Exhibit 10.2

THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
AND THUS MAY NOT BE TRANSFERRED UNLESS SO REGISTERED OR UNLESS AN EXEMPTION FROM
REGISTRATION IS AVAILABLE.

SELLER MERGER CONSIDERATION NOTE

 

Principal Amount    Las Vegas, Nevada    November 20, 2012

FOR VALUE RECEIVED, the undersigned, Boyd Acquisition II, LLC, a Delaware
limited liability company (the “Company”), promises to pay to the order of
Peninsula Gaming Partners, LLC, a Delaware limited liability company (the
“Holder”), at its office at 10250 Constellation Boulevard, Suite 2230, Los
Angeles, California 90067, or at such other place as the Holder may designate,
in lawful money of the United States of America and in immediately available
funds, the “Principal Amount” (as such term is defined in the Merger Agreement
(defined below)) (the “Loan”), together with any interest on the outstanding
principal amount as provided for herein.

This Seller Merger Consideration Note (this “Note”) is being executed and
delivered by the Company to the Holder pursuant to that certain Agreement and
Plan of Merger, dated as of May 16, 2012 (as amended, restated, supplemented or
otherwise modified from time to time, the “Merger Agreement”), by and among Boyd
Gaming Corporation (“Parent”), the Company, Boyd Acquisition Sub, LLC (“Merger
Sub”), the Holder, and Peninsula Gaming, LLC (“PGL”).

ARTICLE I

DEFINITIONS

1.01 Defined Terms. In addition to the terms defined elsewhere in this Note, the
following terms have the following meanings:

“Affiliate” means, with respect to any Person, another Person that directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with, such Person.

“Affiliate Transaction” has the meaning specified in Section 5.07(a).

“Asset Sale” means:

(a) any direct or indirect sale, assignment, transfer, lease, conveyance, or
other disposition (including, without limitation, by way of merger or
consolidation) (collectively, a “transfer”), other than in the ordinary course
of business, of any assets of PGL or any Restricted Subsidiary; or

(b) direct or indirect issuance or sale of any Equity Interests of any
Restricted Subsidiary (other than directors’ qualifying shares), in each case,
to any Person (other than PGL or a Restricted Subsidiary).

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For purposes of this definition, (i) any series of transactions that are part of
a common plan shall be deemed a single Asset Sale and (ii) the term “Asset Sale”
shall not include:

(1) any exchange of Gaming Equipment or furniture, fixtures or other equipment
for replacement items in the ordinary course of business;

(2) any transaction or series of related transactions that have a fair market
value (or result in gross proceeds) of $25 million or less;

(3) a Restricted Payment that is not prohibited by Section 5.05;

(4) any exchange of like property pursuant to Section 1031 of the Code;

(5) the disposition of all or substantially all of the assets of PGL and/or a
Restricted Subsidiary in a manner permitted pursuant to the provisions described
under Section 5.04;

(6) any grant of a non-exclusive license of trademarks, know-how, patents and
any other intellectual property or intellectual property rights;

(7) (A) any transfer of inventory, equipment, receivables or other assets
acquired and held for resale in the ordinary course of business or (B) any
transfer or liquidation of Cash Equivalents;

(8) any transfer of damaged, worn out or other obsolete personal property so
long as such property is no longer necessary for the proper conduct of the
business of PGL or a Restricted Subsidiary, as applicable;

(9) any grant of a lien; or

(10) any transfer of properties or assets by PGL or any Restricted Subsidiary to
PGL or another Restricted Subsidiary.

“Bankruptcy Law” means Title 11 of the U.S. Code, or any similar Federal, state
or foreign law for the relief of debtors.

“Business Day” means any day of the year on which national banking institutions
in the State of New York are open to the public for conducting business and are
not required to close.

“Capital Lease” means any leasing or similar arrangement which, in accordance
with GAAP, is classified as a capital lease.

“Capital Lease Obligations” means all monetary obligations under a Capital
Lease.

 

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“Cash Equivalents” means (a) securities issued or directly and fully guaranteed
or insured by the United States of America or any agency or instrumentality
thereof (provided, that the full faith and credit of the United States of
America is pledged in support thereof); (b) time deposits and certificates of
deposit and commercial paper issued by the parent corporation of any domestic
commercial bank of recognized standing having capital and surplus in excess of
$250.0 million and commercial paper issued by others rated at least A-2 or the
equivalent thereof by S&P or at least P-2 or the equivalent thereof by Moody’s
and in each case maturing within one year after the date of acquisition;
(c) investments in money market funds substantially all of whose assets comprise
securities of the type described in clauses (a) and (b) above; and
(d) repurchase obligations for underlying securities of the types and with the
maturities described above.

“Change of Control” means the occurrence of any of the following events:

(a) any merger or consolidation of the Company or PGL with or into any Person or
any sale, transfer or other conveyance, whether direct or indirect, of all or
substantially all of the assets of the Company or PGL, on a consolidated basis,
in one transaction or a series of related transactions, if, immediately after
giving effect to such transaction(s), any “person” or “group” (as such terms are
used for purposes of Sections 13(d) and 14(d) of the Exchange Act, whether or
not applicable) other than the Parent and its Subsidiaries is or becomes the
“beneficial owner,” directly or indirectly, of more than 50% of the total voting
power in the aggregate of the voting Equity Interests of the transferee(s) or
surviving entity or entities;

(b) any “person” or “group” (as such terms are used for purposes of Sections
13(d) and 14(d) of the Exchange Act, whether or not applicable) other than the
Parent and its Subsidiaries is or becomes the “beneficial owner,” directly or
indirectly, of more than 50% of the total voting power in the aggregate of the
voting Equity Interests of the Company or PGL;

(c) the Company or PGL adopts a plan of liquidation or dissolution; or

(d) the first day on which the Company fails to own, directly or indirectly, 99%
of the issued and outstanding Equity Interests of PGL or, subject to
Section 5.04 hereof, its successor.

“Code” means the Internal Revenue Code of 1986, as amended.

“Collateral” means the Equity Interests in the Company pledged pursuant to the
Pledge Agreement.

“Company” has the meaning specified in the preamble of this Note.

“Consolidated EBITDA” means, for any period, PGL and its Restricted
Subsidiaries’ consolidated earnings (including net earnings attributable to
noncontrolling interests held by third parties in Restricted Subsidiaries)
before interest expense, taxes, depreciation, amortization, non-cash rent
expense, preopening expenses, share-based compensation expense, non-cash change
in value of derivative instruments, interest costs associated with derivative
instruments not otherwise included in interest expense, non-cash litigation
accruals, charges for the early retirement of debt, non-recurring non-cash
losses (or

 

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gains), acquisition and merger related charges, and extraordinary items, all as
determined in accordance with GAAP (“EBITDA”), plus, cash dividends and
distributions paid to PGL and its Restricted Subsidiaries from any Person that
is not a Restricted Subsidiary, provided, that the cumulative amount of such
cash dividends and distributions included in Consolidated EBITDA shall not
exceed the cumulative amount of PGL’s and its Restricted Subsidiaries’ share of
the Consolidated EBITDA of such Person, plus (or minus) without duplication, the
EBITDA during such twelve month period for any Restricted Subsidiary acquired
(or disposed of) by PGL or any of its Restricted Subsidiaries (including the
acquisition or disposition of substantially all of the assets of a Person by PGL
or any of its Restricted Subsidiaries) during such period, in either case, plus
(or minus) any loss (or gain) arising from a change in GAAP, and plus (after the
same shall have been open for at least one full calendar month) the annualized
pro forma EBITDA of any new Venture of PGL and its Restricted Subsidiaries.
“Consolidated EBITDA” shall exclude the Consolidated EBITDA of each Unrestricted
Subsidiary and all Subsidiaries of any Unrestricted Subsidiary. If and to the
extent that any non-cash litigation accruals have not been included in the
computation of Consolidated EBITDA, the amount of any non-appealable judgment or
the cash payment in respect of any settlement or judgment in respect thereof
(net of any assets acquired in connection with such settlement or judgment) in
any future period shall be subtracted from Consolidated EBITDA.

“Consolidated Funded Indebtedness” means, as of any date of determination, for
PGL and its Restricted Subsidiaries on a consolidated basis (exclusive of any
Indebtedness of PGL’s Restricted Subsidiaries to PGL or another Restricted
Subsidiary or any Indebtedness of PGL to any Restricted Subsidiary), the sum
(without duplication) of (a) the outstanding principal amount of all
Indebtedness for borrowed money minus the amount of any cash borrowed by PGL and
pledged or deposited by PGL as cash collateral for a Debt Facility, (b) the
aggregate amount of all Capital Lease Obligations, (c) all guarantees with
respect to outstanding Indebtedness of the types specified in clauses (a) and
(b) above of Persons other than PGL or any of its Restricted Subsidiaries, and
(d) all liabilities under any non-appealable judgment rendered against PGL or
any of its Restricted Subsidiaries. The amount of Consolidated Funded
Indebtedness shall be deemed to be zero with respect to any letter of credit,
unless and until a drawing is made with respect thereto; provided, that such
outstanding letter of credit is taken into account with respect to availability
under a Debt Facility. “Consolidated Funded Indebtedness” shall exclude the
Consolidated Funded Indebtedness of each Unrestricted Subsidiary and all
Subsidiaries of any Unrestricted Subsidiary.

“Consolidated Leverage Ratio” means, as at any date of determination, the ratio
of Consolidated Funded Indebtedness as at such date to Consolidated EBITDA for
the most recently ended four consecutive fiscal quarters for which financial
statements of PGL are available immediately prior to such date of determination,
in each case, (a) pro forma effect shall be given to the incurrence, repayment
or retirement by PGL or any of the Restricted Subsidiaries of any Indebtedness
(other than Indebtedness incurred in the ordinary course of business for general
corporate purposes pursuant to working capital facilities) subsequent to the
commencement of the period for which the Consolidated Leverage Ratio is being
calculated, as if the same had occurred at the beginning of the applicable
period; (b) acquisitions that have been made by PGL or any of the Restricted
Subsidiaries, including all mergers and consolidations, subsequent to the
commencement of such period shall be calculated on a pro forma basis, assuming
that all such acquisitions, mergers and consolidations had occurred on the first
day of

 

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such period, including giving effect to reductions in costs for such period that
are directly attributable to the elimination of duplicative functions and
expenses (regardless of whether such cost savings could then be reflected in pro
forma financial statements under GAAP, Regulation S-X promulgated by the SEC or
any other regulation or policy of the SEC) as a result of such acquisition,
merger or consolidation; provided, that (x) such cost savings were identified
and quantified in an officer’s certificate delivered to the Holder at the time
of the consummation of such acquisition, merger or consolidation and such
officer’s certificate states that such officer believes in good faith that
actions shall be commenced or initiated within 90 days of the consummation of
such acquisition, merger or consolidation to effect such cost savings and sets
forth the specific steps to be taken within the 90 days after such acquisition,
merger or consolidation to accomplish such cost savings, and (y) with respect to
each acquisition, merger or consolidation completed prior to the 90th day
preceding such date of determination, actions were commenced or initiated by PGL
or any of its Restricted Subsidiaries within 90 days of such acquisition, merger
or consolidation to effect the cost savings identified in such officer’s
certificate (regardless, however, of whether the corresponding cost savings have
been achieved).

“Contingent Merger Consideration” has the meaning given to such term in the
Merger Agreement.

“Contractual Obligations” means, as to any Person, any obligation or requirement
under any security issued by such Person or under any agreement, undertaking,
contract, indenture, mortgage, deed of trust or other instrument, document or
agreement to which such Person is a party or by which it or any of its property
is bound.

“Debt Facilities” means (a) that certain Credit Agreement dated as of November
    , 2012 by and among Merger Sub, as the initial Borrower, the lenders party
thereto, and Bank of America, N.A., as Administrative Agent, Collateral Agent
and Swing Line Lender, including any related notes, guarantees, collateral
documents, instruments and agreements executed in connection therewith, and in
each case as amended, restated, supplemented, modified, renewed, refunded,
replaced or refinanced from time to time, including any agreement extending the
maturity thereof, refinancing, replacing, supplementing or otherwise
restructuring all or any portion of the Indebtedness thereunder or increasing or
supplementing the amount loaned or issued thereunder or altering the maturity
thereof, whether pursuant to a credit agreement, indenture or other debt
facility (any of the foregoing, an “Amendment”), (b) that certain Indenture
dated as of August 16, 2012 by and among Merger Sub, Boyd Acquisition Finance
Corp. and U.S. Bank National Association, as Trustee, including any related
notes, guarantees, collateral documents, instruments and agreements executed in
connection therewith and any Amendments thereto, and (c) whether or not the
Credit Agreement referred to in clause (a) remains outstanding and/or the
Indenture referred to in clause (b) remains outstanding, if designated by PGL to
be included in the definition of “Debt Facilities,” one or more (i) debt
facilities or commercial paper facilities, providing for revolving credit loans,
term loans, receivables financing (including through the sale of receivables to
lenders or to special purpose entities formed to borrow from lenders against
such receivables) or letters of credit, (ii) debt securities, indentures or
other forms of debt financing (including convertible or exchangeable debt
instruments or bank guarantees or bankers’ acceptances), or (iii) instruments or
agreements evidencing any other Indebtedness, in each case, with the same or
different borrowers or issuers and, in each case, as amended, supplemented,
modified, extended, restructured, renewed,

 

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refinanced, restated, replaced or refunded in whole or in part from time to
time; provided, PGL and the Restricted Subsidiaries, taken as a whole, do not
incur Indebtedness pursuant to any Amendment defined in clause (a) or clause
(b) or any Indebtedness incurred under clause (c) in an aggregate principal
amount outstanding at any time after the consummation of the Transactions in
excess of the Indebtedness under the Credit Agreement described in clause
(a) and the Indenture described in clause (b) outstanding on the Issue Date
(assuming that any revolving credit commitment is fully funded) minus any
permanent commitment reduction thereof, minus, without duplication, an amount
equal to the aggregate amount of Net Proceeds from Asset Sales that are applied
(excluding temporary applications pursuant to Section 5.06(c)) to repay
Indebtedness pursuant to Section 5.06(a)(iii)(C).

“Default” means any event or circumstance which, with the giving of notice, the
lapse of time, or both, would (if not cured or otherwise remedied) constitute an
Event of Default.

“Dollars” and “$” each mean lawful money of the United States of America.

“Equity Interests” means the capital stock of a corporation, the membership
interests of a limited liability company, the partnership interests in a
partnership and the joint venture interests in a joint venture and all other
evidence or instruments of ownership in any legal entity or trust, together with
all securities convertible, exchangeable or otherwise exercisable into or for
any of the foregoing interests.

“Event of Default” means any of the events or circumstances specified in
Section 6.01.

“Event of Loss” means, with respect to any property or asset, any (a) loss or
destruction of, or damage to, such property or asset or (b) any condemnation,
seizure or taking, by exercise of the power of eminent domain or otherwise, of
such property or asset, or confiscation or requisition of the use of such
property or asset, in each case resulting in Net Proceeds of $25 million or
more.

“Exchange Act” means the Securities and Exchange Act of 1934, and regulations
promulgated thereunder.

“FF&E” means furniture, fixtures and equipment (including Gaming Equipment)
acquired by PGL and the Restricted Subsidiaries in the ordinary course of
business for use in the construction and business operations of PGL or the
Restricted Subsidiaries.

“FF&E Financing” means Indebtedness, the proceeds of which are used solely by
PGL and the Restricted Subsidiaries (concurrently with the incurrence of such
Indebtedness) to acquire or lease or improve or refinance, respectively, FF&E;
provided, that (x) the principal amount of such FF&E Financing does not exceed
the cost (including sales and excise taxes, installation and delivery charges,
capitalized interest and other direct fees, costs and expenses) of the FF&E
purchased or leased with the proceeds thereof or the cost of such improvements,
as the case may be, and (y) such FF&E Financing is secured only by the assets so
financed and assets which, immediately prior to the incurrence of such FF&E
Financing, secured other Indebtedness of PGL and the Restricted Subsidiaries (to
the extent such other Indebtedness and the Liens securing such other
Indebtedness are permitted under this Note) to the lender of such FF&E
Financing.

 

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“GAAP” means generally accepted accounting principles set forth from time to
time in the opinions and pronouncements of the Accounting Principles Board and
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board (or agencies with
similar functions of comparable stature and authority within the accounting
profession), or in such other statements by such other entity as may be in
general use by significant segments of the U.S. accounting profession, which are
applicable to the circumstances as of the date of determination.

“Gaming Equipment” means slot machines, video poker machines, and all other
gaming equipment and related signage, accessories and peripheral equipment.

“Gaming FF&E Financing” means FF&E Financing, the proceeds of which are used
solely by PGL and the Restricted Subsidiaries to acquire or lease FF&E that
constitutes Gaming Equipment.

“Governmental Authority” means any nation or government, any state or other
political subdivision thereof, any central bank (or similar monetary or
regulatory authority) thereof, any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government,
and any corporation or other entity owned or controlled, through stock or
capital ownership or otherwise, by any of the foregoing.

“Holder” has the meaning specified in the preamble of this Note.

“Holdings” means Boyd Acquisition I, LLC, a Delaware limited liability company.

“Indebtedness” of any Person means without duplication, (a) all indebtedness for
borrowed money; (b) all obligations issued, undertaken or assumed as the
deferred purchase price of property or services (excluding trade payables
incurred in the ordinary course of business); (c) all reimbursement obligations
with respect to surety bonds, letters of credit, bankers’ acceptances and
similar instruments; (d) all obligations evidenced by notes, bonds, debentures
or similar instruments, including obligations so evidenced incurred in
connection with the acquisition of property, assets or businesses; (e) all
indebtedness created or arising under any conditional sale or other title
retention agreement, or incurred as financing, in either case with respect to
property acquired by the Person (even though the rights and remedies of the
seller or bank under such agreement in the event of default are limited to
repossession or sale of such property); (f) all Capital Lease Obligations;
(g) all indebtedness referred to in clauses (a) through (f) above secured by (or
for which the holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any Lien upon or in property (including accounts
and contract rights) owned by such Person, even though such Person has not
assumed or become liable for the payment of such Indebtedness; and (h) any
guaranty given in respect of indebtedness or obligations of others of the kinds
referred to in clauses (a) through (f) above.

 

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“Interest Rate Agreement” means with respect to any Person, any interest rate
swap agreement, interest rate cap agreement, interest rate collar agreement or
other similar agreement or arrangement.

“Investment” means with respect to any Person, all investments by such Person in
other Persons (including Affiliates) in the forms of loans, guarantees, advances
or capital contributions (excluding (i), payroll commission, travel and similar
advances to officers and employees of such Person made in the ordinary course of
business, (ii) bona fide accounts receivable arising from the sale of goods or
services in the ordinary course of business consistent with past practice and
(iii) deposits and prepaid expenses incurred in the ordinary course of business
or in connection with proposed transactions that are not consummated), purchases
or other acquisitions for consideration of Indebtedness, Equity Interests or
other securities, and any other items that are or would be classified as
investments on a balance sheet prepared in accordance with GAAP.

“Investment Company Act” means the Investment Company Act of 1940, as amended.

“Issue Date” means the date this Note is executed and delivered.

“Lien” means any mortgage, deed of trust, pledge, hypothecation, assignment,
charge or deposit arrangement, encumbrance, lien (statutory or other) or
preference, priority or other security interest or preferential arrangement of
any kind or nature whatsoever (including those created by, arising under or
evidenced by any conditional sale or other title retention agreement), and the
interest of a lessor under a Capital Lease.

“Loan” has the meaning specified in the preamble of this Note.

“Loan Documents” means this Note, the Pledge Agreement, and any and all other
documents now or hereafter executed by the Company and/or any other Person, by
or in favor of the Holder, which wholly or partially evidence, guarantee or
secure the Loan, as the same may be amended, supplemented, or substituted from
time to time; provided, however, that the Merger Agreement shall not constitute
a Loan Document.

“Management Arrangements” means any management services agreement between PGL
and the Parent, and any other profits interests grants, employment agreements,
consulting agreements, management agreements, operating agreements and other
similar arrangements by and among the Company or PGL, any Affiliate thereof or
any manager, officer, member, employee or consultant of the Company, PGL or such
Affiliate.

“Managers” means, with respect to any Person (a) if such Person is a limited
liability company, the board member, board members, manager or managers
appointed pursuant to the operating agreement of such Person as then in effect
or (b) otherwise, the members of the board of directors or other governing body
of such Person.

“Margin Stock” means “margin stock” as such term is defined in Regulation G, T,
U or X of the Federal Reserve Board.

 

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“Material Adverse Effect” means a material adverse change in, or a material
adverse effect upon, any of (a) the operations, business, assets, properties or
condition (financial or otherwise) of the Company; (b) the ability of the
Company or Holdings to perform under this Note or any other Loan Documents to
which it is a party; and (c) the legality, validity, binding effect or
enforceability of any Loan Document.

“Maturity Date” means November 20, 2018.

“Merger Agreement” has the meaning specified in the preamble of this Note.

“Moody’s” means Moody’s Investors Service, Inc. and its successors.

“Net Proceeds” means the aggregate proceeds received in the form of cash or Cash
Equivalents in respect of any Asset Sale (including issuance or other payments
in an Event of Loss and payments in respect of deferred payment obligations and
any cash or Cash Equivalents received upon the sale or disposition of any
non-cash consideration received in any Asset Sale, in each case when received),
net of:

(i) the reasonable and customary direct out-of-pocket costs relating to such
Asset Sale or Event of Loss (including, without limitation, legal, accounting
and investment banking fees and sales commissions), other than any such costs
payable to an Affiliate of PGL, and

(ii) appropriate amounts provided as a reserve by PGL or any Restricted
Subsidiary, in accordance with GAAP, against any liabilities associated with
such Asset Sale or Event of Loss and retained by PGL or such Restricted
Subsidiary, as the case may be, after such Asset Sale or Event of Loss
(including, without limitation, as applicable, pension and other post-employment
benefit liabilities, liabilities related to environmental matters and
liabilities under any indemnification obligations arising from any Asset Sale).

“Note” has the meaning specified in the preamble of this Note.

“Obligations” means the Loan and other obligations of the Company arising under
this Note or any other Loan Document, whether direct or indirect, absolute or
contingent, due or to become due, or now existing or hereafter arising.

“Organizational Documents” means (a) for any corporation, the certificate or
articles of incorporation, the bylaws, any certificate of determination or
instrument relating to the rights of preferred shareholders of such corporation,
and all applicable resolutions of the board of directors (or any committee
thereof) of such corporation; (b) for any partnership, the partnership
agreement, any certificate of formation, and any other instrument or agreement
relating to the rights between the partners or pursuant to which such
partnership is formed; and (c) for any limited liability company, the operating
agreement, any articles of organization or formation, and any other instrument
or agreement relating to the rights between the members, pertaining to the
manager, or pursuant to which such limited liability company is formed.

“Parent” has the meaning specified in the preamble of this Note.

 

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“Permitted Liens” has the meaning specified in Section 5.03.

“Permitted Investment” means:

(a) Investments by PGL or any Restricted Subsidiary in the Company, PGL or any
other Restricted Subsidiary;

(b) Investments in Cash Equivalents;

(c) Investments by PGL or any Restricted Subsidiary in a Person, if, as a result
of such Investment, such Person (i) becomes a Restricted Subsidiary of PGL, or
(ii) is merged, consolidated or amalgamated with or into, or transfers or
conveys substantially all of its assets to, or is liquidated into, PGL or any
Restricted Subsidiary;

(d) Investments by PGL or any Restricted Subsidiary in Interest Rate Agreements;

(e) Investments by PGL or any Restricted Subsidiary as a result of consideration
received in connection with an Asset Sale made in compliance with Section 5.06;

(f) Investments by PGL or any Restricted Subsidiary existing on the date hereof;

(g) credit extensions by PGL or any Restricted Subsidiary to gaming customers in
the ordinary course of business, consistent with industry practice;

(h) stock, obligations or securities received in settlement of debts created in
the ordinary course of business and owing to PGL or any Restricted Subsidiary
(i) in satisfaction of judgments or (ii) pursuant to any plan of reorganization
or similar arrangement upon the bankruptcy or insolvency of trade creditors or
customers;

(i) loans or other advances by PGL or any Restricted Subsidiary to employees
thereof in an aggregate amount not to exceed $2.5 million at any one time
outstanding;

(j) intercompany Indebtedness incurred pursuant to clause (v) of
Section 5.02(c);

(k) Investments in this Note; and

(l) Investments not otherwise permitted by clauses (a) through (k) above, not to
exceed $20.0 million at any one time outstanding.

“Permitted Tax Distributions” means, with respect to a given Related Period, an
amount equal to the product of (1)(a) the net taxable income of the Company (or,
if the Company is treated as a pass-through entity for U.S. federal, state, or
local tax purposes, the net taxable income allocated to the holders of the
Company’s equity interests) with respect to such Related Period, as computed
after the elimination of intercompany transactions, minus (b) the Tax Loss

 

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Benefit Amount realized at the time such Permitted Tax Distribution is to be
made, and (2) the highest effective corporate tax rate (including federal, state
and local taxes imposed on income) applicable to the Company (or if the Company
is a pass-through entity for purposes of determining such income tax, the direct
or indirect holders of its equity interests) for the applicable Related Period.
Tax obligations resulting from federal or state income, franchise and excise tax
audit adjustments, as well as reconciliations of estimated tax payments to filed
returns will be treated as a Permitted Tax Distribution. In addition to the
amounts noted above, a Permitted Tax Distribution will include franchise and
excise taxes measured on the Company’s or its Subsidiaries’ equity or net worth.

“Person” means an individual, partnership, corporation, business trust, joint
stock company, trust, unincorporated association, joint venture or Governmental
Authority.

“PGL” has the meaning specified in the preamble of this Note.

“Pledge Agreement” means the pledge agreement dated the date hereof made by
Holdings in favor of the Holder, as amended, modified, supplemented, or restated
from time to time, which Pledge Agreement will provide that the Holder will not
have any recourse to the assets of Holdings other than the Equity Interests of
the Company pledged under the Pledge Agreement.

“Pre-Opening Expenses” means, with respect to any fiscal period, the amount of
expenses (other than interest expense) incurred with respect to capital projects
that are classified as “pre-opening expenses” on the applicable financial
statements of PGL and its Restricted Subsidiaries for such period, prepared in
accordance with GAAP.

“Principal Amount” has the meaning specified in the preamble of this Note.

“Purchase Money Obligations” means Indebtedness representing, or incurred to
finance (or to Refinance Indebtedness incurred to finance), the cost (a) of
acquiring any assets (including FF&E) and (b) of construction or build-out of
facilities (including Purchase Money Obligations of any other Person at the time
such other Person is merged with or into or is otherwise acquired by PGL or any
Restricted Subsidiary); provided, that (i) any Lien securing such Indebtedness
does not extend to or cover any other asset or property other than the asset or
property being so acquired, constructed or built and assets which, immediately
prior to the incurrence of such Purchase Money Obligations, secured other
Indebtedness of PGL and the Restricted Subsidiaries (to the extent such other
Indebtedness and the Liens securing such other Indebtedness are permitted under
this Note) to the lender of such Purchase Money Obligations and (ii) such
Indebtedness is (or the Indebtedness being Refinanced was) incurred, and any
Liens with respect thereto are granted, within 180 days of the acquisition or
commencement of construction or build-out of such property or asset.

“Refinance” has the meaning specified in Section 5.02(c)(xi).

“Refinancing Indebtedness” has the meaning specified in Section 5.02(c)(xi).

“Related Period” means the preceding fiscal quarter, fiscal year to date, or the
preceding fiscal year, as applicable.

 

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“Requirement of Law” means, as to any Person, any law (statutory or common),
treaty, rule or regulation or determination of an arbitrator or of a
Governmental Authority, in each case applicable to or binding upon the Person or
any of its property or to which the Person or any of its property is subject.

“Restricted Investment” means any Investment that is not a Permitted Investment.

“Restricted Payment” means:

(a) any dividend or other distribution declared or paid on account of any Equity
Interests of the Company or any other payment to the Parent or Affiliate
thereof, including pursuant to a Management Arrangement or any other arrangement
(other than, in the case of payments made by PGL and its Restricted
Subsidiaries, amounts payable to the Company, PGL or any Restricted Subsidiary);

(b) any payment to purchase, redeem or otherwise acquire or retire for value any
Equity Interest of the Company; or

(c) any Restricted Investment.

“Restricted Subsidiary” means any Subsidiary which at the time of determination
is not an Unrestricted Subsidiary.

“SEC” means the United States Securities and Exchange Commission, or any
successor agency.

“S&P” means Standard & Poor’s Ratings Services, a division of The McGraw-Hill
Companies, and its successors.

“Subsidiary” of a Person means any corporation, association, partnership, joint
venture, limited liability company, or other business entity of which more than
fifty percent (50%) of the voting stock or other Equity Interests (in the case
of Persons other than corporations), is owned or controlled directly or
indirectly by the Person, or one or more of the Subsidiaries of the Person, or a
combination thereof.

“Tax Loss Benefit Amount” at any given time, the amount by which the net taxable
income of the Company (or, if the Company is treated as a pass-through entity
for U.S. federal, state, or local tax purposes, the net taxable income allocated
to the holders of the Company’s equity interests) is reduced by a net operating
loss or net capital loss of the Company (or, if the Company is treated as a
pass-through entity for U.S. federal, state, or local tax purposes, the net
operating losses or net capital losses allocated to the holders of the Company’s
equity interests) from a prior taxable year (or allocated to the holders of the
Company’s equity interests in a prior taxable year, as applicable) carried
forward to the applicable taxable year; provided, that for such purpose the
amount of any such net operating loss or net capital loss shall be used only
once and in each case shall be carried forward to the next succeeding taxable
year until so used. For purposes of calculating the Tax Loss Benefit Amount, the
proportionate part of the items of taxable income, gain, deduction, or loss
(including capital gain or loss) of any Subsidiary of the Company that is a
treated as a pass-through entity for U.S. federal, state, or local tax purposes
shall be included in determining the amount of net operating loss or net capital
loss of the Company.

 

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“Transactions” means the transactions contemplated by the Merger Agreement.

“Unrestricted Subsidiary” means any Subsidiary of PGL that, at or prior to the
time of determination, shall have been designated by the Managers of the Company
as an Unrestricted Subsidiary and each subsidiary of such Subsidiary; provided,
that neither such Subsidiary nor any of its subsidiaries holds any Indebtedness
or capital stock of, or any Lien on any assets of, PGL or any Restricted
Subsidiary. If, at any time, any Unrestricted Subsidiary would fail to meet the
foregoing requirements as an Unrestricted Subsidiary, it shall thereafter cease
to be an Unrestricted Subsidiary for purposes of this Note and any Indebtedness
of such Subsidiary shall be deemed to be incurred by a Restricted Subsidiary as
of such date. The Managers of the Company may at any time designate any
Unrestricted Subsidiary to be a Restricted Subsidiary; provided, that such
designation shall be deemed to be an incurrence of Indebtedness by a Restricted
Subsidiary of any outstanding Indebtedness of such Unrestricted Subsidiary and
such designation shall only be permitted if (i) such Indebtedness is permitted
under the Consolidated Leverage Ratio test set forth in Section 5.02(b)
calculated on a pro forma basis as if such designation had occurred at the
beginning of the four-quarter reference period, and (ii) no Default or Event of
Default would be in existence following such designation. PGL shall be deemed to
make an Investment in each Subsidiary designated as an Unrestricted Subsidiary
immediately following such designation in an amount equal to the fair market
value of the Investment in such Subsidiary and its subsidiaries immediately
prior to such designation. Any such designation by the Managers of the Company
shall be evidenced to the Holder by filing with the Holder a certified copy of
the resolution of the Managers giving effect to such designation and an
officer’s certificate certifying that such designation complies with the
foregoing conditions and is permitted by this Note.

“Venture” means any casino, hotel, casino/hotel, resort, resort/hotel, retail,
residential, riverboat, riverboat/dockside casino, horse racing track,
entertainment center or similar facility (or any site or proposed site for any
of the foregoing), and any and all reasonably related businesses necessary for,
in support, furtherance or anticipation of and/or ancillary to or in preparation
for, any such business, including off-track betting facilities and golf courses.

“Weighted Average Life to Maturity” means, when applied to any Indebtedness at
any date, the number of years (rounded to the nearest one-twelfth) obtained by
dividing (i) the then outstanding principal amount of such Indebtedness into
(ii) the total of the product obtained by multiplying (a) the amount of each
then remaining installment, sinking fund, serial maturity or other required
payments of principal, including payment at final maturity, in respect thereof,
by (b) the number of years (calculated to the nearest one-twelfth) that shall
elapse between such date and the making of such payment.

“Wholly Owned Subsidiary” means a Subsidiary of PGL all the Equity Interests of
which (other than directors’ qualifying shares) is owned directly or indirectly
by PGL; provided, that the term Wholly Owned Subsidiary shall exclude
Unrestricted Subsidiaries.

 

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ARTICLE II

REPAYMENT; INTEREST; COLLATERAL

2.01 Repayment. The Company agrees to pay the outstanding principal amount of
the Loan, together with all accrued and unpaid interest, on the Maturity Date.
Principal amounts prepaid under this Note may not be reborrowed.

2.02 Calculation and Payment of Interest.

(a) Interest shall accrue on the outstanding principal balance hereof at a per
annum rate equal to (i) from the Issue Date to but excluding the first
anniversary of the Issue Date, zero percent (0.00%), (ii) from the first
anniversary of the Issue Date to but excluding the second anniversary of the
Issue Date, six percent (6.00%), (iii) from the second anniversary of the Issue
Date to but excluding the third anniversary of the Issue Date, eight percent
(8.00%), and (iv) from and after the third anniversary of the Issue Date, ten
percent (10.00%). Interest will be computed on the basis of a 360-day year
comprised of twelve 30-day months.

(b) Any adjustment to the Principal Amount made pursuant to the Merger Agreement
other than adjustments resulting from Contingent Merger Consideration and
adjustments pursuant to pay-in-kind interest on this Note shall result in an
adjustment to accrued interest under this Note retroactive to the Issue Date.
Adjustments to the Principal Amount resulting from Contingent Merger
Consideration shall bear interest from and after the date on which such amount
is determined pursuant to Section 2.6(f) of the Merger Agreement.

(c) Interest shall be payable-in-kind on the outstanding principal amount of
this Note. On May 20, 2014 and each May 20 and November 20 thereafter, accrued
and unpaid interest shall be added to the principal amount of this Note without
further action on the part of the Company or the Holder.

2.03 Optional Prepayments. The Company may prepay the Loan at any time, in whole
or in part, without premium or penalty.

2.04 Mandatory Prepayments. The Company shall repay all outstanding Obligations
on the date on which a Change of Control shall occur, unless the Holder
otherwise agrees in writing prior to the occurrence of such Change of Control.

2.05 Default Interest. Following the occurrence and during the continuance of an
Event of Default, the outstanding principal amount of this Note at such time
shall bear interest at a default rate equal to two percent (2%) above the per
annum rate otherwise applicable hereunder.

2.06 Payments by the Company.

(a) All payments made by the Company on account of principal, interest, and any
other amounts required hereunder shall be made to the Holder in Dollars and in
immediately available funds, no later than 5:00 p.m. (New York time) on the date
or dates specified herein. Any payment which is received by the Holder later
than 5:00 p.m. (New York time) shall be deemed to have been received on the
immediately succeeding Business Day and any applicable interest shall continue
to accrue.

 

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(b) Whenever any payment hereunder shall be stated to be due on a day other than
a Business Day, such payment shall be made on the next succeeding Business Day,
and such extension of time shall in such case be included in the computation of
interest.

2.07 Security. The obligations of the Company under this Note shall be secured
by the Collateral pursuant to the Pledge Agreement. Concurrently with the
execution and delivery of this Note, Holdings shall execute and deliver to the
Holder the Pledge Agreement.

ARTICLE III

REPRESENTATIONS AND WARRANTIES

The Company represents and warrants to the Holder that as of the date hereof:

3.01 Existence and Power. The Company is duly organized and validly existing
under the laws of its state of organization. The Company is in compliance with
all Requirements of Law applicable to the Company, except as would not be
reasonably expected to have a Material Adverse Effect. The execution, delivery
and performance of this Note by the Company are within the Company’s limited
liability company power and authority.

3.02 Corporate Authorization. The execution, delivery and performance of this
Note by the Company will not (a) conflict with or violate the Organizational
Documents of the Company, (b) violate any Requirement of Law or any order of any
court or other agency or government, in any such case, in any material respect,
(c) result in a breach of or constitute a default by the Company under any
Contractual Obligation, except as would not be reasonably expected to have a
Material Adverse Effect, or (d) result in the creation or imposition of any Lien
on any of the property or assets of the Company.

3.03 Governmental Authorizations and Third Party Consents. No consent or
approval of any Governmental Authority or any third party is required for the
execution, delivery and performance by the Company of this Note or the
transactions contemplated hereby.

3.04 Binding Effect. The execution and delivery of this Note and the other Loan
Documents and the consummation of the transactions contemplated herein and
therein have been duly authorized by all necessary limited liability company
power of the Company. This Note has been duly executed and delivered and
constitutes the legal, valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms, except as such enforceability
may be limited by applicable bankruptcy, insolvency, or similar laws affecting
the enforcement of creditors’ rights generally, or by equitable principles
relating to enforceability.

3.05 Litigation. There are no actions, suits, proceedings, claims, disputes or
investigations pending, or to the best knowledge of the Company, threatened or
contemplated, at law, in equity, in arbitration or before any Governmental
Authority, against or affecting the Company or any of its assets or with respect
to this Note or any of the other Loan Documents.

 

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3.06 Judgments. No judgment, decree or order of any Governmental Authority has
been issued against the Company which has or may have any Material Adverse
Effect on the business or condition of the Company.

3.07 No Default. No Default or Event of Default exists.

ARTICLE IV

AFFIRMATIVE COVENANTS

The Company covenants and agrees that, so long as the Loan or any other
Obligation shall remain unpaid or unsatisfied, unless the Holder waives
compliance in writing:

4.01 Financial Statements. The Company on behalf of PGL shall furnish or cause
to be furnished to the Holder, within fifteen (15) days after PGL is or would
have been required to file such with the SEC, all quarterly and annual financial
information that would be required to be contained in a filing with the SEC on
Forms 10-Q and 10-K if PGL were required to file such Forms, including for each
a “Management’s Discussion and Analysis of Financial Condition and Results of
Operations” and, with respect to the annual information only, a report thereon
by PGL’s independent certified public accountants. The Company on behalf of PGL
shall furnish or cause to be furnished to the Holder, within three (3) days
after PGL is or would have been required to file such with the SEC, all current
reports that would be required to be contained in a filing with the SEC on Form
8-K if PGL were required to file such Forms. Notwithstanding the foregoing, the
Company will be deemed to have furnished such reports if it or PGL has filed or
furnished such reports with the SEC via the EDGAR filing system and such reports
are publicly available.

4.02 Preservation of Corporate Existence. Subject to the terms hereof, the
Company shall do or cause to be done all things necessary to preserve and keep
in full force and effect (a) its limited liability company existence in
accordance with its Organizational Documents (as the same may be amended from
time to time) and (b) except as would not reasonably be expected to have a
Material Adverse Effect, the rights (charter and statutory), licenses and
franchises of the Company.

4.03 Taxes. The Company shall pay, prior to delinquency, all taxes, assessments,
and governmental levies except such as are contested in good faith and by
appropriate proceedings or where the failure to effect such payment would not
reasonably be expected to have a Material Adverse Effect.

4.04 Compliance with Laws. The Company shall comply in all material respects
with all Requirements of Law, except as would not reasonably be expected to have
a Material Adverse Effect.

 

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ARTICLE V

NEGATIVE COVENANTS

The Company hereby covenants and agrees that, so long as any portion of the Loan
or other Obligation shall remain unpaid or unsatisfied, unless the Holder waives
compliance in writing:

5.01 Restrictions on Activities of the Company. The Company shall not (a) hold
any material assets other than the Equity Interests of PGL (or any successor to
PGL permitted by Section 5.04(b)), cash and Cash Equivalents or (b) become
liable for any material obligations, except for (i) obligations pursuant to or
in connection with the Merger Agreement and (ii) obligations under this Note and
the other Loan Documents.

5.02 Limitation on Indebtedness.

(a) The Company shall not create, incur, issue, assume, guaranty, suffer to
exist, or otherwise become or remain directly or indirectly liable with respect
to, contingently or otherwise, any Indebtedness, except:

(i) the Obligations pursuant to this Note and the other Loan Documents;

(ii) a pledge of stock of PGL given by the Company to secure obligations of PGL
and its Subsidiaries; and

(iii) Indebtedness arising from judgments or decrees in an aggregate principal
amount outstanding at any time not to exceed the amount set forth in
Section 6.01(f).

(b) The Company shall not permit PGL or any of its Restricted Subsidiaries to
incur any Indebtedness; provided, that PGL and the Restricted Subsidiaries may
incur Indebtedness if (i) no Default or Event of Default shall have occurred and
be continuing at the time of, or would occur after giving effect on a pro forma
basis, to such incurrence or issuance, and (ii) the Consolidated Leverage Ratio
for PGL’s most recently ended four full fiscal quarters for which internal
financial statements are available immediately preceding the date on which such
additional Indebtedness is incurred would have been not greater than 5.25 to
1.00 determined on a pro forma basis (including a pro forma application of the
net proceeds therefrom), as if the additional Indebtedness had been incurred at
the beginning of such four-quarter period.

(c) Notwithstanding the foregoing, the foregoing limitations shall not prohibit
the incurrence of:

(i) Indebtedness under the Debt Facilities; provided, that the aggregate
principal amount of Indebtedness so incurred on any date, together with all
other Indebtedness incurred pursuant to this clause (i) and outstanding on such
date, shall not exceed the greater of (A) $1.0 billion and (B) the amount of
Debt Facilities described in clauses (a) and (b) of the definition thereof
outstanding on the Issue Date (assuming that any revolving credit

 

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commitment is fully funded), minus any permanent commitment reduction thereof,
minus, without duplication, an amount equal to the aggregate amount of Net
Proceeds from Asset Sales that are applied (excluding temporary applications
pursuant to Section 5.06(c)) to repay Indebtedness pursuant to
Section 5.06(a)(iii)(C);

(ii) FF&E Financing and Indebtedness represented by Capital Lease Obligations,
mortgage financings or other Purchase Money Obligations; provided, that the
aggregate principal amount of such Indebtedness (including any Refinancing
Indebtedness and any other Indebtedness incurred to repay, redeem, discharge,
retire, defease, refund, refinance or replace any Indebtedness pursuant to this
clause (ii)) outstanding at any time (excluding any Gaming FF&E Financing
incurred pursuant to this clause (ii)) does not exceed $20.0 million;

(iii) Indebtedness solely in respect of bankers acceptances, letters of credit,
payment obligations in connection with self-insurance or similar requirements,
security for workers’ compensation claims, appeal bonds, surety bonds, insurance
obligations or bonds, and performance bonds, and similar bonds or obligations,
all incurred in the ordinary course of business (including, without limitation,
to maintain any license or permits) in accordance with customary industry
practices;

(iv) Indebtedness of PGL and/or the Restricted Subsidiaries under Interest Rate
Agreements, provided, that the obligations under such agreements were entered
into in connection with payment obligations on Indebtedness otherwise permitted
by the terms of this Section 5.02;

(v) Indebtedness of PGL or any Restricted Subsidiary owed to and held by PGL or
another Restricted Subsidiary; provided, that any subsequent issuance or
transfer of any Equity Interests that results in any such Restricted Subsidiary
ceasing to be a Restricted Subsidiary, or any transfer of such Indebtedness
(other than to PGL or another Restricted Subsidiary), shall be deemed, in each
case, to constitute the incurrence of such Indebtedness by PGL or such
Restricted Subsidiary, as the case may be;

(vi) Indebtedness outstanding on the Issue Date;

(vii) Indebtedness arising from the honoring by a bank or other financial
institution of a check, draft or similar instrument inadvertently (except in the
case of daylight overdrafts) drawn against insufficient funds in the ordinary
course of business;

(viii) the accrual of interest, the accretion or amortization of original issue
discount and the payment of interest on any Indebtedness in the form of
additional Indebtedness with the same terms;

(ix) fair value adjustments to the amount of Indebtedness;

(x) Indebtedness arising from agreements for indemnification, adjustment of
purchase price or similar obligations, in each case, incurred in connection with
the disposition of any business or assets of PGL or any of the Restricted
Subsidiaries; provided, that the maximum aggregate liability in respect of all
such Indebtedness shall at no time exceed the gross proceeds actually received
by PGL or the Restricted Subsidiary in connection with such disposition;

 

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(xi) Indebtedness issued in exchange for, or the proceeds of which are
substantially contemporaneously used to extend, repay, redeem, discharge,
refinance, renew, replace, or refund (collectively, “Refinance”), Indebtedness
incurred pursuant to the Consolidated Leverage Ratio test set forth in the
immediately preceding paragraph, Section 5.02(c)(vi) above, this clause (xi) or
Section 5.02(c)(xiii) below (the “Refinancing Indebtedness”); provided, that
(a) the principal amount of such Refinancing Indebtedness does not exceed the
principal amount of Indebtedness so Refinanced (plus any required premiums and
out-of-pocket expenses reasonably incurred in connection therewith) and (b) the
Refinancing Indebtedness has (1) a final scheduled maturity that equals or
exceeds the final stated maturity of the Indebtedness being Refinanced, and
(2) a Weighted Average Life to Maturity that is equal to or greater than the
Weighted Average Life to Maturity of the Indebtedness being Refinanced;

(xii) guarantees by Restricted Subsidiaries of Indebtedness of any Restricted
Subsidiary or the Company or guarantees by the Company of Indebtedness of any
Restricted Subsidiaries if the Indebtedness so guaranteed is permitted under
another provision of this Section 5.02; and

(xiii) Indebtedness not otherwise permitted by clauses (i) through (xii) of this
Section 5.02 in an aggregate outstanding principal amount for all Indebtedness
incurred in reliance on this clause (xiii), as of the date of such incurrence
and after giving pro forma effect to such incurrence, not to exceed $30.0
million.

Upon each incurrence of Indebtedness, if such Indebtedness could have been
incurred under more than one provision of this Section 5.02, (i) the Company may
designate which provision of this Section 5.02 such Indebtedness is being
incurred pursuant to, (ii) the Company may subdivide an amount of Indebtedness
and designate more than one provision pursuant to which such amount of
Indebtedness is being incurred and shall be permitted to classify such item of
Indebtedness on the date of its incurrence, or later reclassify, all or a
portion of such item of Indebtedness, in any manner that complies with this
Section 5.02, and (iii) such Indebtedness shall not be deemed to have been
incurred or outstanding under any other provision of this Section 5.02;
provided, that (a) all incurrences of Indebtedness under the Debt Facilities
outstanding on the Issue Date shall be deemed to have been incurred pursuant to
Section 5.02(c)(i) above and (b) all other Indebtedness outstanding on the Issue
Date shall be deemed to have been incurred pursuant to Section 5.02(c)(vi)
above.

5.03 Limitation on Liens.

(a) The Company shall not, directly or indirectly, make, create, incur, assume
or suffer to exist any Lien upon or with respect to any part of its assets,
whether now owned or hereafter acquired, other than the following (collectively,
the “Permitted Liens”):

(i) any Lien created under any Loan Document;

(ii) a pledge of stock of PGL given by the Company to secure obligations of PGL
and its Subsidiaries;

 

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(iii) Liens for taxes, assessments, and other governmental charges or levies
(A) not yet due or as to which the period of grace, if any, related thereto has
not expired, or (B) which are being contested in good faith and by appropriate
proceedings if adequate reserves are maintained to the extent required by GAAP;

(iv) attachments, judgments and other similar Liens arising in connection with
court proceedings; provided, that the execution or other enforcement of such
Liens is effectively stayed and claims secured thereby are being actively
contested in good faith by appropriate proceedings; and

(v) Liens in favor of financial institutions in the ordinary course of business
in connection with, and which solely encumber deposit or securities accounts
maintained with such financial institutions on funds and other items in such
accounts.

Nothing in this Section 5.03(a) shall limit liens on any entity other than the
Company (including PGL and its Subsidiaries).

(b) The Company shall not permit PGL or any of its Subsidiaries, directly or
indirectly, to make, create, incur, assume or suffer to exist any Lien upon or
with respect to any part of its assets, whether now owned or hereafter acquired,
to secure any obligations of Parent or its Subsidiaries (other than the Company
or any of its Subsidiaries, including, for the avoidance of doubt, PGL and its
Subsidiaries).

5.04 Consolidations and Mergers.

(a) The Company shall not consolidate or merge with or into (regardless of
whether the Company is the surviving corporation), or sell, assign, transfer,
lease, convey or otherwise dispose of all or substantially all of its properties
or assets in one or more related transactions to, any other Person, unless:

(i) the Person formed by or surviving any such consolidation or merger (if other
than the Company) or the Person to which such sale, assignment, transfer, lease,
conveyance or other disposition has been made assumes all the Obligations of the
Company under this Note, and the Person(s) owning all of the Equity Interests in
such Person assume(s) the obligations of Holdings under the Guaranty and the
Pledge Agreement pursuant to documentation in a form reasonably satisfactory to
the Holder;

(ii) immediately after giving effect to such transaction no Default or Event of
Default exists; and

(iii) such transaction would not result in the loss or suspension or material
impairment of any gaming license unless a comparable replacement gaming license
is effective prior to or simultaneously with such loss, suspension or material
impairment.

In the event of any transaction (other than a lease or a transfer of less than
all of the Company’s assets) described in and complying with the conditions
specified in this Section 5.04 in which such Company is not the surviving
Person, such surviving Person or transferee shall succeed to, and be substituted
for, and may exercise every right and power of, the Company under, and the
Company shall be discharged from its Obligations under this Note with the same
effect as if such successor Person had been named as the Company herein on the
date hereof.

 

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(b) The Company shall not permit PGL to consolidate or merge with or into
(regardless of whether PGL is the surviving corporation), or sell, assign,
transfer, lease, convey or otherwise dispose of all or substantially all of its
properties or assets in one or more related transactions to, any other Person,
unless:

(i) either (A) PGL is the surviving Person or (B) the Person formed by or
surviving any such consolidation or merger (if other than PGL) or to which such
sale, assignment, transfer, lease, conveyance or other disposition has been made
is a corporation organized and existing under the laws of the United States of
America, any state thereof or the District of Columbia;

(ii) immediately after giving effect to such transaction on a pro forma basis,
no Default or Event of Default exists;

(iii) such transaction would not result in the loss or suspension or material
impairment of any gaming license unless a comparable replacement gaming license
is effective prior to or simultaneously with such loss, suspension or material
impairment; and

(iv) PGL, or any Person formed by or surviving any such consolidation or merger,
or to which such sale, assignment, transfer, lease, conveyance or other
disposition has been made:

(1) would be permitted, at the time of such transaction and after giving pro
forma effect thereto as if such transaction had occurred at the beginning of the
applicable four-quarter period, to incur at least $1.00 of additional
Indebtedness pursuant to the Consolidated Leverage Ratio test set forth in
Section 5.02(b); or

(2) would have a Consolidated Leverage Ratio, at the time of such transaction
and after giving pro forma effect thereto as if such transaction had occurred at
the beginning of the applicable four-quarter period, at least equal to the
Consolidated Leverage Ratio for PGL and its Restricted Subsidiaries immediately
prior to such transaction.

5.05 Restricted Payments. The Company shall not, and shall not permit PGL or any
of its Restricted Subsidiaries to, directly or indirectly, declare or make any
Restricted Payments; provided, that the foregoing shall not prohibit:

(a) for so long as the Company is treated as a pass-through entity for United
States federal income tax purposes or included in the same consolidated federal
income tax return as the member of the Company, the Company shall be permitted
to make dividends and distributions to the member of the Company, in an amount
not to exceed the amount of the Permitted Tax Distribution for the Related
Period;

(b) Restricted Payments made pursuant to Management Arrangements in an amount
not to exceed the sum of (i) 2.0% of consolidated net revenue of PGL plus
(ii) 5.0% of Consolidated EBITDA of PGL;

 

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(c) other Restricted Payments not to exceed $10.0 million in any twelve
consecutive month period; and

(d) additional Restricted Payments if at the time such Restricted Payment is
made the Consolidated Leverage Ratio is less than 5.25 to 1.00.

5.06 Asset Sales.

(a) The Company shall not permit PGL or any of its Restricted Subsidiaries to
make any Asset Sale unless:

(i) PGL or such Restricted Subsidiary receives consideration at the time of such
Asset Sale not less than the fair market value of the assets subject to such
Asset Sale (as determined by PGL’s Managers in good faith);

(ii) at least 75% of the consideration for such Asset Sale is in the form of
either (A) cash or Cash Equivalents or liabilities of PGL or any Restricted
Subsidiary that are assumed by the transferee of such assets (provided, that
following such Asset Sale, there is no further recourse to PGL or the Restricted
Subsidiaries or PGL and the Restricted Subsidiaries are fully indemnified with
respect to such liabilities; provided, further, that the 75% limitation set
forth in this clause (ii) of this Section 5.06(a) shall not apply to any
proposed Asset Sale for which an independent certified accounting firm has
certified to the Managers of PGL and the Holder that the after-tax cash portion
of the consideration to be received by PGL or such Restricted Subsidiary in such
proposed Asset Sale is equal to or greater than what the net after-tax cash
proceeds would have been had such proposed Asset Sale complied with the 75%
limitation set forth in this clause (ii) of this paragraph), or (B) assets of
the type described in clause (iii)(A) of this Section 5.06(a) below; and

(iii) within 360 days of such Asset Sale, the Net Proceeds thereof are
(A) invested in assets related to or useful in the business of PGL and/or the
Restricted Subsidiaries, (B) applied to repay Indebtedness under Purchase Money
Obligations incurred in connection with the assets so sold, (C) applied to repay
Indebtedness under the Debt Facilities with a permanent reduction of the
commitment thereunder in the principal amount so repaid, or (D) to the extent
not used as provided in clauses (A), (B), (C) or any combination thereof,
applied to repay the Loan.

(b) All Net Proceeds from an Event of Loss shall be used as follows: (1) first,
PGL may use such net cash proceeds to the extent necessary to rebuild, repair,
replace or restore the assets subject to such Event of Loss with comparable
assets and (2) to the extent any Net Proceeds from an Event of Loss are not used
as described in the preceding clause (1), all such remaining Net Proceeds shall
be reinvested or used as provided in the immediately preceding
Section 5.06(a)(iii).

(c) Pending the final application of any Net Proceeds, PGL may temporarily
reduce Indebtedness under the Debt Facilities or temporarily invest such Net
Proceeds in Cash Equivalents.

 

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5.07 Transactions with Affiliates.

(a) The Company shall, and shall cause each of its direct and indirect
Subsidiaries not to, directly or indirectly, sell, lease, transfer or otherwise
dispose of any of its properties or assets to, or purchase any property or
assets from, or enter into any contract, agreement, understanding, loan, advance
or guaranty with, or for the benefit of, any Affiliate of the Company (each of
the foregoing, an “Affiliate Transaction”), except for transactions conducted in
good faith and on terms that are no less favorable to such Subsidiary than those
that would have been obtained in a comparable transaction at such time by such
Subsidiary on an arm’s length basis from a Person that is not an Affiliate of
the Company.

(b) Notwithstanding the foregoing, the following shall be deemed not to be
Affiliate Transactions:

(i) transactions between or among the Company and/or any or all of its
Subsidiaries;

(ii) Restricted Payments permitted by Section 5.05;

(iii) the Management Arrangements and management fees and other payments made
pursuant thereto;

(iv) reasonable and customary compensation (including directors’ fees) paid to,
and indemnity and customary employee benefit arrangements (including directors’
and officer’s liability insurance) provided for the benefit of, any director,
officer, employee or consultant of the Company and its Subsidiaries, in each
case entered into in the ordinary course of business and for services provided
to the Company and its Subsidiaries, as determined in good faith by the Managers
of the Company and its Subsidiaries; and

(v) any agreement or arrangement as in effect on the date hereof among the
Company or any of its Subsidiaries, on the one hand, and any officers or
managers thereof and/or any Affiliates of the Company, on the other hand
(without giving effect to any amendment or supplement thereto or modification
thereof, except for any such amendment, supplement, modification or replacement
agreement that is not more disadvantageous to the Holder in any material respect
than the original agreement thereof as in effect on the date hereof), and any
transactions contemplated thereby.

5.08 Margin Stock. The Company shall not use any portion of the Loan proceeds,
directly or indirectly, (a) to purchase or carry Margin Stock, (b) to extend
credit for the purpose of purchasing or carrying any Margin Stock, or (c) to
acquire any security in any transaction that is subject to Section 13 or 14 of
the Exchange Act.

5.09 Status as Investment Company. The Company shall not be required to register
as an “investment company” (as that term is defined in the Investment Company
Act) or become subject to regulation under the Investment Company Act.

 

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ARTICLE VI

EVENTS OF DEFAULT

6.01 Event of Default. Each of the following shall constitute an “Event of
Default” as such term is used herein and in the other Loan Documents:

(a) the Company defaults in the payment of principal on this Note when the same
becomes due and payable at maturity, by acceleration or otherwise and such
default continues for a period of 2 Business Days;

(b) the Company fails to comply with Section 5.04;

(c) the Company fails to comply with any of its other agreements or covenants in
this Note (other than as set forth in clause (a) or (b) of this Section 6.01),
or the other Loan Documents and such failure continues for 30 days after written
notice thereof has been given to the Company by the Holder, such notice to state
that it is a “Notice of Default”;

(d) any representation or warranty by the Company made in any Loan Document
shall prove to have been false or misleading in any material respect as of the
date on which such representation or warranty was made or deemed made;

(e) the obligations under any Indebtedness of PGL or its Restricted
Subsidiaries, in each case, in excess of $15.0 million, shall have been
accelerated by the respective trustee or agent thereunder or the holders of such
Indebtedness;

(f) a final non-appealable judgment or judgments for the payment of money (other
than to the extent of any judgment as to which a reputable insurance company has
accepted liability) is or are entered by a court or courts of competent
jurisdiction against the Company or any of its Subsidiaries and such judgment or
judgments are not discharged, bonded or stayed within 60 days after entry;
provided, that the aggregate of all such judgments exceeds $15.0 million;

(g) the Guaranty ceases to be in full force and effect or shall be held in any
judicial proceeding to be unenforceable or invalid or is declared null and void
(other than in accordance with the terms of the Guaranty) or Holdings denies or
disaffirms its obligations under the Guaranty or the Pledge Agreement (in each
case, other than by reason of the repayment of the Obligations or the release of
the Guaranty and/or the Pledge Agreement in accordance with its terms);

(h) (i) any event of default under the Pledge Agreement (after giving effect to
any applicable grace periods, applicable notice periods, waivers or amendments)
or (ii) a material breach of representation or warranty made by the Company or
Holdings in this Note or any other Loan Documents to which it is a party and, in
each case, such event of default or breach continues for a period of 30 days
after written notice is given to the Company by the Holder;

 

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(i) the Pledge Agreement ceases to be in full force and effect or ceases to give
the Holder substantially all of the Liens, rights, powers or privileges
purported to be created thereby, or the Pledge Agreement is declared null and
void, or Holdings denies that it has any further liability under the Pledge
Agreement or gives notice to such effect (in each case other than by reason of
repayment of the Obligations or in accordance with the terms of the Pledge
Agreement) and the continuance of such failure for a period of 30 days after
written notice is given to the Company by the Holder;

(j) the Company pursuant to or within the meaning of any Bankruptcy Law:

(i) commences a voluntary case,

(ii) consents to the entry of an order for relief against it in an involuntary
case,

(iii) consents to the appointment of a custodian of it or for all or
substantially all of its property,

(iv) makes a general assignment for the benefit of its creditors, or

(v) admits in writing its inability to pay debts as the same become due; and

(k) a court of competent jurisdiction enters an order or decree under any
Bankruptcy Law that:

(i) is for relief against the Company in an involuntary case,

(ii) appoints a custodian of the Company or for all or substantially all of its
property, or

(iii) orders the liquidation of the Company,

and the order or decree remains unstayed and in effect for 60 days.

6.02 Acceleration. If an Event of Default (other than an Event of Default
specified in clause (j) or (k) of Section 6.01) occurs and is continuing, the
Holder by written notice to the Company may declare the outstanding principal of
and any accrued interest on this Note to be due and payable. Upon such
declaration, the principal and interest shall be due and payable immediately. If
an Event of Default specified in clause (j) or (k) of Section 6.01 occurs, this
Note shall ipso facto become and be immediately due and payable without any
declaration or other act on the part of the Holder. At any time after a
declaration of acceleration, but before a judgment or decree for payment of the
money due has been obtained by the Holder, such declaration of acceleration and
its consequences may, at the Holder’s option, be rescinded and annulled if all
Events of Default, other than the non-payment of principal of and interest on
this Note that have become due solely by such declaration or occurrence of
acceleration, have been cured or waived.

 

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6.03 Other Remedies. If an Event of Default occurs and is continuing, the Holder
may pursue any available remedy to collect the payment of principal and interest
on this Note or to enforce the performance of any provision of this Note or the
other Loan Documents. A delay or omission by the Holder in exercising any right
or remedy accruing upon an Event of Default shall not impair the right or remedy
or constitute a waiver of or acquiescence in the Event of Default. All remedies
are cumulative to the extent permitted by law.

ARTICLE VII

MISCELLANEOUS

7.01 Amendment. This Note may not be changed, waived, discharged or terminated
orally, but only by an instrument or instruments in writing signed by the party
against which enforcement of the change, waiver, discharge or termination is
asserted.

7.02 Notices. All notices and other communications hereunder shall be in writing
and shall be deemed given if properly addressed: (a) if delivered personally, by
commercial delivery service or by facsimile (with confirmation of receipt, with
copies by overnight courier service or certified mail (return receipt
requested)), on the day of delivery; (b) if delivered by registered or certified
mail (return receipt requested), three (3) Business Days after mailing, or
(c) if delivered by e-mail (with confirmation of receipt), on the day of
delivery. Notices shall be deemed to be properly addressed to the Company or the
Holder, as applicable, if addressed to the following addresses (or at such other
address for such Person as shall be specified by like notice):

 

  (a) if to the Company, to:

Boyd Acquisition II, LLC

c/o Boyd Gaming Corporation

3883 Howard Hughes Parkway, 9th Floor

Las Vegas, NV 89169

Attention: Josh Hirsberg

Telephone: (702) 792-7234

E-mail: joshhirsberg@boydgaming.com

Facsimile: (702) 792-7214

and

Attention: Brian A. Larson, Esq.

Telephone: (702) 792-7281

E-mail: brianlarson@boydgaming.com

Facsimile: (702) 696-1114

 

  (b) if to the Holder, to:

Peninsula Gaming Partners, LLC

10250 Constellation Blvd., Suite 2230

Los Angeles, CA 90067

 

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Attention: M. Brent Stevens

Telephone: (424) 281-0700

E-mail: brent.stevens@peninsulagaming.com

Facsimile: (424) 281-0710

and

Attention: Christian Morris

Telephone: (424) 281-0700

E-mail: cmorris@peninsulagaming.com

Facsimile: (424) 281-0710

Notices sent by multiple means, each of which is in compliance with the
provisions of this Note, shall be deemed to have been received at the earliest
time provided for in this Section 7.02.

7.03 Successors and Assigns. This Note shall be binding upon and inure to the
benefit of the Company and the Holder and each of their respective permitted
successors and assigns (if any). Except as permitted by Section 5.04, neither
the Company nor the Holder may assign any of its rights or delegate any of its
obligations under this Note without the prior written consent of the other
party.

7.04 Facsimile Delivery. Any signature page delivered by facsimile or electronic
image transmission shall be binding to the same extent as an original signature
page. If the Company delivers its signature page by facsimile or electronic
image transmission, the Company shall deliver an original of this Note to the
Holder.

7.05 Severability. In the event that any term, covenant, restriction or other
provision of this Note or the application thereof becomes or is declared by a
court of competent jurisdiction to be illegal, void or unenforceable, the
remainder of the terms, covenants, restrictions and other provisions of this
Note will continue in full force and effect and the application of such terms,
covenants, restrictions and other provisions will be reformed, construed and
enforced in such jurisdiction as if such illegal, void or unenforceable term,
covenant, restriction or other provision or any portion thereof had never been
contained herein. The Company and the Holder further agree to replace such void
or unenforceable provision of this Note with a valid and enforceable provision
that will achieve, to the greatest extent possible, the economic, business and
other purposes of such void or unenforceable provision, as agreed upon in good
faith by the Company and the Holder.

7.06 Headings. The article headings and the section and subsection captions used
in this Note are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Note.

7.07 Relationship Between Parties. Nothing contained in this Note shall be
deemed or construed as creating a joint venture or partnership between the
Company and the Holder. The Holder will have no recourse to the stock or assets
of Parent or any “Restricted Subsidiary” of Parent within the meaning of the
Indentures to which Parent is party. Neither Holdings nor any Subsidiary of
Holdings shall be designated as a Restricted Subsidiary under any Indebtedness
of Parent or any Restricted Subsidiary of Parent.

 

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7.08 Governing Law; Venue. This Note shall be governed by, and interpreted in
accordance with, the laws of the State of New York without regard to any
conflicts of laws principles thereof. The Company and by its acceptance of this
Note, the Holder, each irrevocably submits to the exclusive jurisdiction of the
federal courts sitting in the Borough of Manhattan of the city of New York for
the purposes of any action arising out of this Note or any of the transactions
contemplated hereby and each of the Company and, by its acceptance of this Note,
the Holder, agrees that it will not bring or support any action, whether in law
or in equity, in any forum other than the United States District Court for the
Southern District of New York (and the appellate courts thereof); provided,
however, that if such federal courts do not have jurisdiction over such action,
such action shall be heard and determined exclusively in any New York state
court sitting in the Borough of Manhattan in the city of New York. The Company
and, by its acceptance of this Note, the Holder further agree that service of
any process, summons, notice or document hand delivered or sent by U.S.
registered mail to such Person’s respective address set forth in Section 7.02
shall be effective service of process for any action in New York with respect to
any matters to which it has submitted to jurisdiction as set forth in the
immediately preceding sentence. The Company and, by its acceptance of this Note,
the Holder irrevocably and unconditionally waive any objection to the laying of
venue of any action arising out of this Note or the transactions contemplated
hereby in the federal courts sitting in the Borough of Manhattan of the City of
New York; provided, however, that, if such federal courts do not have
jurisdiction over such action, such action shall be heard and determined
exclusively in any New York state court sitting in the Borough of Manhattan in
the city of New York, and hereby further irrevocably and unconditionally waive
and agree not to plead or claim in any such court that any such action brought
in any such court has been brought in an inconvenient forum. The Company and, by
its acceptance of this Note, the Holder hereby irrevocably waive any and all
right to trial by jury in any legal proceeding arising out of or related to this
Note or the transactions contemplated hereby.

7.09 Entire Agreement. This Note and the documents and instruments and other
agreements among the parties referenced herein constitute the entire agreement
among such parties with respect to the subject matter hereof and thereof and
supersede all prior agreements and understandings, both written and oral, among
such parties with respect to the subject matter hereof and thereof.

[Signatures on Next Page]

 

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IN WITNESS WHEREOF, the parties hereto have caused this Note to be duly executed
and delivered by their proper and duly authorized officers as of the day and
year first above written.

 

Boyd Acquisition II, LLC, a Delaware limited liability company By:  

/s/ Josh Hirsberg

Name:  

Josh Hirsberg

Title:  

Treasurer

SIGNATURE PAGE TO SELLER MERGER CONSIDERATION NOTE