Exhibit 10.16

 

ELEVENTH AMENDMENT TO OPERATING AGREEMENT

 

THIS ELEVENTH AMENDMENT TO OPERATING AGREEMENT is made and entered into
effective as of the 31st day of May, 2005, by and between DUBUQUE RACING
ASSOCIATION, LTD., an Iowa non-profit corporation (hereinafter referred to as
“DRA”) and DIAMOND JO, LLC (formerly known as Peninsula Gaming Company, LLC)
(hereinafter referred to as “Peninsula”).

 

WHEREAS, on February 22, 1993, DRA and Peninsula’s predecessor in interest
executed an Operating Agreement setting forth their respective rights, duties
and obligations with regard to excursion gambling boat operations under Chapter
99F of the Iowa Code, which Operating Agreement was amended on February 22,
1993, March 4, 1993, March 11, 1993 (two amendments signed on that date), April
9, 1993, November 29, 1993, April 6, 1994, April 29, 1994, July 11, 1995, and
July 15, 1999 (unless otherwise noted, the term “Operating Agreement” as used
hereafter shall refer to the original Operating Agreement as amended by all
prior amendments); and

 

WHEREAS, in 2004 the Iowa General Assembly enacted House File 2302, which
authorized the operation of table games at racetrack enclosures and the
operation of gambling barges, both on certain conditions; and

 

WHEREAS, Chapter 99F of the Iowa Code, as amended by House File 2302 requires
that DRA and Peninsula file an agreement by June 1, 2005 with the Iowa Racing
and Gaming Commission in order to authorize DRA’s operation of table games and
Peninsula’s operation of the Diamond Jo Dubuque as a barge, and

 

WHEREAS, DRA and Peninsula have jointly agreed to further amend the terms of the
Operating Agreement, as previously amended, for the above-mentioned purposes.

 

NOW, THEREFORE, IT IS AGREED that the Operating Agreement is further amended as
follows, subject to approval by the Iowa Racing and Gaming Commission:

 

1.             As used herein, the following terms shall be defined as follows:

 

(a)           “DRA’s facility” means Dubuque Greyhound Park & Casino;

 

(b)           “Diamond Jo Dubuque” means the excursion gambling boat now or
hereafter owned and operated by Peninsula in the Ice Harbor, Port of Dubuque,
whether operated as an excursion boat (permanently moored or otherwise) or as
barge; “excursion gambling boat,” “excursion boat,” and “barge” have the
meanings defined in Iowa Code Chapter 99F as of the date of this 11th
Amendment.  A permanently moored vessel is not a barge.

 

(c)           “Table games” has the meanings defined for such term in Iowa Code
Chapter 99F as of the date of this 11th Amendment (i.e. any game for which a
table games license is required).

 

(d)           “Adjusted gross receipts” has the meaning as defined in Iowa Code
Chapter 99F as of the date of this 11th Amendment.

 

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2.             The term of the Operating Agreement, as amended herein, is
extended to, and shall terminate on December 31, 2018 at 11:59 p.m.

 

3.             Peninsula consents to DRA’s operation of table games, and DRA
consents to Peninsula’s operation of Diamond Jo Dubuque as a barge.  DRA shall
be solely responsible for payment of the three million dollar ($3,000,000.00)
fee imposed under Iowa Code section 99F.4A(8) as a condition of operating table
games at a racetrack enclosure.

 

4.             DRA is authorized to operate one thousand (1,000) gaming devices
(in a mix of slots and video games, including without limitation video poker and
video blackjack, determined by DRA).  In addition DRA is authorized to operate
up to twenty (20) tables for non-video table games.

 

5.             The last unnumbered paragraph in Paragraph 8(h)(1) of the
Operating Agreement, as previously amended by paragraph 9 the Ninth Amendment to
Operating Agreement, is amended by deleting it in its entirety and the following
substituted in lieu of same:

 

“(h)         For any periods during which subparagraph 4(a)(4) of the Operating
Agreement is applicable, Peninsula and DRA shall use its best efforts to enter
into a non-exclusive joint marketing plan to conduct cooperative
charitable/non-profit contribution advertising and marketing efforts; This plan
shall include recognition of Peninsula’s gross contributions to the DRA.  As
part of and to facilitate said plan, the following provisions apply:

 

Peninsula may elect to require that the posted overall weighted average of
theoretical payback percentage, determined in accordance with paragraph
25.11(2)(b) of the Iowa Racing and Gaming Commission regulations (491 IAC ¶
25.11(2)(b)) on all DRA machine games of chance shall not exceed by more than
one-half of one percentage point the posted overall weighted average of
theoretical payback percentage on all Peninsula machine games of chance.  If
Peninsula makes such election, the following provisions shall apply:

 

(i)            Peninsula shall set its rates A) in good faith, B) in accordance
with reasonable commercial standards, and C) not for the purpose of engaging in
predatory pricing practices to the detriment of DRA.

 

(ii)           Peninsula may not require DRA to change rates on its machines
more than four times per contract year.

 

(iii)          Peninsula shall give at least 30 days written notice of any
intended rate changes to DRA; Peninsula shall provide to DRA upon request the
initial posted overall weighted average of theoretical payback percentage on all
Peninsula machine games of chance on the New Boat as defined in subparagraph
1(a)(1) of this Ninth Amendment, and DRA may not be required to change its
posted weighted average of theoretical payback percentage on all DRA games of
chance until at least thirty days have elapsed after the commencement of the
operations of DRA’s land-based casino or Peninsula’s New Boat, whichever is
later.

 

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(iv)          The parties shall implement the changes concurrently, and after
any required regulatory approvals.

 

Additionally, subparagraphs 8(h)(2) and 8(h)(3), as previously amended, are
deleted.

 

6.             Peninsula consents to maintaining DRA’s status as
lessee/sublessor of access points, including the boarding ramp, and/or frontage
for Diamond Jo Dubuque at current terms (including price of $1 per year),
contingent upon the City-DRA lease term for same being extended to 2018, by no
later than July 31, 2005.

 

7.             The right of first refusal granted to DRA by Paragraph 8 of the
Operating Agreement, as amended by the Ninth Amendment to the Operating
Agreement, shall be limited to a single property sale of Diamond Jo Dubuque by
Peninsula and shall not extend to a sale of Peninsula Gaming, LLC (or any of its
subsidiaries other than Peninsula) and/or substantially all of Peninsula Gaming,
LLC’s (or any of its subsidiaries other than Peninsula) assets.  Peninsula shall
have a right of first refusal in the event of a sale of DRA’s facility
equivalent to the right of first refusal granted to DRA by Paragraph 8 of the
Operating Agreement, as amended by the Ninth Amendment to the Operating
Agreement.

 

8.             If DRA temporarily or permanently ceases operations, DRA shall
receive 8%-10%-12.5%-15% of Diamond Jo Dubuque’s adjusted gross receipts in
accordance with Paragraph 4(a)(2)-(3) as stated in the unamended February 22,
1993 Operating Agreement, whether Diamond Jo Dubuque is operating as an
excursion boat, permanently moored vessel, or barge.

 

9.             DRA shall support Peninsula’s application to the Iowa Racing and
Gaming Commission to obtain permanently moored vessel status for the Diamond Jo
Dubuque vessel in operation as of the date of this 11th Amendment.

 

10.           For purposes of Paragraph 13(d), below, if for any reason
Peninsula fails to operate its current vessel and/or a barge in the Ice Harbor,
Port of Dubuque, as required by the Operating Agreement as amended herein, DRA
shall have no obligation to provide any credits pursuant to Paragraph 13(d),
below, from the date of said failure to operate; provided, however, that this
Paragraph 10 does not authorize Peninsula to suspend or terminate operations
pursuant to the Operating Agreement as amended herein, prior to December 31,
2018 at 11:59 p.m.

 

11.           Peninsula shall be solely responsible for payment of City taxes
imposed under Iowa Chapter 99F.

 

12.           Peninsula and DRA shall enter into a joint campaign effort related
to the 2010 county referendum to re-authorize gambling games in Dubuque County. 
The joint campaign effort shall urge Dubuque County voters to vote in favor of
approving re-authorization for (i) riverboat gambling operations in Dubuque
County, and (ii) gambling operations at Dubuque Greyhound Park & Casino. 
Peninsula shall commit to spend between $250,000 and $400,000 on the joint
campaign effort, to be pre-funded in equal annual installments prior to the
referenda. All funds will be disbursed by a joint committee of equal
representatives from DRA and Dubuque Diamond Jo.  During this campaign both
parties will enter into a quiet period (defined as the period commencing sixty
(60) days prior to the referendum) of any individual advertising promoting
solely each party’s own referendum or each party’s

 

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separate contributions to the City and charities.

 

13.           Non-Barge Operations.  So long as Diamond Jo Dubuque continues to
operate its current vessel at its current location as an excursion boat or as a
permanently moored vessel, and not as a “Barge Operation” pursuant to Section
14, below:

 

(a)           Diamond Jo Dubuque is authorized to expand to eight hundred (800)
gaming devices on the Diamond Jo Dubuque.   Diamond Jo Dubuque may increase the
number of gaming devices by twenty-five (25) to eight hundred twenty-five (825);
at such time as Diamond Jo Dubuque’s gaming devices exceed eight hundred (800)
DRA may increase the number of its gaming devices to one thousand twenty-five
(1,025).  Diamond Jo Dubuque may increase the number of gaming devices by
twenty-five (25) to eight hundred fifty (850); at such time as Diamond Jo
Dubuque’s gaming devices exceed eight hundred twenty-five (825), DRA may
increase the number of its gaming devices to one thousand fifty (1,050).

 

(b)           Until December 31, 2008, Diamond Jo Dubuque shall maintain in good
condition the quantity and quality of games it had in operation on May 28,
2005.  Prior to December 31, 2008, Peninsula Gaming shall not decrease the
number or quality of gambling game positions , or materially change the hours
and days of operation, or make other material changes in its operation that have
the purpose or effect of decreasing adjusted gross receipts below the level that
they would otherwise achieve.

 

(c)           Peninsula shall continue to pay DRA fifty cents (50¢) per
admission on Diamond Jo Dubuque through December 31, 2008, after which such
obligation shall terminate.  Fee shall be payable by Peninsula to DRA by the
15th of each month for the preceding month.  Peninsula shall be reimbursed by
DRA amount of rents paid by Peninsula to the City of Dubuque for rents for the
Portside patio and for non-exclusive parking in Lots 1 and 2 (also known as
Parking Lots A and C, respectively) in the Ice Harbor, said reimbursement for
rent payments not to exceed two hundred fifty thousand dollars ($250,000.00) per
year.  Reimbursements to be paid on the same schedule as rents paid by Peninsula
to the City of Dubuque.

 

(d)           From the date that DRA commences operation of table games and
continuing until December 31, 2008, DRA shall pay to Peninsula thirty three
cents (33¢) for each one dollar ($1.00) of reduction in Diamond Jo Dubuque’s
adjusted gross receipts after DRA commences operation of table games.  DRA shall
commence operation of table games not later than June 1, 2006.  DRA shall
provide Peninsula with not less than thirty (30) days notice prior to the date
they intend to commence operating table games.

 

Diamond Jo Dubuque’s loss of adjusted gross receipts shall be based upon the
difference between Diamond Jo Dubuque’s adjusted gross receipts in a month
compared to the same month during the twelve month period immediately preceding
the commencement of table game operations by DRA (hereinafter the “Base Term”). 
For Example:

 

If DRA commences operation of table games on June 1, 2006, the Base Term would
be June 1, 2005 through and including May 31, 2006.  Accordingly, to

 

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show loss of adjusted gross receipts during May 2007, Diamond Jo Dubuque would
compare adjusted gross receipts for May 2007, to the adjusted gross receipts of
May 2006, and multiply the difference by 0.33.  The calculation would be as
follows: (May 2006) — (May 2007) x 0.33 = payment received by Diamond Jo Dubuque
based on diminished adjusted gross receipts.

 

The maximum amount of loss of adjusted gross receipts for which the 33¢ credit
will be given is fifteen percent (15%) of Base Term AGR.  Provided, however,
that DRA shall not be required to compensate Peninsula for declines in Diamond
Jo Dubuque’s adjusted gross receipts if such reduction is caused by construction
by Dubuque Diamond Jo, strikes, lockouts, labor troubles, unavailability of
construction materials, unavailability or excessive price of fuel, power
failure, riots, insurrection, war, terrorist activities, explosions, hazardous
conditions, fire, flood, weather or acts of God, or by reason of any other cause
beyond the exclusive and reasonable control of DRA.

 

If/when a gambling operation commences within 125 miles of Dubuque, Iowa,  for
purposes of the computation called for in the preceding paragraph, Diamond Jo
Dubuque’s adjusted gross receipts for the twelve month period preceding the
commencement of table games at DRA’s facility shall first be reduced by seven
percent (7%) before being compared to current results.  This maximum reduction
in AGR is seven percent (7%) no matter if two or more gambling operations
commence.  For Example:

 

If DRA commences operation of table games on June 1, 2006 and Waterloo and
Washington County commence operations in January 2007.  The Base Term AGR (June
1, 2005 through and including May 31, 2006) is multiplied by 93% to establish a
New Base Term AGR.  Accordingly, to show loss of adjusted gross receipts during
January 2007, Diamond Jo Dubuque would compare adjusted gross receipts for
January 2007, to the adjusted gross receipts of January 2006 multiplied by 93%
and multiply the difference by .33.  The calculation would be as follows: 
((January 2006 x .93) — (January 2007 ))  x 0.33 = payment received by Peninsula
based upon diminished adjusted gross receipts.

 

Whether Peninsula exists as a non-barge or barge, payments to Peninsula related
to diminished adjusted gross receipts as calculated above will be payable on a
monthly basis on the 15th of each month for the preceding month.  In the event
such payments exceed the amounts otherwise payable to DRA by Peninsula under
this Agreement, such excess shall be accrued and carried forward without
interest.  Commencing January 1, 2009, the total of such carry forward shall be
paid to Peninsula in monthly payments starting January 1, 2009 through December
31, 2015.  The amount of the monthly payments starting in January 1, 2009 shall
equal the amounts paid by Peninsula to DRA for the same month under the
Operating Agreement.  In no event shall the amounts paid by DRA to Peninsula in
a calendar year exceed the amount received from Diamond Jo Dubuque for the same
year under the Operating Agreement.  On December 31, 2015 all remaining accrued
payments due to Peninsula related to diminished adjusted gross receipts shall be
forfeited by Peninsula.

 

(e)           Commencing January 1, 2009, Peninsula shall pay to DRA three
percent (3%) of Diamond Jo Dubuque’s adjusted gross receipts.  Peninsula shall
be reimbursed by DRA the amount of rents paid by Diamond Jo Dubuque to the City
of Dubuque for rents for the Portside patio and for non-exclusive parking in
Lots 1 and 2 (also known as Parking Lots A and C, respectively) in the Ice
Harbor, said reimbursement for rent payments not to exceed two hundred fifty
thousand dollars ($250,000.00) per year.  Reimbursements to

 

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be paid on the same schedule as rents paid by Peninsula to the City of Dubuque.

 

14.           Barge Operation.  Beginning at such time, if any, that Diamond Jo
Dubuque commences operation as a barge, and through the remaining term of the
Operating Agreement as amended herein:

 

(a)           Both DRA and Diamond Jo Dubuque shall be authorized to increase to
a maximum of one thousand five hundred (1,500) gaming positions, provided,
however, that if DRA’s facility is at less than 1,500 gaming positions, said
barge shall not exceed the total number of gaming positions at DRA’s facility by
more than 2%.  The 2% calculation on Diamond Jo exceeding the number of DRA’s
gaming positions will be calculated off of the highest number of gaming
positions that are operating at the DRA at any time during this agreement.

 

(b)           DRA shall receive four and one-half percent (4.5%) of Diamond Jo
Dubuque’s adjusted gross receipts payable by the 15th of each month for the
preceding month.   Peninsula shall be reimbursed by DRA amount of rents paid by
Diamond Jo Dubuque to the City of Dubuque for the Portside patio and for
non-exclusive parking in Lots 1 and 2 (also known as Parking Lots A and C,
respectively) in the Ice Harbor, such reimbursement for rent payments not to
exceed $500,000 per year.  Reimbursements to be paid on the same schedule as
rents paid by Peninsula to the City of Dubuque.

 

(c)           Peninsula shall no longer be obligated to pay DRA fifty cents
(50¢) for each boat admissions.

 

(d)           At the time Diamond Jo Dubuque commences operation as a barge,
pursuant to this Section 14, DRA shall have no further duty to accrue payments
related to diminished adjusted gross receipts to Peninsula pursuant to Section
13(d) of this 11th Amendment to the Operating Agreement.

 

15.           Peninsula’s operation of any gambling operations, other than the
current Diamond Jo Dubuque vessel as an excursion boat docked in the Ice Harbor,
or as a permanently moored vessel in the Ice Harbor, or operation as a barge in
the Ice Harbor, is not authorized under the Operating Agreement.

 

16.           If any provision of this 11th Amendment shall be declared by any
court or regulatory authority of competent jurisdiction to be illegal, void or
unenforceable, all other provisions of this 11th Amendment, and all other
provisions of the Operating Agreement shall not be affected and shall remain in
full force and effect.

 

17.           This 11th Amendment is subject to and conditioned upon the
extension of existing leases, at current terms,(including without limitation Lot
C (also known as Lot 2), Lot D, the fifteen foot strip between the waterline and
the Portside facility and the docking facilities/boarding ramp) between the City
of Dubuque as Lessor and Dubuque Racing Association, Ltd. as Lessee through
December 31, 2018, by no later than July 31, 2005.

 

18.           Both parties shall use their best efforts to secure their approval
of this 11th Amendment to the Operating Agreement, at the earliest practicable
dates, from the Iowa Racing and Gaming

 

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Commission.  Peninsula shall use its best efforts in assisting DRA to secure
necessary lease amendments referred to in paragraphs 6 and 17, above, at the
earliest practicable dates.

 

19.           Each party shall provide the other a certified resolution
approving this 11th Amendment not later than June 1, 2005.

 

20.           Except as specifically amended above, all of the provisions of the
February 22, 1993 Operating Agreement and prior Amendments thereto shall remain
in full force and effect.  In the event of a conflict between the terms of this
11th Amendment and any other terms of the Operating Agreement, as amended
through the 10th Amendment to Operating Agreement, the terms of this 11th
Amendment shall govern.

 

21.           For all purposes, this 11th Amendment and the Operating Agreement
shall be deemed drafted by all parties hereto even though one of the parties may
have initially drafter the 11th Amendment and/or the Operating Agreement and
submitted it to the other for review.  No provision shall be interpreted for or
against a particular party due to the fact that the party drafted the provision.

 

 

Dubuque Racing Association, Ltd.

 

/s/ Bruce W. Wentworth

 

By:  Bruce W. Wentworth, General Manager

 

 

Diamond Jo, LLC

 

/s/ Natalie Schramm

 

By:  Natalie Schramm, General Manager for Diamond Jo, LLC (formerly known as
“Peninsula Gaming Company, LLC”)

 

 

Peninsula Gaming, LLC

 

/s/ Natalie Schramm

 

By:  Natalie Schramm, Chief Financial Officer for Peninsula Gaming, LLC

 

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STATE OF IOWA

COUNTY OF DUBUQUE

 

On this first day of June, 2005 before me, a NOTARY PUBLIC in and for the State
of Iowa, personally appeared Natalie Schramm, to me personally known, who being
by me duly sworn did say that the person is the Chief Financial Officer of
Peninsula Gaming, LLC and General Manager of Diamond Jo, LLC executing the
forgoing instrument, that the instrument was signed on behalf of the said
limited liability companies by authority of the companies and the said Natalie
Schramm acknowledged the execution of said instrument to be the voluntary act
and deed of said limited liability companies by them voluntarily executed.

 

 

/s/ Kathryn Malone

 

Notary Public in the State of Iowa

 

 

 

STATE OF IOWA

COUNTY OF DUBUQUE

 

On this first day of June, 2005 before me, a NOTARY PUBLIC in and for the State
of Iowa, personally appeared Bruce Wentworth, to me personally known, who being
by me duly sworn did say that the person is the General Manager of Dubuque
Racing Association, Ltd executing the forgoing instrument, that the instrument
was signed on behalf of the said corporation by authority of the companies and
the said Bruce Wentworth acknowledged the execution of said instrument to be the
voluntary act and deed of said corporation by them voluntarily executed.

 

 

/s/ Kathryn Malone

 

Notary Public in the State of Iowa

 

 

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