidelines, such holder is exempt from back-up withholding. If the Old Notes are in more than one name or are not in the name of the actual owner, consult the enclosed Guidelines for information on which TIN to report. 6. TRANSFER TAXES. The Issuer will pay all transfer taxes, if any, applicable to the transfer of Old Notes to it or its order pursuant to the Exchange Offer. If, however, the Exchange Notes or certificates for Old Notes not exchanged are to be delivered to, or are to be issued in the name of, any person other than the record holder, or if tendered certificates are recorded in the name of any person other than the person signing this Letter, or if a transfer tax is imposed by any reason other than the transfer of Old Notes to the Issuer or its order pursuant to the Exchange Offer, then the amount of such transfer taxes (whether imposed on the record holder or any other person) will be payable by the tendering holder. If satisfactory evidence of payment of taxes or exemption from taxes is not submitted with this Letter, the amount of transfer taxes will be billed directly to the tendering holder. Except as provided in this Instruction 6, it will not be necessary for transfer tax stamps to be affixed to the certificates listed in this Letter. 7. WAIVER OF CONDITIONS. The Issuer reserves the absolute right to amend or waive any of the specified conditions in the Exchange Offer in the case of any Old Notes tendered. 8. MUTILATED, LOST, STOLEN OR DESTROYED CERTIFICATES. Any holder whose certificates for Old Notes have been mutilated, lost, stolen or destroyed should contact the Exchange Agent at the address indicated above, for further instructions. 9. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions relating to the procedure for tendering, as well as requests for additional copies of the Prospectus or this Letter, may be directed to the Exchange Agent. IMPORTANT: THIS LETTER (TOGETHER WITH CERTIFICATES REPRESENTING TENDERED OLD NOTES OR A BOOK-ENTRY CONFIRMATION AND ALL OTHER REQUIRED DOCUMENTS) MUST BE RECEIVED BY THE EXCHANGE AGENT ON OR BEFORE THE EXPIRATION DATE. EX-99.2 21 EXHIBIT 99.2 ARGOSY GAMING COMPANY NOTICE OF GUARANTEED DELIVERY OF 13 1/4% FIRST MORTGAGE NOTES DUE 2004 As set forth in the Prospectus dated , 1996 (as the same may be amended or supplemented from time to time, the "Prospectus") of Argosy Gaming Company (the "Issuer") under "The Exchange Offer -- How to Tender" and in the Letter of Transmittal for 13 1/4% First Mortgage Notes due 2004 (the "Letter of Transmittal"), this form or one substantially equivalent hereto must be used to accept the Exchange Offer (as defined below) of the Issuer if: (i) certificates for the above-referenced Notes (the "Old Notes") are not immediately available, (ii) time will not permit all required documents to reach the Exchange Agent (as defined below) on or prior to the Expiration Date (as defined in the Prospectus) or (iii) the procedures for book-entry transfer cannot be completed on or prior to the Expiration Date. Such form may be delivered by hand or transmitted by telegram, telex, facsimile transmission or letter to the Exchange Agent. TO: FIRST NATIONAL BANK OF COMMERCE (the "Exchange Agent") BY FACSIMILE: (504) 623-1095 CONFIRM BY TELEPHONE TO: (504) 623-7581 BY MAIL: BY HAND DELIVERY/OVERNIGHT DELIVERY: Trust Security Services Trust Security Services First National Bank of Commerce 210 Baronne Street P.O. Box 60279 Basement Level New Orleans, Louisiana 70160-0279 New Orleans, Louisiana 70112 Attention: Rebecca Norton Attention: Rebecca Norton
Delivery of this instrument to an address other than as set forth above or transmittal of this instrument to a facsimile or telex number other then as set forth above does not constitute a valid delivery. Ladies and Gentlemen: The undersigned hereby tenders to the Issuer, upon the terms and conditions set forth in the Prospectus and the Letter of Transmittal (which together constitute the "Exchange Offer"), receipt of which are hereby acknowledged, the principal amount of Old Notes set forth below pursuant to the guaranteed delivery procedures described in the Prospectus and the Letter of Transmittal. The undersigned understands and acknowledges that the Exchange Offer will expire at 5:00 p.m., New York City time, on , 1996, unless extended by the Issuer. With respect to the Exchange Offer, "Expiration Date" means such time and date, or if the Exchange Offer is extended, the latest time and date to which the Exchange Offer is so extended by the Issuer. All authority herein conferred or agreed to be conferred by this Notice of Guaranteed Delivery shall survive the death or incapacity of the undersigned and every obligation of the undersigned under this Notice of Guaranteed Delivery shall be binding upon the heirs, personal representatives, executors, administrators, successors, assigns, trustees in bankruptcy and other legal representatives of the undersigned. SIGNATURES Principal amount of Old Notes Exchanged: $ Signature of Owner Certificate Nos. of Old Notes (if available) Signature of Owner (if more than one) Dated: , 1996 Total $ Name(s): IF OLD NOTES WILL BE DELIVERED BY BOOK-ENTRY TRANSFER, PROVIDE THE DEPOSITORY TRUST COMPANY (Please Print) ("DTC") ACCOUNT NO.: Address: Account No. (Include Zip Code) Area Code and Telephone No.: Capacity (full title), if signing in a representative capacity: Taxpayer Identification or Social Security No.:
GUARANTEE OF DELIVERY (NOT TO BE USED FOR SIGNATURE GUARANTEE) The undersigned, a member of a recognized signature guarantee medallion program within the meaning of Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), hereby guarantees (a) that the above-named person(s) own(s) the above-described securities tendered hereby within the meaning of Rule 10b-4 under the Exchange Act, (b) that such tender of the above-described securities complies with Rule 10b-4 under the Exchange Act, and (c) that delivery to the Exchange Agent of certificates tendered hereby, in proper form for transfer, or delivery of such certificates pursuant to the procedure for book-entry transfer, in either case with delivery of a properly completed and duly executed Letter of Transmittal (or facsimile thereof) and any other required documents, is being made within three New York Stock Exchange trading days after the date of execution of a Notice of Guaranteed Delivery of the above-named person. Name of Firm: (Authorized Signature) Title: Number and Street or P.O. Box Date: City State Zip Code Tel. No. Fax No.:
NOTE: DO NOT SEND CERTIFICATES REPRESENTING OLD NOTES WITH THIS NOTICE. OLD NOTES SHOULD BE SENT TO THE EXCHANGE AGENT TOGETHER WITH A PROPERLY COMPLETED AND DULY EXECUTED LETTER OF TRANSMITTAL. EX-99.3 22 EXHIBIT 99.3 ARGOSY GAMING COMPANY OFFER TO EXCHANGE $1,000 IN PRINCIPAL AMOUNT OF 13 1/4% FIRST MORTGAGE NOTES DUE 2004 WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT FOR EACH $1,000 IN PRINCIPAL AMOUNT OF OUTSTANDING 13 1/4% FIRST MORTGAGE NOTES DUE 2004 THAT WERE ISSUED AND SOLD IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED To Securities Dealers, Commercial Banks Trust Companies and Other Nominees: Enclosed for your consideration is a Prospectus dated , 1996 (as the same may be amended or supplemented from time to time, the "Prospectus") and a form of Letter of Transmittal (the "Letter of Transmittal") relating to the offer (the "Exchange Offer") by Argosy Gaming Company (the "Issuer") to exchange up to $235,000,000 in aggregate principal amount of its 13 1/4% First Mortgage Notes due 2004 (the "Exchange Notes") for up to $235,000,000 in aggregate principal amount of its outstanding 13 1/4% First Mortgage Notes due 2004 that were issued and sold in a transaction exempt from registration under the Securities Act of 1933, as amended (the "Old Notes"). We are asking you to contact your clients for whom you hold Old Notes registered in your name or in the name of your nominee, in addition, we ask you to contact your clients who, to your knowledge, hold Old Notes registered in their own name. The Issuer will not pay any fees or commissions to any broker, dealer or other person in connection with the solicitation of tenders pursuant to the Exchange Offer. You will, however, be reimbursed by the Issuer for customary mailing and handling expenses incurred by you in forwarding any of the enclosed materials to your clients. The Issuer will pay all transfer taxes, if any, applicable to the tender of Old Notes to it or its order, except as otherwise provided in the Prospectus and the Letter of Transmittal. Enclosed are copies of the following documents: 1. The Prospectus; 2. A Letter of Transmittal for your use in connection with the exchange of Old Notes and for the information of your clients (facsimile copies of the Letter of Transmittal may be used to exchange Old Notes); 3. A form of letter that may be sent to your clients for whose accounts you hold Old Notes registered in your name or the name of your nominee, with space provided for obtaining the clients' instructions with regard to the Exchange Offer; 4. A Notice of Guaranteed Delivery; 5. Guidelines of the Internal Revenue Service for Certification of Taxpayer Identification Number on Substitute Form W-9; and 6. A return envelope addressed to First National Bank of Commerce, the Exchange Agent. Your prompt action is requested. The Exchange offer will expire at 5:00 p.m., New York City time, on , , 1996, unless extended (the "Expiration Date"). Old Notes tendered pursuant to the Exchange Offer may be withdrawn, subject to the procedures described in the Prospectus, at any time prior to the Expiration Date. To tender Old Notes, certificates for Old Notes or a Book-Entry Confirmation (as defined in the Prospectus), a duly executed and properly completed Letter of Transmittal or a facsimile thereof, and any other required documents, must be received by the Exchange Agent as provided in the Prospectus and the Letter of Transmittal. Questions and requests for assistance with respect to the Exchange Offer or for additional copies of the enclosed material may be directed to the Exchange Agent at its address set forth in the Prospectus or at (504) 623-1640. Very truly yours, ARGOSY GAMING COMPANY NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR ANY PERSON AS AN AGENT OF THE ISSUER OR THE EXCHANGE AGENT, OR ANY AFFILIATE THEREOF, OR AUTHORIZE YOU OR ANY OTHER PERSON TO MAKE ANY STATEMENTS OR USE ANY DOCUMENT ON BEHALF OF ANY OF THEM WITH RESPECT TO THE EXCHANGE OFFER, EXCEPT FOR THE ENCLOSED DOCUMENTS AND THE STATEMENTS EXPRESSLY MADE IN THE PROSPECTUS AND THE LETTER OF TRANSMITTAL. 2 EX-99.4 23 EXHIBIT 99.4 ARGOSY GAMING COMPANY OFFER TO EXCHANGE $1,000 IN PRINCIPAL AMOUNT OF 13 1/4% FIRST MORTGAGE NOTES DUE 2004 WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT FOR EACH $1,000 IN PRINCIPAL AMOUNT OF OUTSTANDING 13 1/4% FIRST MORTGAGE NOTES DUE 2004 THAT WERE ISSUED AND SOLD IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED To Our Clients: Enclosed for your consideration is a Prospectus dated , 1996 (as the same may be amended or supplemented from time to time, the "Prospectus") and a form of Letter of Transmittal (the "Letter of Transmittal") relating to the offer (the "Exchange Offer") by Argosy Gaming Company (the "Issuer") to exchange up to $235,000,000 in aggregate principal amount of its 13 1/4% First Mortgage Notes due 2004 (the "Exchange Notes") for up to $235,000,000 in aggregate principal amount of its outstanding 13 1/4% First Mortgage Notes due 2004 that were issued and sold in a transaction exempt from registration under the Securities Act of 1933, as amended (the "Old Notes"). The material is being forwarded to you as the beneficial owner of Old Notes carried by us for your account or benefit but not registered in your name. A tender of any Old Notes may be made only by us as the registered holder and pursuant to your instructions. Therefore, the Issuer urges beneficial owners of Old Notes registered in the name of a broker, dealer, commercial bank, trust company or other nominee to contact such registered holder promptly if they wish to tender Old Notes in the Exchange Offer. Accordingly, we request instructions as to whether you wish us to tender any or all of the Old Notes held by us for your account, pursuant to the terms and conditions set forth in the Prospectus and Letter of Transmittal. We urge you to read carefully the Prospectus and Letter of Transmittal before instructing us to tender your Old Notes. Your instructions to us should be forwarded as promptly as possible in order to permit us to tender Old Notes on your behalf in accordance with the provisions of the Exchange Offer. The Exchange Offer will expire at 5:00 p.m., New York City time, on , , 1996, unless extended (the "Expiration Date"). Old Notes tendered pursuant to the Exchange Offer may be withdrawn, subject to the procedures described in the Prospectus, at any time prior to the Expiration Date. Your attention is directed to the following: 1. The Exchange Offer is for the exchange of $1,000 principal amount at maturity of the Exchange Notes for each $1,000 principal amount at maturity of the Old Notes, of which $235,000,000 aggregate principal amount of the Old Notes was outstanding as of , 1996. The terms of the Exchange Notes are substantially identical (including principal amount, interest rate, maturity, security and ranking) to the terms of the Old Notes, except that the Exchange Notes (i) are freely transferable by holders thereof (except as provided in the Prospectus) and (ii) are not entitled to certain registration rights and certain additional interest provisions which are applicable to the Old Notes under a registration rights agreement dated as of June 5, 1996 (the "Registration Rights Agreement") among the Company, the Guarantors and Bear, Stearns & Co. Inc., Donaldson, Lufkin & Jenrette Securities Corporation, BA Securities, Inc., and Deutsche Morgan Grenfell/C.J. Lawrence Inc. as initial purchasers. 2. THE EXCHANGE OFFER IS SUBJECT TO CERTAIN CONDITIONS, SEE "THE EXCHANGE OFFER -- CONDITIONS TO THE EXCHANGE OFFER" IN THE PROSPECTUS. 3. The Exchange Offer and withdrawal rights will expire at 5:00 p.m., New York City time, on , 1996, unless extended. 4. The Issuer has agreed to pay the expenses of the Exchange Offer except as provided in the Prospectus and the Letter of Transmittal. 5. Any transfer taxes incident to the transfer of Old Notes from the tendering Holder to the Issuer will be paid by the Issuer, except as provided in the Prospectus and the Letter of Transmittal. The Exchange Offer is not being made to nor will exchange be accepted from or on behalf of holders of Old Notes in any jurisdiction in which the making of the Exchange Offer or the acceptance thereof would not be in compliance with the laws of such jurisdiction. If you wish to have us tender any or all of your Old Notes held by us for your account or benefit, please so instruct us by completing, executing and returning to us the instruction form that appears below. The accompanying Letter of Transmittal is furnished to you for informational purposes only and may not be used by you to tender Old Notes held by us and registered in our name for your account or benefit. INSTRUCTIONS The undersigned acknowledge(s) receipt of your letter and the enclosed material referred to therein relating to the Exchange Offer of Argosy Gaming Company, including the Prospectus and the Letter of Transmittal. This form will instruct you to exchange the aggregate principal amount of Old Notes indicated below (or, if no aggregate principal amount is indicated below, all Old Notes) held by you for the account or benefit of the undersigned, pursuant to the terms and conditions set forth in the Prospectus and Letter of Transmittal. Aggregate Principal Amount of Old Notes to be exchanged $ * * I (we) understand that if I (we) sign these instruction forms without indicating an aggregate principal amount of Old Notes Signature(s) in the space above, all Old Notes held by you for my (our) account will be exchanged. (Please print name(s) and address above) Dated: , 1996 (Area Code & Telephone Number) (Taxpayer Identification or Social Security Number)
2 EX-99.5 24 EXHIBIT 99.5 GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER OF SUBSTITUTE FORM W-9 Guidelines for Determining the Proper Identification Number to Give the Payer--Social Security numbers have nine digits separated by two hyphens: i.e. 000-00-0000. Employee identification numbers have nine digits separated by only one hyphen: i.e. 00-0000000. The table below will help determine the number to give the payer.
------------------------------------------------------ GIVE THE SOCIAL SECURITY FOR THIS TYPE OF ACCOUNT: NUMBER OF-- ------------------------------------------------------ 1. An individual's account The individual 2. Two or more individuals The actual owner of the (joint account) account or, if combined funds, any one of the individuals (1) 3. Husband and wife (joint The actual owner of the account) account or, if joint funds, either person (1) 4. Custodian account of a The minor (2) minor (Uniform Gift to Minors Act) 5. Adult and minor (joint The adult or, if the account) minor is the only contributor, the minor (1) 6. Account in the name of The ward, minor, or guardian or committee incompetent person (3) for a designated ward, minor, or incompetent person 7. a. The usual revocable The grantor- trustee savings trust account (1) (grantor is also trustee) b. So-called trust The actual owner (1) account that is not a legal or valid trust under State law 8. Sole proprietorship The owner (4) account ------------------------------------------------------ GIVE THE EMPLOYER IDENTIFICATION NUMBER FOR THIS TYPE OF ACCOUNT: OF-- ------------------------------------------------------ 9. A valid trust, estate, The legal entity (Do or pension trust not furnish the identifying number of the person representative or trustee unless the legal entity itself is not designated in the account title) (5) 10. Corporate account The corporation 11. Religious, charitable, The organization or educational organization account 12. Partnership account The partnership held in the name of the business 13. Association, club, or The organization other tax-exempt organization 14. A broker or registered The broker or nominee nominee 15. Account with the The public entity Department of Agriculture in the name of a public entity (such as a State or local government, school district, or prison) that receives agricultural program payments
- -------------------------------------------------------------------------------- (1) List first and circle the name of the person whose number you furnish. (2) Circle the minor's name and furnish the minor's social security number. (3) Circle the ward's, minor's or incompetent person's name and furnish such person's social security number. (4) Show the name of the owner. (5) List first and circle the name of the legal trust, estate, or pension trust. Note: If no name is circled when there is more than one name, the number will be considered to be that of the first name listed. GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER OF SUBSTITUTE FORM W-9 PAGE 2 OBTAINING A NUMBER If you don't have a taxpayer identification number or you don't know your number, obtain Form SS-5, Application for a Social Security Number Card, or Form SS-4, Application for Employer Identification Number, at the local office of the Social Security Administration or the Internal Revenue Service and apply for a number. PAYEES EXEMPT FROM BACKUP WITHHOLDING Payees specifically exempted from backup withholding on ALL payments include the following: - A corporation - A financial institution - An organization exempt from tax under section 501(a). or an individual retirement plan. - The United States or any agency or instrumentality thereof. - A State, the District of Columbia, a possession of the United States, or any subdivision or instrumentality thereof. - A foreign government, a political subdivision of a foreign government, or any agency or instrumentality thereof. - An international organization or any agency, or instrumentality thereof. - A registered dealer in securities or commodities registered in the U.S. or a possession of the U.S. - A real estate investment trust. - A common trust fund operated by a bank under section 584(a). - An exempt charitable remainder trust, or a nonexempt trust describe in section 4947(a)(1). - An entity registered at all times under the Investment Company Act of 1940. - A foreign central bank of issue. Payments of dividends and patronage dividends not generally subject to backup withholding include the following: - Payments to nonresident aliens subject to withholding under section 1441. - Payments to partnerships not engaged in a trade or business in the U.S. and which have at least one nonresident partner. - Payments of patronage dividends where the amount received is not paid in money. - Payments made a by a certain foreign organizations. - Payments made to a nominee. Payments of interest not generally subject to backup withholding include the following: - Payments of Interest on obligations issued by individuals. Note: You may be subject to backup withholding if this interest is $600 or more and is paid in the course of the payer's trade or business and you have not provided your correct taxpayer identification number to the payer. - Payments of tax-exempt interest (including exempt- interest dividends under section 852). Payments described in section 6049(b)(5) to non-resident aliens. - Payments on tax-free covenant bonds under section 1451. - Payments made by certain foreign organizations. - Payments made to a nominee. Exempt Payees described above should file form W-9 to avoid possible erroneous backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, AND RETURN IT TO THE PAYER. IF THE PAYMENTS ARE INTEREST, DIVIDENDS, OR PATRONAGE DIVIDENDS, ALSO SIGN AND DATE THE FORM. Certain payments other than interest, dividends, and patronage dividends, that are not subject to information reporting are also not subject to backup withholding. For details, see the regulations under sections 6041, 6041A(a), 6045, and 6050A. PRIVACY ACT NOTICE--Section 6109 requires most recipients of dividend, interest or other payments to give taxpayer identification numbers to payers who must report the payments to IRS. IRS uses the numbers for identification purposes. Payers must be given the numbers whether or not recipients are required to file tax returns. Beginning January 1, 1993, payers must generally withhold 31% of taxable interest, dividend, and certain other payments to a payee who does not furnish a taxpayer identification number to a payer. Certain penalties may also apply. PENALTIES (1) PENALTIES FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER.--If you fail to furnish your taxpayer identification number to a payer, you are subject to a penalty of $50 for each such failure unless your failure is due to a reasonable cause and not to willful neglect. (2) FAILURE TO REPORT CERTAIN DIVIDEND AND INTEREST PAYMENTS.--If you fail to include any portion of an includible payment for interest, dividends, or patronage dividends in gross income, such failure will be treated as being due to negligence and will be subject to a penalty of 5% on any portion of an under-payment attributable to that failure unless there is clear and convincing evidence to the contrary. (3) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING.--If you make a false statement with no reasonable basis which results in no imposition of backup withholding, you are subject to a penalty of $500 (4) CRIMINAL PENALTY FOR FALSIFYING INFORMATION. --Falsifying certifications or affirmations may subject you to criminal penalties including fines and/or imprisonment. FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE SERVICE -----END PRIVACY-ENHANCED MESSAGE-----