Exhibit 10.2

Execution Version

 

BANK OF AMERICA, N.A.

MERRILL LYNCH, PIERCE,

FENNER & SMITH

INCORPORATED

One Bryant Park

New York, NY 10036

  

DEUTSCHE BANK TRUST

COMPANY

AMERICAS

DEUTSCHE BANK AG

CAYMAN ISLANDS

BRANCH

DEUTSCHE BANK

SECURITIES INC.

60 Wall Street

New York, NY 10005

  

JPMORGAN CHASE BANK,

N.A.

J.P. MORGAN SECURITIES

LLC

383 Madison Avenue

New York, NY 10179

May 16, 2012

Boyd Gaming Corporation

3883 Howard Hughes Parkway, Ninth Floor

Las Vegas, Nevada 89169

Attention: Josh Hirsberg,

Senior Vice President, Chief Financial Officer and Treasurer

Project Florida

Commitment Letter

Ladies and Gentlemen:

You have advised Bank of America, N.A. (“Bank of America”), Merrill Lynch,
Pierce, Fenner & Smith Incorporated (or its designated affiliate, “Merrill
Lynch” and, together with Bank of America, “BofAML”), Deutsche Bank Trust
Company Americas (“DBTCA”), Deutsche Bank AG Cayman Islands Branch (“DBCI”),
Deutsche Bank Securities Inc. (“DBSI” and together with DBTCA and DBCI,
collectively, “DB”), JPMorgan Chase Bank, N.A. (“JPMCB”) and J.P. Morgan
Securities LLC (“JPMS” and, together with JPMCB, “JPM” and, together with BofAML
and DB, the “Commitment Parties”, “we” or “us”) that Boyd Gaming Corporation
(“you” or “Boyd”) intends to acquire Peninsula Gaming, LLC, a Delaware limited
liability company (the “Target Company”) through a newly created wholly-owned
(directly or indirectly) unrestricted subsidiary of Boyd (“Acquisition Co.”).
Boyd, Acquisition Co. and the Target Company are sometimes collectively referred
to herein as the “Companies” and the acquisition of the Target Company is
referred to herein as the “Acquisition”.

In connection with the Acquisition, you have advised us that you intend to
(i) pay consideration in connection with the Acquisition and (ii) refinance
certain of the Target’s existing indebtedness as described below (collectively,
the “Target Refinancing”):

(a) the Target Company’s 8.375% Senior Secured Notes due 2015 (the “Existing
Secured Notes”) (including the applicable premium plus accrued and unpaid
interest to the repayment date plus out-of-pocket expenses) (the “Secured
Refinancing Amount”); and

(b) the Target Company’s 10.750% Senior Unsecured Notes due 2017 (the “Existing
Unsecured Notes”) (including the applicable premium plus accrued and unpaid
interest to the repayment date plus out-of-pocket expenses) (the “Unsecured
Refinancing Amount” and together with the Secured Refinancing Amount, the
“Refinancing Amount”),

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in each case, with the proceeds of (x) $850.0 million in senior secured credit
facilities of the Target Company (and/or Acquisition Co. in the event such
facilities are entered into prior to the Acquisition Closing Date (as defined
below)) (collectively, the “Target Senior Credit Facilities”), comprised of
(i) term loan facilities of $800.0 million and (ii) a revolving credit facility
of up to $50.0 million; and (y) $350.0 million in gross proceeds from the
issuance and sale by the Target Company (and/or Acquisition Co. in the event
such facilities are entered into prior to the Acquisition Closing Date) of
senior unsecured notes (the “Target Notes” or the “Notes”) or, if the Target
Notes are not issued and sold on or prior to the Acquisition Closing Date,
$350.0 million in senior unsecured bridge loans (the “Target Bridge Loans” and,
together with any Target Rollover Loans and Target Exchange Notes (each, as
defined in Annex II-A hereto), the “Target Bridge Facility” and together with
the Target Senior Credit Facilities, the “Target Facilities” or the
“Facilities”) made available to the Target Company (and/or Acquisition Co.) as
interim financing to the senior unsecured notes or any other securities of the
Target Company that may be issued after the Acquisition Closing Date for the
purpose of refinancing all or a portion of the outstanding amounts under the
Target Bridge Facility (the “Target Permanent Securities”). In the event the
Target Facilities are entered into prior to the Acquisition Closing Date,
Acquisition Co. will be the borrower under such Facilities, with Target Company
assuming such obligations on terms and conditions to be agreed upon the
Acquisition Closing Date.

Definitions. The Acquisition, the Target Senior Credit Facilities, the Target
Bridge Facility and the issuance and sale of the Notes and/or the entering into
and funding of the loans under the Target Senior Credit Facilities and/or the
Target Bridge Facility and all related transactions are hereinafter collectively
referred to as the “Transaction.” The date of the consummation of the
Acquisition is referred to herein as the “Acquisition Closing Date.”

1. Commitments.

(a) Target Company and/or Acquisition Co. Facilities.

(i) Each of Bank of America, DBTCA and JPMCB is pleased to advise you of its
several and not joint commitment to provide 37.5%, 25% and 37.5%, respectively,
of the principal amount of the Target Senior Credit Facilities (in such
respective capacity, the “Initial Target Senior Lenders”), and Bank of America’s
willingness to act as the sole and exclusive administrative agent (in such
capacity, the “Target Senior Administrative Agent”) for the Target Senior Credit
Facilities, in each case, all upon and subject to the terms and conditions set
forth in this letter and in Annexes I and III hereto (collectively, the “Target
Senior Secured Summaries of Terms”); and

(ii) each of Merrill Lynch, DBSI and JPMS is also pleased to advise you of its
willingness, and you hereby engage Merrill Lynch, DBSI and JPMS to act as joint
arrangers and joint bookrunning managers (in such capacity, the “Target Senior
Lead Arrangers”), and in connection therewith to form a syndicate of lenders for
the loans under the Target Senior Credit Facilities (collectively, the “Target
Senior Lenders”) reasonably acceptable to you, including Bank of America, DBTCA
and JPMCB; and

(iii) Each of Bank of America, DBCI and JPMCB is pleased to advise you of its
several and not joint commitment to provide 37.5%, 25% and 37.5%, respectively,
of the principal amount of the Target Bridge Facility (in such respective
capacity, the “Initial Target Bridge Lenders” and together with the Initial
Target Senior Lenders, the “Initial Target

 

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Lenders” or “Initial Lenders”) and Bank of America’s willingness to act as the
sole and exclusive administrative agent (in such capacity, the “Target Bridge
Administrative Agent” and together with the Target Senior Administrative Agent,
the “Administrative Agent”) for the Target Bridge Facility, all upon and subject
to the terms and conditions set forth in this letter and in Annexes II and III
hereto (collectively, the “Target Bridge Summary of Terms” and together with the
Target Senior Secured Summaries of Terms, the “Target Summaries of Terms”); and

(iv) Each of Merrill Lynch, DBSI and JPMS is also pleased to advise you of its
willingness, and you hereby engage Merrill Lynch, DBSI and JPMS to act as joint
arrangers and joint bookrunning managers (in such capacity, the “Target Bridge
Lead Arrangers” and together with the Target Senior Lead Arrangers, the “Target
Lead Arrangers” or “Lead Arrangers”), and in connection therewith to form a
syndicate of lenders for the Target Bridge Loans (collectively, the “Target
Bridge Lenders” and together with the Target Senior Lenders, the “Target
Lenders” of the “Lenders”) reasonably acceptable to you, including Bank of
America, DBCI and JPMCB.

(b) Left Lead. It is understood and agreed that Merrill Lynch will have “lead
left” placement on all marketing materials relating to the Facilities and will
perform the duties and exercise the authority customarily performed and
exercised by them in such role.

(c) Conditions Precedent. The commitments of the Initial Lenders in respect of
the Facilities and the undertaking of the Lead Arrangers to provide the services
described herein are subject to the satisfaction of each of the conditions
precedent set forth in Section 5 herein and in Annex III hereto. All capitalized
terms used and not otherwise defined herein shall have the same meanings as
specified therefor in the Summaries of Terms.

2. Syndication. The Lead Arrangers in consultation with you intend to commence
syndication of the Facilities promptly after your acceptance of the terms of
this Commitment Letter and the Fee Letter (as defined below), and the commitment
of the Commitment Parties hereunder shall be reduced dollar-for-dollar as and
when corresponding commitments are received from the Target Lenders, as the case
may be. You agree to actively assist and to use your commercially reasonable
efforts to cause the Target Company and its subsidiaries to actively assist the
Lead Arrangers in achieving a syndication of each such Facility that is
reasonably satisfactory to the Lead Arrangers and you. Such assistance shall
include (a) your providing and causing your advisors to provide, and using your
reasonable best efforts to cause the Target Company, its subsidiaries and its
advisors to provide, the Lead Arrangers and the Lenders upon request with all
information reasonably deemed necessary by the Lead Arrangers to complete such
syndication, including, but not limited to, information and evaluations prepared
by you, the Target Company and your and its advisors, or on your or their
behalf, relating to the Acquisition (including the Projections (as defined
below)), (b) assisting in the preparation of an information memorandum promptly
following the date hereof with respect to each of the Facilities in form and
substance customary for transactions of this type and otherwise reasonably
satisfactory to the Lead Arrangers (each, an “Information Memorandum”) and other
materials to be used in connection with the syndication of each such Facility
(collectively with the Summaries of Terms and any additional summary of terms
prepared for distribution to Public Lenders (as defined below), the “Information
Materials”), (c) your using your commercially reasonable efforts to ensure that
the syndication efforts of the Lead Arrangers benefit from your existing lending
relationships and the existing banking relationships of the Target Company,
(d) your obtaining, promptly following the date hereof, monitored public
corporate credit or family ratings of the Target Company after giving effect to
the Transaction and ratings of the Target Facilities and the Target Notes, in
each case, from Moody’s Investors Service, Inc. (“Moody’s”) and Standard &
Poor’s, a division of The McGraw-Hill Companies, Inc. (“S&P”) (collectively, the
“Ratings”), (e) you shall not, and shall use your commercially reasonable
efforts to ensure that none of the Companies shall, have syndicated or issued,

 

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attempted to syndicate or issue, announced or authorized the announcement of the
syndication or issuance of, or engaged in discussions concerning the syndication
or issuance of, any equity or debt of the Companies (other than (w) the
Facilities and the Notes, (x) the Holdco Note (as defined in the Acquisition
Agreement) (which, for the avoidance of doubt, may be issued at the closing of
the Acquisition but may not be syndicated or marketed), (y) certain commitments
(including incremental commitments) under Boyd’s Second Amended and Restated
Credit Agreement dated as of December 17, 2010 by and among Boyd, as borrower,
the lenders from time to time party thereto and Bank of America, N.A., as
administrative agent (as amended, restated, supplemented or otherwise modified
from time to time, the “Boyd Credit Agreement”) and refinancings of such
borrowings along with an offering of senior unsecured notes, and including any
renewals or refinancings of any existing debt, and (z) certain furniture,
fixture and equipment financings contemplated by the Acquisition Agreement with
respect to Kansas Star Casino) without the prior written consent of the Lead
Arrangers and (f) your otherwise assisting the Lead Arrangers in its syndication
efforts, including by making your officers and advisors, and using your
reasonable best efforts to make the officers and advisors of the Target Company,
available from time to time to attend and make presentations regarding the
business and prospects of the Companies, the Target Company and the Transaction
at one or more meetings of prospective Lenders.

Notwithstanding our right to syndicate the Facilities and receive commitments
with respect thereto, syndication of, or receipt of our commitments or
participations in respect of, all or any portion of our commitments hereunder
prior to the Acquisition Closing Date shall not be a condition to our
commitments.

It is understood and agreed that the Lead Arrangers will manage and control all
aspects of the syndication of the Facilities in consultation with you, including
decisions as to the selection of prospective Lenders and any titles offered to
proposed Lenders, when commitments will be accepted and the final allocations of
the commitments among the Lenders. It is understood that no Lender participating
in the Facilities will receive compensation from you in order to obtain its
commitment, except on the terms contained herein and in the Summaries of Terms,
the Fee Letter or as otherwise agreed between you and us. It is also understood
and agreed that the amount and distribution of the fees among the Lenders will
be at the sole and absolute discretion of the Lead Arrangers.

3. Information Requirements. You hereby represent, warrant and covenant that
(a) all information, other than Projections, that has been or is hereafter made
available to the Lead Arrangers or any of the Lenders by or on behalf of you or
any of your representatives relating to Boyd and its subsidiaries in connection
with any aspect of the Transaction (other than the Target Company and its
subsidiaries) (the “Information”) is and will be complete and correct in all
material respects and does not and will not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
contained therein not misleading, (b) all information, other than Projections,
that has been or is hereafter made available to the Lead Arrangers or any of the
Lenders relating to the Target Company and its subsidiaries (including
information made available by or on behalf of the Target Company or any of its
representatives) (the “Target Information”) is and will be, to the best of your
knowledge, complete and correct in all material respects and does not and will
not, to the best of your knowledge, contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements contained
therein not misleading, (c) all financial projections concerning the Companies
(other than the Target Company and its subsidiaries) that have been or are
hereafter made available to the Lead Arrangers or any of the Lenders by or on
behalf of you or any of your representatives (the “Projections”) have been or
will be prepared in good faith based upon reasonable assumptions and (d) all
financial projections concerning the Target Company and its subsidiaries that
have been or are hereafter made available to the Lead Arrangers or any of the
Lenders by or on behalf of the Target Company or its representatives (the
“Target Projections”) have been and will be, to the best of your knowledge,
prepared in good faith based upon reasonable assumptions. You agree that if at
any time prior to the Acquisition Closing Date and, if

 

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requested by us, for such period (not to exceed 90 days) thereafter as is
necessary to complete the syndication of the Facilities any of the
representations in the preceding sentence would be incorrect in any material
respect if the Information, the Target Information, the Projections and the
Target Projections were being furnished, and such representations were being
made, at such time, then you will promptly supplement, or cause to be
supplemented, the Information, the Target Information, the Projections and the
Target Projections so that such representations will be correct at such time. In
issuing this commitment and in arranging and syndicating each of the Facilities,
the Commitment Parties are and will be using and relying on the Information and
the Projections without independent verification thereof. The Information and
Projections provided to the Lead Arrangers prior to the date hereof are
hereinafter referred to as the “Pre-Commitment Information”.

You acknowledge that (a) the Lead Arrangers on your behalf will make available
Information Materials to the proposed syndicate of Lenders by posting the
Information Materials on IntraLinks or another similar electronic system and
(b) certain prospective Lenders (such Lenders, “Public Lenders”; all other
Lenders, “Private Lenders”) may have personnel that do not wish to receive
material non-public information (within the meaning of the United States federal
securities laws, “MNPI”) with respect to the Companies, their respective
affiliates or any other entity, or the respective securities of any of the
foregoing, and who may be engaged in investment and other market-related
activities with respect to such entities’ securities. If requested, you will
assist us in preparing an additional version of the Information Materials not
containing MNPI (the “Public Information Materials”) to be distributed to
prospective Public Lenders.

Before distribution of any Information Materials (a) to prospective Private
Lenders, you shall provide us with a customary letter in form and substance
reasonably satisfactory to both you and us authorizing the dissemination of the
Information Materials and (b) to prospective Public Lenders, you shall provide
us with a customary letter in form and substance reasonably satisfactory to both
you and us authorizing the dissemination of the Public Information Materials and
confirming the absence of MNPI therefrom, in each case, exculpating the
Commitment Parties and their respective affiliates with respect to liability
related to the use of the contents of the Information Materials by the
recipients thereof. In addition, at our request, you shall identify Public
Information Materials by clearly and conspicuously marking the same as “PUBLIC”.
To the extent any Information Materials are not so marked “PUBLIC”, we are
authorized by you treat such Information Materials as if they contained MNPI.

Notwithstanding the foregoing, you agree that the Lead Arrangers on your behalf
may distribute the following documents to all prospective Lenders regardless of
whether marked “PUBLIC”, unless you advise the Lead Arrangers in writing
(including by email) within a reasonable time prior to their intended
distributions that such material should only be distributed to prospective
Private Lenders: (a) administrative materials for prospective Lenders such as
lender meeting invitations and funding and closing memoranda, (b) notifications
of changes to the terms of the Facilities, (c) customary marketing term sheets
related to the Facilities and (d) other materials intended for prospective
Lenders after the initial distribution of the Information Materials, including
drafts and final versions of definitive documents with respect to the
Facilities. If you advise us that any of the foregoing items should be
distributed only to Private Lenders, then the Lead Arrangers will not distribute
such materials to Public Lenders without further discussions with you.

4. Fees and Indemnities.

(a) You agree to pay the fees set forth in the separate fee letter addressed to
you dated the date hereof from the Commitment Parties (the “Fee Letter”). You
also agree to reimburse the Commitment Parties from time to time on demand for
all reasonable out-of-pocket fees and expenses (including, but not limited to,
the reasonable fees, disbursements and other charges of counsel to the Lead
Arrangers

 

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and the Administrative Agents under each Facility, and of any special gaming and
local counsel to the Lenders retained by the Lead Arrangers, and due diligence
expenses) in connection with the Facilities, the syndication thereof, the
preparation of the Credit Documentation (as defined below) therefor and the
other transactions contemplated hereby, whether or not the Acquisition Closing
Date occurs or any Credit Documentation is executed and delivered or any
extensions of credit are made under any of the Facilities. You acknowledge that
we may receive a benefit, including without limitation, a discount, credit or
other accommodation, from any of such counsel based on the fees such counsel may
receive on account of their relationship with us including, without limitation,
fees paid pursuant hereto.

(b) You also agree to indemnify and hold harmless each of the Commitment
Parties, each other Lender and each of their affiliates, successors and assigns
and their respective officers, directors, employees, agents, advisors and other
representatives (each, an “Indemnified Party”) from and against (and will
reimburse each Indemnified Party as the same are incurred for) any and all
claims, damages, losses, liabilities and expenses (including, without
limitation, the reasonable fees, disbursements and other charges of counsel)
that may be incurred by or asserted or awarded against any Indemnified Party, in
each case arising out of or in connection with or by reason of (including,
without limitation, in connection with any investigation, litigation or
proceeding or preparation of a defense in connection therewith) (a) any aspect
of the Transaction or any related transaction and any of the other transactions
contemplated thereby or (b) the Facilities or any use made or proposed to be
made with the proceeds thereof (in all cases, whether or not caused or arising,
in whole or in part, out of the comparative, contributory or sole negligence of
the Indemnified Party), except to the extent such claim, damage, loss, liability
or expense is found in a final, non-appealable judgment by a court of competent
jurisdiction to have resulted from such Indemnified Party’s gross negligence or
willful misconduct. In the case of any claim, litigation, investigation or
proceeding (any of the foregoing, a “Proceeding”) to which the indemnity in this
paragraph applies, such indemnity shall be effective whether or not such
Proceeding is brought by you, your equity holders or creditors or an Indemnified
Party, whether or not an Indemnified Party is otherwise a party thereto and
whether or not any aspect of the Transaction is consummated. You also agree that
no Indemnified Party shall have any liability (whether direct or indirect, in
contract or tort or otherwise) to you, the Target Company or your or its
subsidiaries or affiliates or to your or its respective equity holders or
creditors or any other person arising out of, related to or in connection with
any aspect of the Transaction, except to the extent of direct (as opposed to
special, indirect, consequential or punitive) damages determined in a final,
non-appealable judgment by a court of competent jurisdiction to have resulted
from such Indemnified Party’s gross negligence or willful misconduct. It is
further agreed that the Commitment Parties shall only have liability to you (as
opposed to any other person), and that the Commitment Parties shall be severally
liable solely in respect of their respective commitments to the Facilities, on a
several, and not joint, basis with any other Lender, and that such liability
shall only arise to the extent damages have been caused by breach of the
Commitment Parties’ respective obligations hereunder to negotiate in good faith
the Credit Documentation on the terms set forth in this Commitment Letter and
the Fee Letter, as determined in a final, non-appealable judgment by a court of
competent jurisdiction. Notwithstanding any other provision of this Commitment
Letter, no Indemnified Party shall be liable for any damages arising from the
use by others of information or other materials obtained through electronic
telecommunications or other information transmission systems, other than for
direct, actual damages resulting from the gross negligence or willful misconduct
of such Indemnified Party as determined by a final, non-appealable judgment of a
court of competent jurisdiction. You shall not, without the prior written
consent of an Indemnified Party, effect any settlement of any pending or
threatened Proceeding against an Indemnified Party in respect of which indemnity
could have been sought hereunder by such Indemnified Party unless (i) such
settlement includes an unconditional release of such Indemnified Party from all
liability or claims that are the subject matter of such Proceeding and (ii) does
not include any statement as to any admission.

 

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5. Conditions to Financing.

The commitment of the Lenders in respect of the Target Facilities and the
undertaking of the Target Lead Arrangers to provide the services described
herein, in each case, are subject only to the satisfaction of each of the
conditions set forth in Annex III hereto and are subject to the negotiation,
execution and delivery of definitive documentation with respect to each such
Facility consistent with this Commitment Letter and the Fee Letter, customary
for transactions of such type and otherwise reasonably satisfactory to the Lead
Arrangers and the Lenders under the Facilities (the “Credit Documentation”).

Notwithstanding anything in this Commitment Letter, the Fee Letter, the Credit
Documentation or any other letter agreement or other undertaking concerning the
financing of the Transaction to the contrary, (1) the only representations the
accuracy of which shall be a condition to the availability of the Target
Facilities on the Acquisition Closing Date shall be (i) the representations made
by or with respect to the Target Company and its subsidiaries in the Acquisition
Agreement as are material to the interests of the Lenders, but only to the
extent that you have the right to decline to consummate the Acquisition pursuant
to the Acquisition Agreement as a result of a breach of such representations in
the Acquisition Agreement (the “Acquisition Agreement Representations”) and
(ii) the Specified Representations (as defined below) and (2) the terms of the
Credit Documentation shall be in a form such that they do not impair the
availability of the Facilities on the Acquisition Closing Date if the conditions
set forth in this Section 5 and in Annex III hereto are satisfied (it being
understood that to the extent any security interest in the intended collateral
(other than any collateral the security interest in which may be perfected by
the filing of a UCC financing statement, the filing of short-form security
agreements with the United States Patent and Trademark Office or the United
States Copyright Office or the delivery of certificates evidencing equity
interests) is not provided on the Acquisition Closing Date, as applicable, after
your use of commercially reasonable efforts to do so, then the provision of such
perfected security interest(s) shall not constitute a condition precedent to the
availability of the Target Senior Credit Facilities on the Acquisition Closing
Date but shall be required to be delivered after the Acquisition Closing Date
pursuant to arrangements to be mutually agreed by the parties hereto acting
reasonably). For purposes hereof, “Specified Representations” means the
representations and warranties relating to organizational status, organizational
power and authority to enter into the Credit Documentation, due authorization,
execution, delivery and enforceability of the Credit Documentation, no conflicts
with or consents required under charter documents, solvency, Federal Reserve
margin regulations, the U.S.A. Patriot Act, the Investment Company Act, status
of the Facilities as senior debt (to the extent applicable) and, subject to the
parenthetical set forth in clause (ii) of the immediately preceding sentence,
the creation, validity, priority and perfection of the security interests
granted in the intended collateral.

6. Confidentiality and Other Obligations. This Commitment Letter and the Fee
Letter and the contents hereof and thereof are confidential and, may not be
disclosed in whole or in part to any person or entity without our prior written
consent except (i) on a confidential basis to Boyd’s accountants, attorneys and
other professional advisors in connection with the Transaction, (ii) pursuant to
the order of any court or administrative agency in any pending legal or
administrative proceeding, or otherwise as required by applicable law or
compulsory legal process based on the reasonable advice of your legal counsel
(in which case you agree to inform us promptly thereof), and (iii) this
Commitment Letter and the Fee Letter (redacted in a manner reasonably
satisfactory to us) may be disclosed on a confidential basis to the respective
boards of directors and advisors of the Target Company in connection with their
consideration of the Transaction.

The Commitment Parties shall use all confidential information provided to them
by or on behalf of you hereunder solely for the purpose of providing the
services which are the subject of this letter agreement and otherwise in
connection with the Transaction and shall treat confidentially all such
information; provided, however, that nothing herein shall prevent the Commitment
Parties from disclosing any such information (i) pursuant to the order of any
court or administrative agency or in any pending legal or administrative
proceeding, or otherwise as required by applicable law or compulsory legal
process (in

 

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which case the Commitment Parties agree to inform you promptly thereof only to
the extent permitted by law and other than in the case of ordinary course audits
or examinations), (ii) upon the request or demand of any regulatory authority
having jurisdiction over the Commitment Parties or any of their respective
affiliates, (iii) to the extent that such information becomes publicly available
other than by reason of disclosure in violation of this agreement by the
Commitment Parties, (iv) to the Commitment Parties’ affiliates, employees, legal
counsel, independent auditors and other experts or agents who need to know such
information in connection with the Transaction and are informed of the
confidential nature of such information, (v) for purposes of establishing a “due
diligence” defense, (vi) to the extent that such information is received by the
Commitment Parties from a third party that is not to the Commitment Parties’
knowledge subject to confidentiality obligations to you, (vii) to the extent
that such information is independently developed by the Commitment Parties,
(viii) to the applicable rating agencies in connection with any rating of the
Facilities and/or Notes or (ix) to potential Lenders, participants or assignees
who agree to be bound by the terms of this paragraph (or language substantially
similar to this paragraph or as otherwise reasonably acceptable to you and each
Commitment Party, including as may be agreed in any confidential information
memorandum or other marketing material). This paragraph shall terminate on the
second anniversary of the date hereof.

You acknowledge that the Commitment Parties or their affiliates may be providing
financing or other services to parties whose interests may conflict with yours.
The Commitment Parties agree that they will not furnish confidential information
obtained from you to any of their other customers and will treat confidential
information relating to the Companies and their respective affiliates with the
same degree of care as they treat their own confidential information. The
Commitment Parties further advise you that they will not make available to you
confidential information that they have obtained or may obtain from any other
customer. In connection with the services and transactions contemplated hereby,
you agree that the Commitment Parties are permitted to access, use and share
with any of their bank or non-bank affiliates, agents, advisors (legal or
otherwise) or representatives any information concerning the Companies or any of
their respective affiliates that is or may come into the possession of the
Commitment Parties or any of such affiliates.

In connection with all aspects of each transaction contemplated by this
Commitment Letter, you acknowledge and agree, and acknowledge your affiliates’
understanding, that: (i) each of the Target Facilities and any related arranging
or other services described in this Commitment Letter is an arm’s-length
commercial transaction between you and your affiliates, on the one hand, and the
Commitment Parties, on the other hand, (ii) the Commitment Parties have not
provided any legal, accounting, regulatory or tax advice with respect to any of
the transactions contemplated hereby and you have consulted your own legal,
accounting, regulatory and tax advisors to the extent you have deemed
appropriate, (iii) you are capable of evaluating, and understand and accept, the
terms, risks and conditions of the transactions contemplated hereby, (iv) in
connection with each transaction contemplated hereby and the process leading to
such transaction, each Commitment Party has been, is, and will be acting solely
as a principal and has not been, is not, and will not be acting as an advisor,
agent or fiduciary, for you or any of your affiliates, stockholders, creditors
or employees or any other party, (v) the Commitment Parties have not assumed and
will not assume an advisory, agency or fiduciary responsibility in your or your
affiliates’ favor with respect to any of the transactions contemplated hereby or
the process leading thereto (irrespective of whether any of the Commitment
Parties has advised or is currently advising you or your affiliates on other
matters) and the Commitment Parties have no obligation to you or your affiliates
with respect to the transactions contemplated hereby except those obligations
expressly set forth in this Commitment Letter and (vi) the Commitment Parties
and their respective affiliates may be engaged in a broad range of transactions
that involve interests that differ from yours and those of your affiliates, and
the Commitment Parties have no obligation to disclose any of such interests to
you or your affiliates. To the fullest extent permitted by law, you hereby waive
and release any claims that you may have against the Commitment Parties with
respect to any breach or alleged breach of agency or fiduciary duty in
connection with any aspect of any transaction contemplated by this Commitment
Letter.

 

-8-

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The Commitment Parties hereby notify the Companies that pursuant to the
requirements of the USA PATRIOT Act, Title III of Pub. L. 107-56 (signed into
law October 26, 2001) (the “U.S.A. Patriot Act”), each of them is required to
obtain, verify and record information that identifies the Companies, which
information includes your name and address and other information that will allow
the Commitment Parties, as applicable, to identify the Companies in accordance
with the U.S.A. Patriot Act.

Boyd agrees that the Lead Arrangers may place advertisements in financial and
other newspapers and journals at the Lead Arrangers’ expense describing the Lead
Arrangers’ involvement in and services rendered with respect to the Transaction
subject to customary confidentiality and disclosure restrictions.

7. Survival of Obligations. The provisions of Sections 2, 3, 4, 6 and 8 shall
remain in full force and effect regardless of whether any Credit Documentation
shall be executed and delivered and notwithstanding the termination of this
Commitment Letter or any commitment or undertaking of the Commitment Parties
hereunder, except that the provisions of Sections 2 and 3 shall not survive if
the commitments and undertakings of the Commitment Parties with respect thereto
are terminated prior to the effectiveness of the Target Facilities and funding
thereof.

8. Miscellaneous. This Commitment Letter and the Fee Letter may be executed in
multiple counterparts and by different parties hereto in separate counterparts,
all of which, taken together, shall constitute an original. Delivery of an
executed counterpart of a signature page to this Commitment Letter or the Fee
Letter by telecopier, facsimile or other electronic transmission (e.g., a “pdf”
or “tiff”) shall be effective as delivery of a manually executed counterpart
thereof. Headings are for convenience of reference only and shall not affect the
construction of, or be taken into consideration when interpreting, this
Commitment Letter or the Fee Letter.

This Commitment Letter and the Fee Letter and any claim, controversy or dispute
arising out of relating to this Commitment Letter or the Fee Letter shall be
governed by, and construed in accordance with, the laws of the State of New
York. Each party hereto hereby irrevocably waives any and all right to trial by
jury in any action, proceeding or counterclaim (whether based on contract, tort
or otherwise) arising out of or relating to this Commitment Letter, the Fee
Letter, the Transaction and the other transactions contemplated hereby and
thereby or the actions of the Commitment Parties in the negotiation, performance
or enforcement hereof. Each party hereto hereby irrevocably and unconditionally
submits to the exclusive jurisdiction of any New York State court or Federal
court of the United States of America sitting in the Borough of Manhattan in New
York City in respect of any suit, action or proceeding arising out of or
relating to the provisions of this Commitment Letter, the Fee Letter, the
Transaction and the other transactions contemplated hereby and thereby and
irrevocably agrees that all claims in respect of any such suit, action or
proceeding may be heard and determined in any such court. The parties hereto
agree that service of any process, summons, notice or document by registered
mail addressed to you shall be effective service of process against you for any
suit, action or proceeding relating to any such dispute. Each party hereto
waives, to the fullest extent permitted by applicable law, any objection that it
may now or hereafter have to the laying of the venue of any such suit, action or
proceedings 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. A final judgment in any such suit, action or proceeding brought in any
such court may be enforced in any other courts to whose jurisdiction you are or
may be subject by suit upon judgment.

 

-9-

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This Commitment Letter, together with the Fee Letter, embodies the entire
agreement and understanding among the parties hereto and your affiliates with
respect to the Facilities and supersedes all prior agreements and understandings
relating to the subject matter hereof. No party has been authorized by the
Commitment Parties to make any oral or written statements that are inconsistent
with this Commitment Letter. Neither this Commitment Letter (including the
attachments hereto) nor the Fee Letter may be amended or any term or provision
hereof or thereof waived or modified except by an instrument in writing signed
by each of the parties hereto.

This Commitment Letter may not be assigned by you without our prior written
consent (and any purported assignment without such consent will be null and
void), is intended to be solely for the benefit of the parties hereto and is not
intended to confer any benefits upon, or create any rights in favor of, any
person other than the parties hereto (and the Indemnified Parties). Each
Commitment Party may assign its commitment hereunder, in whole or in part, to
any of its affiliates or to any Lender.

Please indicate your acceptance of the terms of the Facilities set forth in this
Commitment Letter and the Fee Letter by returning to us executed counterparts of
this Commitment Letter and the Fee Letter with respect to the Facilities not
later than 5:00 p.m. (New York City time) on May 16, 2012, whereupon the
undertakings of the parties with respect to the Facilities shall become
effective to the extent and in the manner provided hereby. This offer shall
terminate if not so accepted by you at or prior to that time. Upon your
acceptance of this offer, thereafter the commitments and undertakings of the
Commitment Parties hereunder will expire on the earliest of (a) December 31,
2012, (b) the termination of the Acquisition Agreement (as defined in Annex III
hereto) and (c) the Target Refinancing without the use of the Target Facilities.

[The remainder of this page intentionally left blank.]

 

-10-

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We are pleased to have the opportunity to work with you in connection with this
important financing.

 

Very truly yours, BANK OF AMERICA, N.A. By:   /s/ Daniel J. Kelly   Name: Daniel
J. Kelly   Title: Managing Director

 

MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED By:   /s/ Daniel J. Kelly  
Name: Daniel J. Kelly   Title: Managing Director

Signature Page to Commitment Letter – Target Refinancing

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DEUTSCHE BANK TRUST COMPANY AMERICAS By:   /s/ Stefan Parsch   Name: Stefan
Parsch   Title: Director

 

By:   /s/ David J. Bell   Name: David J. Bell   Title: Managing Director

 

DEUTSCHE BANK AG CAYMAN ISLANDS BRANCH By:   /s/ Stefan Parsch   Name: Stefan
Parsch   Title: Director

 

By:   /s/ David J. Bell   Name: David J. Bell   Title: Managing Director

 

DEUTSCHE BANK SECURITIES INC. By:   /s/ Nicholas Hayes   Name: Nicholas Hayes  
Title: Managing Director

 

By:   /s/ Frank Fazio   Name: Frank Fazio   Title: Managing Director

Signature Page to Commitment Letter – Target Refinancing

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JPMORGAN CHASE BANK, N.A. By:   /s/ Mohammad S. Hasan   Name: Mohammad S. Hasan
  Title: Vice President

 

J.P. MORGAN SECURITIES LLC By:   /s/ Jack D. Smith   Name: Jack D. Smith  
Title: Managing Director

Signature Page to Commitment Letter – Target Refinancing

--------------------------------------------------------------------------------

The provisions of this Commitment Letter are accepted and agreed to as of the
date first written above: BOYD GAMING CORPORATION By:   /s/ Josh Hirsberg  
Name: Josh Hirsberg   Title: SVP, CFO

Signature Page to Commitment Letter – Target Refinancing

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ANNEX I

SUMMARY OF TERMS AND CONDITIONS

TARGET SENIOR CREDIT FACILITIES

Capitalized terms not otherwise defined herein have the same meanings as
specified therefor in the Commitment Letter to which this Annex I is attached.

 

Borrower:    (x) The Target Company if the Target Senior Credit Facilities are
entered into on the Acquisition Closing Date and (y) Acquisition Co. if the
Target Senior Credit Facilities are entered into before the Acquisition Closing
Date (the applicable date of the funding of the Target Senior Credit Facilities,
the “Target Senior Credit Facilities Funding Date”), with the obligations of
Acquisition Co. to be assumed (the “Assumption”) by the Target Company on the
Acquisition Closing Date (for purposes of this Annex I, in each case, including
after giving effect to the Assumption, the “Applicable Borrower”). Guarantors:
   Same as existing and future Guarantors of the Existing Unsecured Notes and
Existing Secured Notes. Administrative
and Collateral Agent:    Bank of America, N.A. (“Bank of America”) will act as
sole and exclusive administrative and collateral agent for the Target Senior
Lenders (the “Target Senior Administrative Agent”). Joint Arrangers
and Joint Bookrunning Managers:    Merrill Lynch, Pierce, Fenner & Smith
Incorporated (“Merrill Lynch”), Deutsche Bank Securities Inc. (“DBSI”) and J.P.
Morgan Securities LLC (“JPMS”) will act as joint arrangers and joint bookrunning
managers for the Target Senior Credit Facilities (in such capacity, the “Target
Senior Lead Arrangers”). Lenders:    Bank of America, N.A., Deutsche Bank Trust
Company Americas (“DBTCA”) and JPMorgan Chase Bank, N.A and other banks,
financial institutions and institutional lenders selected by the Target Senior
Lead Arrangers and reasonably acceptable to the Applicable Borrower (the “Target
Senior Lenders”). Target Senior Credit Facilities:    An aggregate principal
amount of $850.0 million will be available through the following facilities:   
Target Senior Term B Loan Facility: an $800.0 million term loan facility, all of
which will be drawn on the Target Senior Credit Facilities Funding Date (the
“Target Senior Term Loan Facility”).    Target Revolving Credit Facility: a
$50.0 million “super-priority” revolving credit facility (the “Target Revolving
Credit Facility”), available from time to time on or after the Target Senior
Credit Facilities Funding Date until the fifth anniversary of the Target Senior
Credit

 

Annex I-1

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   Facilities Funding Date, and to include a sublimit to be determined for the
issuance of standby and commercial letters of credit (each, a “Letter of
Credit”). Letters of Credit will be initially issued by Bank of America (in such
capacity, the “Issuing Bank”), and each of the Target Senior Lenders under the
Target Revolving Credit Facility will purchase an irrevocable and unconditional
participation in each Letter of Credit. Up to an amount to be agreed may be
borrowed on the Target Senior Credit Facilities Funding Date. Letters of Credit
may be issued on the Target Senior Credit Facilities Funding Date in order to
backstop, roll over or replace letters of credit outstanding under the existing
credit facility of the Applicable Borrower.    The Target Senior Credit
Facilities may initially be funded with an original discount of 1.0% of the
original aggregate principal amount (which may, at the option of the Target
Senior Lead Arrangers, be structured as an upfront fee). Purpose:    The
proceeds of the Target Senior Credit Facilities, together with proceeds from the
Target Bridge Facility, shall be used to fund the Acquisition and Target
Refinancing and to pay transaction fees and expenses. Interest Rates:    The
interest rates per annum (calculated on a 360-day basis) applicable to the
Target Senior Credit Facilities will be, at the option of the Applicable
Borrower as set forth below at either LIBOR or the Base Rate plus the Applicable
Margin set forth in the Fee Letter.    The Applicable Borrower may select
interest periods of one, two, three or six months (and, if agreed to by all
relevant Target Senior Lenders for the Target Senior Term Loan Facility or the
Target Revolving Credit Facility, as applicable, nine or twelve months or such
other period) for LIBOR advances. Interest shall be payable at the end of the
selected interest period, but no less frequently than quarterly.    “LIBOR” and
“Base Rate” will have meanings customary and appropriate for financings of this
type; provided that LIBOR with respect to the Target Senior Term Loan Facility
will be deemed to be not less than 1.25% per annum and Base Rate will be deemed
to be not less than 100 basis points higher than one-month LIBOR.    During the
continuance of an event of default or a payment default, interest will accrue
(i) on the principal of any loan at a rate of 200 basis points in excess of the
rate otherwise applicable to such loan and (ii) on any other outstanding amount
at a rate of 200 basis points in excess of the non-default interest rate then
applicable to Base Rate loans under the Target Revolving Credit Facility, and
will be payable on demand.    If the Applicable Borrower is Acquisition Co., the
first interest payment will be due on a date that is after the Acquisition
Closing Date.

 

Annex I-2

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Commitment Fee:    Commencing on the Target Senior Credit Facilities Funding
Date, a commitment fee of 0.50% per annum (calculated on a 360-day basis) shall
be payable on the actual daily unused portions of the Target Revolving Credit
Facility, such fee to be payable quarterly in arrears and on the date of
termination or expiration of the commitments. Calculation of Interest and Fees:
   Other than calculations in respect of interest at the Base Rate (which shall
be made on the basis of actual number of days elapsed in a 365/366 day year),
all calculations of interest and fees shall be made on the basis of actual
number of days elapsed in a 360-day year. Cost and Yield Protection:   
Customary for transactions and facilities of this type, including, without
limitation, in respect of breakage or redeployment costs incurred in connection
with prepayments, changes in capital adequacy and capital requirements or their
interpretation, illegality, unavailability, reserves without proration or offset
and payments free and clear of withholding or other taxes. Letter of Credit
Fees:    Letter of Credit fees equal to the Applicable Margin from time to time
on LIBOR advances under the Target Revolving Credit Facility on a per annum
basis will be payable quarterly in arrears and shared proportionately by the
Target Senior Lenders under the Target Revolving Credit Facility. In addition, a
fronting fee of 0.25% per annum will be payable to the Issuing Bank for its own
account, as well as customary issuance and documentary fees. Both the Letter of
Credit fees and the fronting fees will be calculated on the amount available to
be drawn under each outstanding Letter of Credit. Maturity:    Target Senior
Term Facility: Five years after the Target Senior Credit Facilities Funding
Date.    Target Revolving Credit Facility: Five years after the Target Senior
Credit Facilities Funding Date. Scheduled Amortization:    Target Senior Term
Loan Facility: The Target Senior Term Facility will be subject to quarterly
amortization of principal equal to 0.25% of the original aggregate principal
amount of the Target Senior Term Loan Facility for the first 4.75 years, with
the balance payable at final maturity (collectively, the “Scheduled
Amortization”).    Target Revolving Credit Facility: None. Incremental
Facilities:    The Credit Documentation will permit the Applicable Borrower to
add one or more incremental term loan facilities to the Target Senior Credit
Facilities (each, an “Target Incremental Term Facility”) and/or increase
commitments under the Target Revolving Credit Facility (any such increase, an
“Target Incremental Revolving Facility”; the Target Incremental Term Facilities
and the Target Incremental Revolving Facilities are collectively referred to as
“Target Incremental Facilities”) in an aggregate amount of up to $50.0 million
(of which no more than

 

Annex I-3

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   an amount to be agreed may be under Target Incremental Revolving Facilities);
provided that (i) no Lender will be required to participate in any such Target
Incremental Facility, (ii) no event of default or default exists or would exist
after giving effect thereto, (iii) the representations and warranties in the
Credit Documentation shall be true and correct in all material respects, (iv) on
a pro forma basis on the date of incurrence and after giving effect thereto
(assuming, in the case of an Incremental Revolving Facility, the full drawing
thereunder), the Applicable Borrower shall be in compliance with a secured
leverage ratio that is 0.25x less than such ratio required by the financial
covenant as of the last day of the most recently ended fiscal quarter, (v) the
maturity date of any such Target Incremental Term Facility shall be no earlier
than the maturity date for the Target Senior Term Loan Facility, (vi) the
weighted average life to maturity of any Target Incremental Term Facility shall
be no shorter than the weighted average life to maturity of the Target Senior
Term Loan Facility, (vii) the interest margins for the Target Incremental Term
Facility shall be determined by the Applicable Borrower and the lenders of the
Target Incremental Term Facility; provided that in the event that the interest
margins for any Target Incremental Term Facility are greater than the Applicable
Margins for the Target Senior Term Loan Facility by more than 25 basis points,
then the Applicable Margins for the Target Senior Term Loan Facility shall be
increased to the extent necessary so that the interest margins for the Target
Incremental Term Facility are not more than 25 basis points higher than the
Applicable Margins for the Target Senior Term Loan Facility, and the Applicable
Margins for the Target Revolving Credit Facility shall be increased by a like
amount; provided that such “MFN” shall not apply to any Target Incremental
Facility that is secured on a junior basis to the Target Senior Credit
Facilities; provided, further, that in determining the interest margins
applicable to the Target Senior Term Loan Facility and the Applicable Margins
for the Target Incremental Term Facility, (x) original issue discount (“OID”) or
upfront fees (which shall be deemed to constitute like amounts of OID) payable
by the Applicable Borrower for the account of the Target Lenders of the Target
Senior Term Loan Facility or the Target Incremental Term Facility in the primary
syndication thereof shall be included (with OID being equated to interest based
on an assumed four-year life to maturity), (y) customary arrangement or
commitment fees payable to the Target Lead Arrangers (or their affiliates) in
connection with the Target Senior Term Loan Facility or to one or more arrangers
(or their affiliates) of the Target Incremental Term Facility shall be excluded,
and (z) if the LIBOR or Base Rate floor for the Target Incremental Term Facility
is greater than the LIBOR or Base Rate floor, respectively, for the existing
Target Senior Term Loan Facility, the difference between such floor for the
Target Incremental Term Facility and the existing Target Senior Term Loan
Facility shall be equated to an increase in the Applicable Margin for purposes
of this clause (vii), (viii) each Target Incremental Facility may be secured by
either a pari passu or junior lien on the collateral securing the Target Senior
Credit Facilities in each case on terms and pursuant to documentation reasonably
satisfactory to the Target Senior

 

Annex I-4

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   Administrative Agent and (ix) any Target Incremental Revolving Facility shall
be on terms and pursuant to documentation applicable to the Target Revolving
Credit Facility and any Target Incremental Term Facility shall be on terms and
pursuant to documentation to be determined, provided that, to the extent such
terms and documentation are not consistent with the Target Senior Term Loan
Facility (except to the extent permitted by clause (iv), (v) or (vi) above),
they shall be reasonably satisfactory to the Target Senior Administrative Agent.
The Applicable Borrower shall seek commitments in respect of any Target
Incremental Facility from existing Target Lenders or from additional banks,
financial institutions and other institutional lenders reasonably acceptable to
the Target Senior Administrative Agent who will become Target Lenders in
connection therewith. Mandatory Prepayments
and Commitment Reductions:    In addition to the amortization set forth above,
(a) all net cash proceeds from sales of property and assets of the Target
Company or any of its subsidiaries (including sales or issuances of equity
interests by subsidiaries of the Target Company but excluding sales of inventory
in the ordinary course of business and other exceptions and limitations
(including reinvestment periods) to be agreed in the Credit Documentation) and
(b) 50% of Excess Cash Flow (to be defined but will be after deducting mandatory
amortization payments and any management fees to Boyd) of the Applicable
Borrower and its subsidiaries (with stepdowns to be agreed) shall be applied to
the prepayment of (and permanent reduction of the commitments under) the Target
Senior Credit Facilities in the following manner: first, ratably to the
principal repayment installments of the Target Senior Term Loan Facility on a
pro rata basis and, second, to the Target Revolving Credit Facility. Excess Cash
Flow shall be payable annually beginning with calendar year 2013, and shall be
payable after audited financial statements are final. Optional Prepayments and
Commitment Reductions:    The Target Senior Credit Facilities may be prepaid at
any time in whole or in part without premium or penalty, upon written notice, at
the option of the Applicable Borrower, except that any prepayment of LIBOR
advances other than at the end of the applicable interest periods therefor shall
be made with reimbursement for any funding losses and redeployment costs of the
Target Senior Lenders resulting therefrom. Each optional prepayment of the
Target Senior Term Loan Facilities shall be applied to the scheduled
amortization payments of the Target Senior Term Loan Facility on a pro rata
basis. The unutilized portion of any commitment under the Target Senior Credit
Facilities may be reduced permanently or terminated by the Applicable Borrower
at any time without penalty. Notwithstanding the foregoing, prior to the first
anniversary of the Funding Date, any prepayments accompanied by a repricing of
the Target Senior Term Loan Facility shall be accompanied by a 1% prepayment
premium.

 

Annex I-5

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Security:    Substantially the same as the collateral securing the obligations
under the Existing Secured Notes (which shall include, for the avoidance of
doubt, customer lists and databases). Conditions Precedent to Closing:    Those
specified in the Commitment Letter (including Annex III hereto). Conditions
Precedent to Each Borrowing under the Target Senior Credit Facilities:    Those
set forth in the Commitment Letter (including Annex III hereto).    After the
Acquisition Closing Date, each borrowing or issuance or renewal of a Letter of
Credit under the Target Senior Credit Facilities will be subject to satisfaction
of the following conditions precedent: (i) all of the representations and
warranties in the Credit Documentation shall be true and correct as of the date
of such extension of credit (subject to a materiality qualification) and (ii) no
default or event of default under the Credit Documentation shall have occurred
and be continuing or would result from such extension of credit. Representations
and Warranties:    Usual and customary for transactions of this type, and others
deemed appropriate by the Target Senior Lead Arrangers, and substantially
consistent with the Boyd Credit Agreement. Covenants:    Usual and customary
affirmative, negative and financial covenants (applicable to the Applicable
Borrower and its subsidiaries that are not designated as “unrestricted
subsidiaries”) for a transaction of this type, and others deemed appropriate by
the Target Senior Lead Arrangers, including, without limitation, the following:
  

(a)    Affirmative Covenants: (i) Compliance with laws and regulations
(including, without limitation, ERISA and environmental laws); (ii) maintenance
of appropriate and adequate insurance; (iii) preservation of corporate
existence, rights (charter and statutory), franchises, permits, licenses and
approvals; (iv) visitation and inspection rights; (v) keeping of proper books in
accordance with generally accepted accounting principles; (vi) maintenance of
properties; (vii) performance of leases, related documents and other material
agreements; (viii) further assurances as to perfection and priority of security
interests; (ix) additional guarantors and additional collateral and (x)
customary financial and other reporting requirements (including, without
limitation, audited annual financial statements and quarterly unaudited
financial statements, notices of defaults, covenant compliance certificates,
notices of material litigation and proceedings, material environmental actions
and liabilities and material ERISA and tax events and liabilities, and other
business and financial information as any Target Senior Lender shall reasonably
request); in each of the foregoing cases with such materiality and/or Material
Adverse Effect qualifiers as may be agreed upon in the Credit Documentation.

 

Annex I-6

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(b)    Negative Covenants: Restrictions on (i) liens; (ii) debt (other than the
Target Notes or the Target Bridge Loans, as the case may be, and, in the case of
the Target Bridge Loans, Target Permanent Securities in an initial principal
amount sufficient to refinance the outstanding Target Bridge Loans), guarantees
or other contingent obligations (including, without limitation, the
subordination of all intercompany indebtedness on terms satisfactory to the
Target Senior Lenders); (iii) mergers and consolidations; (iv) sales, transfers
and other dispositions of property and assets (other than sales of inventory in
the ordinary course of business); (v) loans, acquisitions, joint ventures and
other investments; (vi) in the case of the Applicable Borrower, dividends and
other distributions to, and redemptions and repurchases from, equity holders
(with a carveout, subject to customary subordination provisions, for annual
management fees not to exceed the sum of 2% of revenue and 5% of EBITDAM (each
to be defined in a manner to be agreed); (vii) capital expenditures; (viii)
granting negative pledges (other than any such negative pledge under the Credit
Documentation for the Target Notes and Target Bridge Loans, as the case may be,
which shall expressly permit liens in favor of the Target Senior Administrative
Agent and the Target Senior Lenders); (ix) transactions with affiliates;
(x) changes in the nature of business; (xi) changes in accounting policies or
reporting practices; (xii) changes in fiscal year; and (xiii) amending
organizational documents, or amending or otherwise modifying certain material
agreements and prepayments of certain debt, in each of the foregoing cases, with
such exceptions and thresholds as may be agreed upon in the Credit
Documentation.

  

(c)    Financial Covenants: To include the following:

  

•     Maintenance of a maximum Leverage Ratio (total debt/EBITDA); and

  

•     Maintenance of a minimum Fixed Charge Coverage Ratio (to be defined in a
manner to be agreed).

   All of the financial covenants will be calculated on a consolidated basis and
for each consecutive four fiscal quarter period. Calculations will be made on a
pro forma basis for acquisitions and dispositions outside the ordinary course of
business (and incurrences and repayments of debt in connection therewith)
including the Target Refinancing, as if they had occurred at the beginning of
the applicable period, in accordance with Regulation S-X under the Securities
Act of 1933, as amended and otherwise in a manner satisfactory to the Target
Senior Lead Arrangers. The financial covenants will be set at a 25% cushion
(calculated on a “static”, non-cumulative basis) to the management base
projections.

 

Annex I-7

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Events of Default:    Usual and customary for a transaction of this type, and
others deemed appropriate by the Target Senior Lead Arrangers, including,
without limitation, (i) nonpayment of principal, interest, fees or other
amounts; (ii) any representation or warranty proving to have been inaccurate in
any material respect when made or confirmed; (iii) failure to perform or observe
covenants set forth in the Credit Documentation; (iv) cross-defaults to other
indebtedness in an amount to be agreed; (v) bankruptcy and insolvency defaults;
(vi) monetary judgment defaults in an amount to be agreed and material
non-monetary judgment defaults; (vii) actual or asserted impairment of Credit
Documentation or security; (viii) Change of Control (to be defined but to
exclude the Acquisition); and (ix) customary ERISA defaults; in each of the
foregoing cases, with such cure periods and thresholds as may be agreed upon in
the Credit Documentation. Unrestricted Subsidiaries:    The Credit Documentation
will contain provisions pursuant to which, subject to limitations on
investments, loans, advances and guarantees and pro forma covenant compliance,
the Applicable Borrower will be permitted to designate any existing or
subsequently acquired or organized subsidiary as an “unrestricted subsidiary”
and subsequently re-designate any such unrestricted subsidiary as a restricted
subsidiary (subject to customary conditions that are reasonably satisfactory to
the Target Senior Lead Arrangers). Unrestricted subsidiaries will not be subject
to the affirmative or negative covenant or event of default provisions of the
Credit Documentation, and the results of operations and indebtedness of
unrestricted subsidiaries will not be taken into account for purposes of
determining compliance with the financial covenants contained in the Credit
Documentation. Assignments and Participations:    Each Target Senior Lender will
be permitted to make assignments in minimum amounts to be agreed to other
entities approved by the Target Senior Administrative Agent and, so long as no
default has occurred, the Applicable Borrower, which approval shall not be
unreasonably withheld or delayed; provided, however, that (i) no approval of the
Applicable Borrower shall be required in connection with assignments to other
Target Senior Lenders or any of their affiliates and (ii) no approval of the
Target Senior Administrative Agent shall be required in connection with
assignments (x) under the Target Senior Term Loan Facility to other Target
Senior Lenders or any of their affiliates under the Target Senior Term Loan
Facility or any of their affiliates or (y) under the Target Revolving Credit
Facility to other Target Senior Lenders or any of their affiliates under the
Target Revolving Credit Facility. Each Target Senior Lender will also have the
right, without consent of the Applicable Borrower or the Target Senior
Administrative Agent, to assign as security all or part of its rights under the
Credit

 

Annex I-8

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   Documentation to any Federal Reserve Bank. Target Senior Lenders will be
permitted to sell participations with voting rights limited to significant
matters such as changes in amount, rate and maturity date. An assignment fee in
the amount of $3,500 will be charged with respect to each assignment unless
waived by the Target Senior Administrative Agent in its sole discretion. Waivers
and Amendments:    Amendments and waivers of the provisions of the Credit
Documentation will require the approval of Target Senior Lenders holding
advances and commitments representing more than 50% of the aggregate advances
and commitments under the Target Senior Credit Facilities, except that (a) the
consent of each Target Senior Lender affected thereby will be required with
respect to, among other things, (i) increases in commitment amounts, (ii)
reductions of principal, interest, or fees, (iii) extensions of scheduled
maturities or times for payment, (iv) releases of all or substantially all of
the collateral or value of the guarantees and (v) changes that impose any
restriction on the ability of any Target Senior Lender to assign any of its
rights or obligations and (b) tranche voting will be required for certain
matters. Indemnification:    The Applicable Borrower will indemnify and hold
harmless the Target Senior Administrative Agent, each Target Senior Lead
Arranger, each Target Senior Lender and each of their affiliates and their
officers, directors, employees, agents and advisors from and against all losses,
liabilities, claims, damages or expenses arising out of or relating to the
Target Refinancing, the Target Senior Credit Facilities, the Applicable
Borrower’s use of loan proceeds or the commitments, including, but not limited
to, reasonable attorneys’ fees and settlement costs; provided that the
Applicable Borrower shall not have any indemnification obligation if any such
loss, liability, claim, damage or expense results from the gross negligence or
willful misconduct of any such person or entity. This indemnification shall
survive and continue for the benefit of all such persons or entities,
notwithstanding any failure of the Target Senior Credit Facilities to close.
Governing Law:    New York. Expenses:    The Applicable Borrower will pay all
reasonable costs and expenses associated with the preparation, due diligence,
administration, syndication and enforcement of all Credit Documentation,
including, without limitation, the legal fees and expenses of the Target Senior
Administrative Agent’s counsel, regardless of whether or not the Target Senior
Credit Facilities are closed. The Applicable Borrower will also pay the expenses
of each Target Senior Lender in connection with the enforcement of any of the
Credit Documentation related to the Target Senior Credit Facilities. Counsel to
the Administrative Agent:    Mayer Brown LLP.

 

Annex I-9

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Miscellaneous:    Each of the parties shall (i) waive its right to a trial by
jury and (ii) submit to New York jurisdiction.

 

Annex I-10

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ANNEX II-A

SUMMARY OF TERMS AND CONDITIONS

TARGET BRIDGE LOANS

Capitalized terms not otherwise defined herein have the same meanings as
specified therefor in the Commitment Letter to which this Annex II-A is
attached.

 

Borrower:    (x) The Target Company if the Target Bridge Loans are funded on the
Acquisition Closing Date and (y) Acquisition Co. if the Target Bridge Loans are
funded before the Acquisition Closing Date (the applicable date of the funding
of the Target Bridge Loans, the “Target Bridge Loans Funding Date”), with the
obligations of Acquisition Co. to be assumed (the “Assumption”) by the Target
Company on the Acquisition Closing Date (for purposes of this Annex II, in each
case, including after giving effect to the Assumption, the “Applicable
Borrower”). Guarantors:    Same as the Target Senior Credit Facilities. Target
Bridge Administrative Agent:    Bank of America, N.A. or an affiliate thereof
will act as sole and exclusive administrative agent for the Target Bridge
Lenders (the “Target Bridge Administrative Agent”). Joint Arrangers and Joint
Bookrunning Manager:    Merrill Lynch, Pierce, Fenner & Smith Incorporated
(“Merrill Lynch”), Deutsche Bank Securities Inc. (“DBSI”) and J.P. Morgan
Securities LLC (“JPMS”) will act as joint arrangers and joint bookrunning
managers for the Target Bridge Loans (in such capacity, the “Target Bridge Lead
Arrangers”). Bridge Lenders:    Bank of America, N.A. or an affiliate thereof
(“Bank of America”), Deutsche Bank AG Cayman Islands Branch or an affiliate
thereof (“DBCI”) and JPMorgan Chase Bank, N.A. or an affiliate thereof (“JPMCB”)
and, together with Bank of America and DBCI, the “Initial Bridge Lenders”) and
other financial institutions and institutional lenders selected by the Target
Bridge Lead Arrangers and reasonably acceptable to the Applicable Borrower (the
“Bridge Lenders”). Target Bridge Loans:    $350.0 million of senior unsecured
bridge loans (the “Target Bridge Loans”), less the aggregate gross proceeds of
Target Permanent Securities issued on or prior to the Target Bridge Loans
Funding Date. The Target Bridge Loans will be available to the Applicable
Borrower in one drawing on the upon consummation of the Acquisition Ranking:   
The Target Bridge Loans will be senior unsecured obligations of the Applicable
Borrower and will rank pari passu in right of payment with all other senior
unsecured obligations of the Applicable Borrower and effectively subordinated to
all of the Applicable Borrower’s senior secured obligations, including
borrowings under the Target Senior Credit Facilities. The guarantees will be
senior unsecured obligations of each

 

Annex II-A-1

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   Guarantor and will rank pari passu in right of payment with all other
unsecured obligations of such Guarantor and effectively subordinated to all of
such Guarantor’s senior secured obligations, including such Guarantor’s
obligations under the Applicable Borrower’s Target Senior Credit Facilities.
Security:    None. Purpose:    The proceeds of the Target Bridge Loans, together
with proceeds from the Target Senior Credit Facilities, shall be used to fund
the Acquisition and Target Refinancing and to pay transaction fees and expenses
related thereto. Interest Rate:    Interest shall be payable quarterly in
arrears at a rate per annum equal to three-month LIBOR plus the Applicable
Margin (as defined in the Fee Letter).    “LIBOR” shall be deemed to be not less
than 1.50% per annum.    During the continuance of a payment default, interest
will accrue on the principal of the Target Bridge Loans and on any other
outstanding amount at a rate of 200 basis points in excess of the rate otherwise
applicable to the Target Bridge Loans.    Following the Target Bridge First
Anniversary (as defined below), interest on the Target Bridge Loans will accrue
at a per annum rate equal to the Target Total Cap, and will be payable quarterly
in arrears.    All calculations of interest shall be made on the basis of actual
number of days elapsed in a 360-day year. Cost and Yield Protection:   
Customary for transactions and facilities of this type, including, without
limitation, in respect of breakage or redeployment costs incurred in connection
with prepayments of LIBOR loans, changes in capital adequacy and capital
requirements or their interpretation, illegality, unavailability, reserves
without proration or offset and payments free and clear of withholding or other
taxes. Amortization:    None. Optional Prepayments:    The Target Bridge Loans
may be prepaid prior to the first anniversary of the Target Bridge Loans Funding
Date (the “Target Bridge First Anniversary Date”), without premium or penalty,
in whole or in part, upon written notice, at the option of the Applicable
Borrower, at any time, together with accrued interest to the prepayment date.
Mandatory Prepayments:    The Applicable Borrower shall prepay the Target Bridge
Loans without premium or penalty and offer to purchase Target Exchange Notes at
the premium for optional redemptions set forth in Annex II-C (on a pro rata
basis) together with accrued interest to the prepayment or purchase date, with
(a) all net cash proceeds from (i) sales of property and assets

 

Annex II-A-2

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   of the Target Company or any of its subsidiaries (including sales or
issuances of equity interests by subsidiaries of the Target Company but
excluding sales of inventory in the ordinary course of business and other
exceptions to be agreed in the Credit Documentation), and (ii) Extraordinary
Receipts (to be defined to include extraordinary receipts such as tax refunds,
casualty and indemnity payments, and certain insurance proceeds and to exclude
cash receipts in the ordinary course of business), in each case, subject to
reinvestment rights to be agreed, (b) all net cash proceeds from the issuance or
incurrence after the Target Bridge Loan Funding Date of additional debt of the
Target Company or any of its subsidiaries other than certain debt permitted
under the Credit Documentation, and (c) 100% of all net cash proceeds from any
issuance of equity interest by, or equity contribution to, the Target Company,
subject to exceptions to be agreed. The Applicable Borrower’s obligation to
prepay Target Bridge Loans and purchase Target Exchange Notes shall be deemed to
be satisfied with respect to clause (a) above on a dollar-for-dollar basis to
the extent of amounts applied to repay loans under (i) the Target Senior Term
Loan Facility or (ii) the Target Revolving Credit Facility to the extent
accompanied by a permanent reduction in commitments thereunder. Change of
Control:    In the event of a Target Change of Control (to be defined but to
exclude the Acquisition), each Target Bridge Lender will have the right to
require the Applicable Borrower, and the Applicable Borrower must offer, to
prepay the outstanding principal amount of the Target Bridge Loans at a premium
equal to 101% of the principal amount thereof, plus accrued and unpaid interest
thereon to the date of prepayment. Prior to making any such offer, the
Applicable Borrower will, within 30 days of the Target Change of Control, repay
all obligations under the Target Senior Credit Facilities or obtain any required
consent of the Target Senior Lenders under the Target Senior Credit Facilities
to make such prepayment of the Target Bridge Loans. Conversion into Target
Rollover Loans:    If the Target Bridge Loans have not been previously prepaid
in full for cash on or prior to the Target Bridge First Anniversary Date, the
principal amount of the Target Bridge Loans outstanding on the Target Bridge
First Anniversary Date may, subject to the conditions precedent set forth in
Annex II-B, be converted into senior second priority secured rollover loans with
a maturity of 4.5 years from the Target Bridge First Anniversary Date and
otherwise having the terms set forth in Annex II-B (the “Target Rollover
Loans”). Any Target Bridge Loans not converted into Target Rollover Loans shall
be repaid in full on the Target Bridge First Anniversary Date. Exchange into
Exchange Notes:    Each Target Bridge Lender that is (or will immediately
transfer its Target Exchange Notes to) an Eligible Holder (as defined in
Annex II-C) will have the right, at any time on or after the Target Bridge First
Anniversary Date, to exchange Target Rollover Loans held by it for unsecured
senior exchange notes of the Applicable Borrower having the

 

Annex II-A-3

--------------------------------------------------------------------------------

   terms set forth in Annex II-C (the “Target Exchange Notes”). Notwithstanding
the foregoing, the Applicable Borrower will not be required to exchange Target
Rollover Loans for Target Exchange Notes unless at least $25.0 million of Target
Exchange Notes would be outstanding immediately after such exchange. In
connection with each such exchange, or at any time prior thereto if requested by
the Initial Target Bridge Lenders, the Applicable Borrower shall (i) deliver to
the Target Bridge Lenders that is receiving Target Exchange Notes, and to such
other Target Bridge Lenders as the Initial Target Bridge Lenders request, an
offering memorandum of the type customarily utilized in a Rule 144A offering of
high yield securities covering the resale of such Target Exchange Notes or
Target Bridge Loans by such Target Bridge Lenders, in such form and substance as
reasonably acceptable to the Applicable Borrower and the Initial Target Bridge
Lenders, and keep such offering memorandum updated in a manner as would be
required pursuant to a customary Rule 144A securities purchase agreement,
(ii) execute an exchange agreement containing provisions customary in Rule 144A
transactions (including indemnification provisions) if requested by the Initial
Target Bridge Lenders, (iii) deliver or cause to be delivered such opinions and
accountants’ comfort letters addressed to the Initial Target Bridge Lenders and
such certificates as the Initial Target Bridge Lenders may request as would be
customary in Rule 144A offerings and otherwise in form and substance reasonably
satisfactory to the Initial Bridge Lenders and (iv) take such other actions, and
cause its advisors, auditors and counsel to take such actions, as reasonably
requested by the Initial Bridge Lenders in connection with issuances or resales
of Target Exchange Notes or Bridge Loans, including providing such information
regarding the business and operations of the Target Company and its subsidiaries
as is reasonably requested by any prospective holder of Target Exchange Notes or
Bridge Loans and customarily provided in due diligence investigations in
connection with purchases or resales of securities. Conditions Precedent:   
Those set forth in the Commitment Letter (including the conditions specified in
Annex III to the Commitment Letter). Covenants:    Based on the covenants for
the Target Senior Credit Facilities, subject to cushions in respect of baskets
and thresholds at levels to be determined and a covenant to comply with the Fee
Letter and a covenant for the Applicable Borrower to use its best efforts to
refinance the Target Bridge Facility with the proceeds of the Target Permanent
Securities as promptly as practicable following the Target Bridge Loans Funding
Date.    Negative covenants that are customary for high yield debt securities of
issuers of similar size and credit quality, as determined by the Target Bridge
Lead Arrangers in light of prevailing market conditions and other circumstances;
provided that prior to the Target Bridge First Anniversary Date, the limitation
on restricted payments and the limitation on liens and debt will be more
restrictive than customary high yield

 

Annex II-A-4

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   covenants. In addition the Applicable Borrower will be required to comply
with the Commitment Letter, the Fee Letter and the Engagement Letter, and to use
best efforts to refinance the Target Bridge Loans as promptly as practicable
following the Target Bridge Loans Funding Date, including by taking the actions
specified in Annex III. Representations and Warranties, Events of Default,
Waivers and Consents:    Usual and customary for a transaction of this type, and
others deemed appropriate by the Target Bridge Lead Arrangers, including
(without limitation) provisions similar to those contained in the Target Senior
Credit Facilities. Assignments and Participations:    Each Target Bridge Lender
will be permitted to make assignments in minimum amounts to be agreed to other
entities approved by the Target Bridge Administrative Agent, which approval
shall not be unreasonably withheld or delayed; provided, however, that no such
approval shall be required in connection with assignments to other Target Bridge
Lenders or any of their affiliates. Each Target Bridge Lender will also have the
right, without any consent, to assign as security all or part of its rights
under the Credit Documentation to any Federal Reserve Bank. Target Bridge
Lenders will be permitted to sell participations with voting rights limited to
significant matters such as changes in amount, rate and maturity date. An
assignment fee in the amount of $3,500 will be charged with respect to each
assignment unless waived by the Target Bridge Administrative Agent in its sole
discretion.    If an Initial Target Bridge Lender makes an assignment of Target
Bridge Loans at a price less than par, the assignment agreement may provide
that, upon any repayment or prepayment of such Target Bridge Loans with the
proceeds of an issuance of securities of the Target Company or any of its
subsidiaries in which the Initial Target Bridge Lenders or an affiliate thereof
acted as underwriter or initial purchaser (an “Applicable Offering”), (i) the
Applicable Borrower shall pay the holder of such Target Bridge Loans the price
set forth in the assignment agreement as the price (which may be the price at
which the Initial Target Bridge Lenders assigned such Target Bridge Loans but in
any event may not be greater than par) at which the holder of such Target Bridge
Loans will be repaid by the Applicable Borrower with the proceeds of an
Applicable Offering (the “Agreed Price”) and (ii) the Applicable Borrower shall
pay the Initial Target Bridge Lenders the difference between par and the Agreed
Price. Such payments by the Applicable Borrower shall be in full satisfaction of
such Target Bridge Loans in the case of a repayment or prepayment with proceeds
of an Applicable Offering. For the avoidance of doubt, the provisions of this
paragraph do not apply to any repayments or prepayments other than with proceeds
of an Applicable Offering.

 

Annex II-A-5

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Governing Law:    New York. Indemnification and Expenses:    Same as the Target
Senior Credit Facilities. Counsel to Target Bridge Lead Arrangers:    Cahill
Gordon & Reindel llp.

 

Annex II-A-6

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ANNEX II-B

TARGET ROLLOVER LOANS

Capitalized terms not otherwise defined herein have the same meanings as
specified therefor in the Commitment Letter to which this Annex II-B is
attached.

 

Borrower:

   Same as the Target Bridge Loans.

Guarantors:

   Same as the Target Bridge Loans.

Rollover Loans:

   Target Rollover Loans in an initial principal amount equal to 100% of the
outstanding principal amount of the Target Bridge Loans on the Target Bridge
First Anniversary Date. Subject to the conditions precedent set forth below, the
Target Rollover Loans will be available to the Applicable Borrower to refinance
the Target Bridge Loans on the Target Bridge First Anniversary Date. The Target
Rollover Loans will be governed by the Credit Documentation for the Target
Bridge Loans and, except as set forth below, shall have the same terms as the
Target Bridge Loans.

Ranking and Security:

   Same as Target Bridge Loans.

Interest Rate:

   Interest shall be payable quarterly in arrears at a rate per annum equal to
the Target Total Cap.    During the continuance of an event of default or a
payment default, interest will accrue on the principal of the Target Rollover
Loans and on any other outstanding amount at a rate of 200 basis points in
excess of the rate otherwise applicable to the Target Rollover Loans, and will
be payable on demand.    All calculations of interest shall be made on the basis
of actual number of days elapsed in a 360-day year.

Maturity:

   Five years and six months after the Target Bridge Loans Funding Date (the
“Target Rollover Maturity Date”).

Optional Prepayments:

   For so long as the Target Rollover Loans have not been exchanged for Target
Exchange Notes of the Applicable Borrower as provided in Annex II-C, they may be
prepaid at the option of the Applicable Borrower, in whole or in part, at any
time, together with accrued and unpaid interest to the prepayment date (but
without premium or penalty). Conditions Precedent to Rollover:    The ability of
the Applicable Borrower to convert any Target Bridge Loans into Target Rollover
Loans is subject to the following conditions being satisfied:   

(i)      at the time of any such refinancing, there shall exist no event of
default or event that, with notice and/or lapse of time, could become an event
of default, and there shall be no failure to comply with the Target Take-out
Demand (as defined in the Fee Letter);

 

Annex II-B-1

--------------------------------------------------------------------------------

  

(ii)     all fees due to the Target Bridge Lead Arrangers and the Initial Target
Bridge Lenders shall have been paid in full;

  

(iii)   the Target Bridge Lenders shall have received promissory notes
evidencing the Target Rollover Loans (if requested) and such other documentation
as shall be set forth in the Credit Documentation; and

  

(iv)    no order, decree, injunction or judgment enjoining any such refinancing
shall be in effect.

Covenants:

   From and after the Target Bridge First Anniversary Date, the covenants
applicable to the Target Rollover Loans will conform to those applicable to the
Target Exchange Notes, except for covenants relating to the obligation of the
Applicable Borrower to refinance the Target Rollover Loans and others to be
agreed. Assignments and Participations:    Same as the Target Bridge Loans.
Governing Law:    New York. Indemnification and Expenses:    Same as the Target
Bridge Loans.

 

Annex II-B-2

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ANNEX II-C

SUMMARY OF TERMS AND CONDITIONS TARGET EXCHANGE NOTES

Capitalized terms not otherwise defined herein have the same meanings as
specified therefor in the Commitment Letter to which this Annex II-C is
attached.

 

Issuer:

   Same as the Target Bridge Loans.

Guarantors:

   Same as the Target Bridge Loans.

Exchange Notes:

   The Applicable Borrower will issue the Target Exchange Notes under an
indenture that complies with the Trust Indenture Act of 1939, as amended (the
“Target Indenture”). The Applicable Borrower will appoint a trustee reasonably
acceptable to the holders of the Target Exchange Notes. The Target Indenture
will include provisions customary for an indenture governing publicly traded
high yield debt securities, but with covenants that are more restrictive in
certain respects. Except as expressly set forth above, the Target Exchange Notes
shall have the same terms as the Target Rollover Loans.

Ranking and Security:

   Same as the Target Bridge Loans.

Interest Rate:

   Interest shall be payable quarterly in arrears at a per annum rate equal to
the Target Total Cap.    During the continuance of an event of default or a
payment default, interest will accrue on the principal of the Target Exchange
Notes and on any other outstanding amount at a rate of 200 basis points in
excess of the rate otherwise applicable to the Target Exchange Notes, and will
be payable on demand.

Maturity:

   Same as the Target Rollover Loans.

Amortization:

   None.

Optional Redemption:

   Until the date that is the 30 month anniversary of the Target Bridge Loans
Funding Date (the “Redemption Date”), the Target Exchange Notes will be
redeemable at a customary “make-whole” premium calculated using a discount rate
equal to the yield on comparable Treasury securities plus 50 basis points.
Thereafter, the Target Exchange Notes will be redeemable at the option of the
Target Company at a premium equal to 50% of the coupon on the Target Exchange
Notes, declining ratably to par on the date which is 12 months prior to the
Target Rollover Maturity Date.    In addition, Target Exchange Notes will be
redeemable at the option of the Issuer prior to the Redemption Date with the net
cash proceeds of qualified equity offerings of the Target Company at a premium
equal to the coupon on the Target Exchange Notes; provided that after giving
effect to such redemption at least 65% of the aggregate principal amount of
Target Exchange Notes originally issued shall remain outstanding.

 

Annex II-C-1

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Mandatory Offer to Purchase:    The Applicable Borrower will be required to
offer to purchase the Target Exchange Notes upon a Target Change of Control (to
be defined in the Target Indenture but to exclude the Acquisition) at 101% of
the principal amount thereof plus accrued interest to the date of purchase.
Right to Transfer Exchange Notes:    Each holder of Target Exchange Notes shall
have the right to transfer its Target Exchange Notes in whole or in part, at any
time to an Eligible Holder and, after the Target Exchange Notes are registered
pursuant to the provisions described under “Registration Rights”, to any person
or entity; provided that if the Issuer or any of its affiliates holds Target
Exchange Notes, such Target Exchange Notes shall be disregarded in any voting.
“Eligible Holder” will mean (a) an institutional “accredited investor” within
the meaning of Rule 501 under the Securities Act, (b) a “qualified institutional
buyer” within the meaning of Rule 144A under the Securities Act, (c) a person
acquiring the Target Exchange Notes pursuant to an offer and sale occurring
outside of the United States within the meaning of Regulation S under the
Securities Act or (d) a person acquiring the Target Exchange Notes in a
transaction that is, in the opinion of counsel reasonably acceptable to the
Issuer, exempt from the registration requirements of the Securities Act;
provided that in each case such Eligible Holder represents that it is acquiring
the Target Exchange Notes for its own account and that it is not acquiring such
Target Exchange Notes with a view to, or for offer or sale in connection with,
any distribution thereof (within the meaning of the Securities Act) that would
be in violation of the securities laws of the United States or any state
thereof. Registration Rights:    None. Governing Law:    New York.
Indemnification and Expenses:    Same as the Target Bridge Loans.

 

Annex II-C-2

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ANNEX III

CONDITIONS PRECEDENT TO CLOSING

Capitalized terms not otherwise defined herein have the same meanings as
specified therefor in the Commitment Letter to which this Annex III is attached.

The funding of the loans under the Facilities will be subject to the following
conditions precedent:

(i) The Lead Arrangers shall be satisfied with the definitive agreement relating
to the Acquisition (including all schedules and exhibits thereto) (the
“Acquisition Agreement”) (it being understood that the Commitment Parties, the
Lenders and the Lead Arrangers hereby acknowledge that they are satisfied with
the Acquisition Agreement, dated as of May 16, 2012, and all exhibits,
schedules, annexes, attachments and exhibits thereto (including, but not limited
to, the terms of the HoldCo Note (as defined in the Acquisition Agreement))
which have been delivered to the Lead Arrangers at 12:43 p.m. on May 16, 2012);
and the Acquisition Agreement shall not have been altered, amended or otherwise
changed or supplemented or any provision waived or consented to that would be
materially adverse to the Lenders (in their capacity as such) without the prior
written consent of the Lead Arrangers (it being understood and agreed that any
reduction in the purchase price by 10% or more (except as contemplated in the
Acquisition Agreement on the date hereof) shall be deemed materially adverse to
the Lenders and further that any such reduction in the purchase price shall
reduce, on a dollar-for-dollar basis, the amounts available under this
Commitment Letter of the Target Senior Secured Credit Facilities and/or Target
Bridge Facility or the Notes, at the option of Lead Arrangers).

(ii) There has been no Company Material Adverse Effect (as defined in the
Acquisition Agreement) since the date of this Commitment Letter.

(iii) The Lead Arrangers shall have received: (A) as soon as available and in
any event within 45 days after the end of each of the first three fiscal
quarters of the 2012 fiscal year beginning with the fiscal quarter ending
June 30, 2012, an unaudited balance sheet and related statements of operations
and cash flows of the Target Company for such fiscal quarter and for the elapsed
period of the 2012 fiscal year and for the comparable periods of the prior
fiscal year (the “Quarterly Financial Statements”) and (B) pro forma balance
sheet and related statement of operations of Boyd and the Target Company for
fiscal year 2011 and for the latest four-quarter period ending with the latest
fiscal quarter covered by the Quarterly Financial Statements, in each case after
giving effect to the Transaction (the “Pro Forma Financial Statements”),
promptly after the historical financial statements for such periods are
available, each of which financial statements shall meet the requirements of
Regulation S-X under the Securities Act and all other accounting rules and
regulations of the Securities and Exchange Commission promulgated thereunder.
Notwithstanding the foregoing, the Target Company will be deemed to have
furnished such reports if it or its parent company has filed or furnished such
reports with the SEC via the EDGAR filing system and such reports are publicly
available

(iv) The Lead Arrangers and the Initial Lenders under the Target Facilities
shall have received forecasts prepared by management of the Applicable Borrower,
each in form reasonably satisfactory to the Lead Arrangers and the Initial
Target Lenders under the Target Facilities, of balance sheets, income statements
and cash flow statements for each quarter for the first two years following the
Acquisition Closing Date, and for each year commencing with the first fiscal
year following the Acquisition Closing Date for the term of each Target
Facility.

 

Annex II-C-1

--------------------------------------------------------------------------------

(v) The Acquisition Closing Date shall not occur less than 20 days after the
delivery of the applicable Information Memorandum.

(vi) All fees then due to the Administrative Agent, the Lead Arrangers and the
Initial Lenders shall have been paid, and all expenses to be paid or reimbursed
to the Administrative Agent and the Lead Arrangers that have been invoiced a
reasonable period of time prior to the closing of the Facilities (and in any
event, invoiced at least 3 business days prior to the closing of the Facilities
(except as otherwise agreed by Boyd)) shall have been paid.

(vii) The Lead Arrangers shall have received reasonably satisfactory evidence
that Acquisition Co. shall have received an investment from Boyd in an amount of
not less than $200.0 million.

(viii) After giving effect to the Transaction, the Companies shall have
outstanding no indebtedness for borrowed money or preferred stock other than
(a) the loans and other extensions of credit under the Facilities and (b) other
indebtedness for borrowed money as set forth on Annex IV hereto. The Lead
Arrangers shall have received reasonably satisfactory evidence of repayment of
all indebtedness of such entities to be repaid on the closing of the Facilities.

(ix) Each of the Borrowers and each of the applicable Guarantors under each
Facility shall have provided the documentation and other information to the
applicable Administrative Agent that are required by regulatory authorities
under applicable “know-your-customer” rules and regulations, including the
Patriot Act, at least 10 business days prior to the closing of the Facilities.

(x) Boyd shall have received all governmental and/or regulatory approvals
(including approvals from all applicable gaming authorities) necessary to
consummate the Transaction (including on the terms and conditions contemplated
by this Commitment Letter and the Fee Letter).

(xi) The Initial Target Lender shall have received certification as to the
financial condition and solvency of the Target Company or Acquisition Co., as
applicable (as used in this Annex III, the “Applicable Borrower”), from the
chief financial officer of such entity. The Initial Target Lenders shall have
received reasonably satisfactory customary opinions of counsel to the Applicable
Borrower and any applicable Guarantors under each Target Facility (which shall
cover, among other things, authority, legality, validity, binding effect and
enforceability of the documents for such Facility and creation and perfection of
the liens granted thereunder on the collateral) and of appropriate local counsel
and such customary corporate resolutions, certificates and other closing
documents as such lenders shall reasonably require.

(xii) In each case, subject to Section 5 of this Commitment Letter: with respect
to the Target Senior Credit Facilities, if the Target Company is the Applicable
Borrower, all filings, recordations and searches necessary or desirable in
connection with the liens and security interests in the collateral shall have
been duly made; all filing and recording fees and taxes shall have been duly
paid and any title insurance reasonably requested by each of the Administrative
Agents under the Target Senior Credit Facilities with respect to real property
interests of the Target Company and the Guarantors under the Target Senior
Credit Facilities shall have been obtained. If the Target Company is the
Applicable Borrower, the Target Senior Administrative Agent shall have

 

Annex II-C-2

--------------------------------------------------------------------------------

received the results of recent lien searches in each relevant jurisdiction with
respect to the Target Company and its subsidiaries, and such search results
shall reveal no material liens on any material assets of the Target Company and
its subsidiaries other than Permitted Liens (consistent with the term as defined
in the indenture governing the Existing Senior Secured Notes). If Acquisition
Co. is the Applicable Borrower, the Target Senior Administrative Agent shall
have received the results of recent lien searches in each relevant jurisdiction
with respect to Acquisition Co. and such search results shall reveal no material
liens on any cash or cash equivalents of Acquisition Co. except for customary
permitted liens and liens to be discharged on or prior to the Acquisition
Closing Date pursuant to documentation reasonably satisfactory to the Target
Senior Administrative Agent. The Initial Target Lenders shall be satisfied with
the amount, types and terms and conditions of all insurance maintained by the
Applicable Borrower and its subsidiaries, and the Target Lenders shall have
received endorsements naming the Target Senior Administrative Agent, on behalf
of such Lenders, as an additional insured or loss payee, as the case may be,
under all insurance policies to be maintained with respect to the properties of
the Applicable Borrower and its subsidiaries forming part of the collateral
under the Target Senior Credit Facilities. If the Target Company is the
Applicable Borrower, (A) the collateral under the Target Senior Credit
Facilities described in this clause will be comparable to the Collateral as
defined in the indenture governing the Existing Secured Notes and (B) the
documentation granting the Target Senior Administrative Agent a security
interest in such collateral will be comparable to the documentation provided to
the Collateral Agent under and as defined in the indenture governing the
Existing Secured Notes.

(xiii) Boyd shall have engaged one or more investment banks (the “Investment
Banks”) reasonably satisfactory to the Lead Arrangers to sell or place the Notes
and (a) the Investment Banks shall have received (i) a preliminary offering
memoranda or preliminary private placement memoranda (“Offering Document”),
which shall be in customary complete form or which, with respect to the
description of notes and any other parts thereof for which the Investment Banks’
or their advisors’ cooperation or approval is required for them to be complete,
the Applicable Borrower shall have used its commercially reasonable efforts to
cause it to be complete, and in either case, which Offering Document shall
contain information regarding the Applicable Borrower of type and form
customarily included in private placements under Rule 144A of the Securities Act
and financial statements, pro forma financial statements, business and other
financial data of the type required in a registered offering by Regulation S-X
and Regulation S-K under the Securities Act (other than Rule 3-10 of Regulation
S-X and subject to exceptions customary for private placements pursuant to Rule
144A of the Securities Act) and (ii) drafts of customary “comfort” letters
(including “negative assurance” comfort) that independent accountants of the
Applicable Borrower would be prepared to deliver upon completion of customary
procedures in connection with the offering of the Target Notes and (b) the
Investment Banks shall have been afforded a consecutive 15 business-day period
ending on the day that is two business days prior to the Acquisition Closing
Date to seek to offer and sell or privately place the Target Notes with
qualified purchasers thereof; provided that such 15 business-day period shall
exclude the days from (x) August 20, 2012 through and including September 4,
2012 and (y) December 17, 2012 through and including December 31, 2012.

 

Annex II-C-3

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ANNEX IV

DEBT

Boyd Bank credit facility

Boyd 9.125% senior notes due 2018

New bridge refinancing facility and/or notes of Boyd

Boyd 6.75% senior subordinated notes due 2014

Boyd 7.125% senior subordinated notes due 2016

Other long-term debt with a principal balance of less than $12 million related
to aircraft

Target Senior Secured Credit Facilities

Target Senior Bridge Facility and/or Notes

Holdco Note

DJL term loan

KSC term loan

KSC slot vendor financing

PGL capital lease obligation

 

Annex IV-1