EXHIBIT
10.8  
  
  FIRST
PREFERRED SHIP MORTGAGE
 ON THE
WHOLE OF THE BELLE OF ORLEANS
 
 (U.S.C.G.
Official Number 1033140)
 
 Maximum
Principal Amount of $58,500,000
 
 BELLE OF
ORLEANS, L.L.C.
 c/o
Peninsula Gaming Partners, LLC
 600 Star
Brewery Dr., Ste. 110
 Dubuque,
Iowa  52001
 Attn:  Natalie
Schramm
 
 Owner and
Mortgagor
 
 In Favor
of
 
 WELLS
FARGO FOOTHILL, INC., as Agent
 2450
Colorado Avenue, Suite 3000W
 Santa
Monica, California  90404
 Attn:  Business
Finance Division Manager
 
 Mortgagee
 
 Dated as
of October 29, 2009
 
 Total
Amount and Discharge Amount:  $58,500,000 (or such lesser amount of
principal as shall have been advanced and remain outstanding) Together With
Interest, Expenses, Fees and Performance of Mortgage Covenants
 
  LEGAL_US_W #
62793942.5
  FIRST
PREFERRED SHIP MORTGAGE
  BY:           BELLE
OF ORLEANS, L.L.C.
 
 IN FAVOR
OF:                                WELLS
FARGO FOOTHILL, INC., as Agent
 
 BE IT
KNOWN, that on the 29th day of October, 2009, before me, the undersigned Notary
Public, duly commissioned and qualified in and for the State of Iowa and the
County of Dubuque, and in the presence of the undersigned competent witnesses,
personally came and appeared:
 
 BELLE OF
ORLEANS, L.L.C., a Louisiana limited liability company, whose mailing address is
c/o Peninsula Gaming Partners, LLC, 600 Star Brewery Dr., Ste. 110, Dubuque,
Iowa  52001, Attn: Natalie Schramm, appearing herein through its duly
authorized representative pursuant to a resolution of its board of directors
(the “Mortgagor”).
 
  WHO AFTER
BEING DULY SWORN DECLARED AS FOLLOWS:
  This
FIRST PREFERRED SHIP MORTGAGE (as same may be amended, replaced or supplemented
from time to time hereafter, this "Mortgage") on the
whole of the Vessel (as defined below), which is dated as of October 29, 2009,
is provided, made and granted by the Mortgagor, in favor of Wells Fargo
Foothill, Inc., a California corporation, as agent (“Agent”; Agent,
together with its successors and assigns, is referred to herein as “Mortgagee”) for the
Lenders (as defined in the hereinafter defined Loan Agreement) under that
certain Amended and Restated Loan and Security Agreement dated as of
October 29, 2009 (as the same may be amended, restated, modified, renewed
or supplemented from time to time hereafter, the "Loan Agreement") by
and among Mortgagor, Peninsula Gaming, LLC, a Delaware limited liability company
(“Parent”),
Diamond Jo Worth, LLC, a Delaware limited liability company (“DJW”), The Old
Evangeline Downs, L.L.C., a Louisiana limited liability company (“OED”), Diamond Jo,
LLC, a Delaware limited liability company (“DJ”) (Mortgagor,
Parent, DJW, OED, and DJ are referred to hereinafter each individually as "Borrower," and
individually and collectively, jointly and severally, as "Borrowers"), the
lenders from time to time party thereto (the "Lenders"), and
Agent.  Capitalized terms not otherwise defined herein shall have the
meaning set forth for such terms in the Loan Agreement.
  RECITALS
  WHEREAS,
the Mortgagor is the sole owner of the whole of the vessel, BELLE OF ORLEANS,
Official Number 1033140, having its hailing port as New Orleans, Louisiana
(together will all appurtenances thereto as described in Granting Clause (vi)
below, the “Vessel”), and the
Vessel is documented under the laws and flag of the United States;
  WHEREAS,
pursuant to the Loan Agreement, the Lenders have agreed to loan Borrowers the
maximum principal amount of $58,500,000.00, subject to the terms and conditions
in the Loan Agreement and maturing on January 15, 2014.
  1
 WHEREAS,
in order to secure the Secured Obligations (as defined below), the Mortgagor has
duly authorized the execution and delivery of this Preferred Ship Mortgage under
and pursuant to the Commercial Instruments and Maritime Liens Act, Chapter 313
of Subtitle 111 of Title 46 U.S.C. Sec. 31301 et seq. (as the same may from time
to time be amended hereafter, or any reenactment or recodification thereof, the
“Ship Mortgage
Act”).
  WHEREAS,
for purposes of this Mortgage and in order to comply with Section 31321(b)(3) of
the Ship Mortgage Act, the parties to this Mortgage hereby declare that the
maximum amount of indebtedness that is now or will in the future be owed under
the Secured Obligations at any one time is $58,500,000, plus interest, expenses
and fees incurred by the Mortgagee and performance of the covenants of this
Mortgage and the Loan Documents.
  WHEREAS,
the interest of the Mortgagor in the Vessel and the interest mortgaged by this
Mortgage is that of one-hundred percent (100%) absolute and sole
ownership.
  GRANTING
CLAUSES
  NOW,
THEREFORE, in consideration of ten dollars and other good and valuable
consideration, the receipt of and sufficiency of which are hereby acknowledged,
and to secure
  (i)           all
“Obligations” of Borrowers under the Loan Agreement, including the payment when
due of indebtedness evidenced by the Loan Agreement in the maximum principal sum
of $58,500,000.00, bearing interest as set forth in the Loan Agreement and
maturing on January 15, 2014, such date being the “Maturity Date,” including,
without limitation, all accrued and unpaid interest thereon, and premiums and
penalties, if any, thereon, including late payment charges and Additional
Interest (as defined in Section 4.2
hereof),
  (ii)           all
other sums that may or shall become due hereunder, in connection with the Loan
Agreement or under the other Loan Documents, including the costs and expenses of
enforcing any provision of any of the foregoing documents,
  (iii)           the
reimbursement to Mortgagee of all monies which may be advanced as herein
provided and of any and all costs and expenses (including reasonable attorneys’
fees and expenses) incurred or paid on account of any litigation at law or in
equity that may arise in respect of this Mortgage or the obligations secured
hereby,
  (iv)           the
payment by the Mortgagor to Mortgagee of all sums, if any, as may be duly
expended or advanced by Mortgagee in the performance of any obligation of the
Mortgagor as provided hereunder,
  (v)           the
payment of any and all other indebtedness that this Mortgage by its terms
secures and
  2
 (vi)           the
performance and observance of the covenants, agreements and obligations of
Borrowers contained herein and in the other Loan Documents (all obligations and
sums included in the foregoing clauses (i), (ii), (iii), (iv), (v) and (vi)
being hereinafter collectively referred to as the “Secured
Obligations”), and in order to charge the Vessel with such performance
and with such payments, the Mortgagor does hereby GRANT, CONVEY, MORTGAGE,
PLEDGE, CONFIRM, ASSIGN, TRANSFER AND SET OVER, AND BY THESE PRESENTS DOES
HEREBY GRANT, CONVEY, MORTGAGE, PLEDGE, CONFIRM, ASSIGN, TRANSFER AND SET OVER
unto the Mortgagee and its successors and assigns, for the benefit of the Lender
Group, the WHOLE of the Vessel, together, to the extent that such items may
exist from time to time, with all of its boilers, engines, machinery, masts,
spars, boats, cables, motors, tools, anchors, chains, booms, cranes, rigs,
pumps, pipe, tanks, tackle, apparel, furniture, fixtures, rigging, supplies,
fittings and machinery equipment including, but not limited to, communication
systems, visual and electronic surveillance systems and transportation systems,
tools, utensils, food and beverage, liquor, uniforms, linens, housekeeping and
maintenance supplies, fuel, and any other electronic equipment of every nature
used in connection with the operation of such vessel, all machinery, equipment,
engines, appliances and fixtures for generating or distributing air, water,
heat, electricity, light, fuel or refrigeration, or for ventilating or sanitary
purposes, or for the exclusion of vermin or insects, or safes, built-in
furniture and installations, shelving, lockers, partitions, door stops, vaults,
motors, elevators, dumb-waiters, hoses and brackets and boxes for the same, fire
sprinklers, alarm, surveillance and security systems, computers, drapes, drapery
rods and brackets, mirrors, mantles, screens, linoleum, carpets and carpeting,
plumbing, bathtubs, sinks, basins, pipes, faucets, water closets, laundry
equipment, washers, dryers, iceboxes and heating units, all kitchen and
restaurant equipment, utensils, stoves, refrigerators, ovens, ranges,
dishwashers, disposals, water heaters, incinerators, furniture, fixtures and
furnishings, all cocktail lounge supplies, including, but not limited to, bars,
glassware, bottles and tables used in connection with such Vessel, beauty and
barber equipment, and maintenance supplies used in connection with such Vessel,
all specifically designed installations and furnishings and all furniture,
furnishings and personal property of every nature whatsoever now or hereafter
owned by Mortgagor or in which Mortgagor has any rights or interest in and
located in or on, or attached to, or used or intended to be used or which are
now or may hereafter be appropriated for use on or in connection with the
operation of such Vessel or in connection with any construction being conducted
or which may be conducted thereon, and all extensions, additions, accessions,
improvements, betterments, renewals, substitutions and replacement to any of the
foregoing, all of which (to the fullest extent permitted by law) shall be
conclusively deemed appurtenances to such vessel, and all other appurtenances to
such Vessel appertaining or belonging, whether now owned or hereafter acquired,
whether on board or not, and all additions, improvements and replacements
hereafter made in or to such Vessel, or any part thereof, or in or to her
equipment and appurtenances.  Notwithstanding anything to the contrary
contained in this Mortgage, the Secured Obligations shall not be secured by any
Excluded Asset.
  TO HAVE
AND TO HOLD the Vessel, the rights and privileges hereby conveyed or assigned,
or intended so to be, unto Mortgagee and its successors and assigns, for the
benefit of the Lender Group, forever for the uses and purposes and subject to
the terms and conditions herein set forth.
  SUBJECT,
HOWEVER, to Permitted Liens, the subordinate lien on the Vessel in favor of U.S.
Bank, National Association, as collateral agent (“Subordinated Lien Creditor
Agent”), which lien is subordinate to the lien created by this Mortgage
pursuant to that certain Intercreditor Agreement by and between Subordinate Lien
Creditor Agent and Agent, dated August 6, 2009 (the “Intercreditor
Agreement”), liens for the wages of the crew, general average, salvage
and any other lien arising by operation of law and in the normal course of
business and not as a result of any delay or omission by Mortgagor
(collectively, the “Permitted Maritime
Liens”).
  3
 PROVIDED
NEVERTHELESS, (a) should Borrowers or any of their successors or assigns pay and
perform all of the Secured Obligations in accordance with the terms hereof and
of the other Loan Documents and shall perform and observe all of the agreements,
covenants and provisions contained herein and in the other Loan Documents, (b)
all Commitments shall be irrevocably terminated in accordance with the Loan
Agreement, and (c) all Letters of Credit shall have terminated or expired in
accordance with the Loan Agreement, this Mortgage and the estate and rights
hereby granted shall cease to be binding and be void, otherwise to remain in
full force and effect.  Nothing herein shall be deemed or construed to
subject to the security hereof any property other than the whole of the Vessel
as defined herein and as the term “vessel” is used in the Ship Mortgage
Act.
  The
Mortgagor FURTHER agrees as follows:
  ARTICLE
I
 COVENANTS
  Section
1.1                      Performance of
Obligations.  The Mortgagor shall pay and perform the Secured
Obligations.  Time is of the essence hereof.
  Section
1.2                      Further
Assurances.  If Mortgagee requests in its Permitted Discretion,
the Mortgagor shall sign and deliver and cause to be recorded as Mortgagee shall
direct any further mortgages, instruments of further assurance, certificates and
other documents as Mortgagee may consider reasonably necessary or desirable in
order to perform, perfect, continue, and preserve the obligations of the
Mortgagor under the Loan Documents.  The Mortgagor further agrees to
pay to Mortgagee, upon demand, all costs and expenses incurred by Mortgagee in
connection with the preparation, execution, recording, filing and refiling of
any such documents, including attorneys’ fees that are reasonable.
  Section
1.3                      Operation and Maintenance;
Compliance with Laws.  The Mortgagor shall cause the Vessel to
be maintained in good working order and condition, ordinary wear and tear
excepted, and the Mortgagor shall make all necessary repairs, renewals,
replacements, additions, betterments and improvements thereto, as shall be
reasonably necessary for the proper conduct of the business of the
Mortgagor.  The Mortgagor shall comply or cause compliance with all
laws, ordinances and regulations of any governmental authority with reference to
the Vessel and the manner of using or operating the same, except where the
non-compliance with which, individually or in the aggregate, would not result in
and reasonably could not be expected to result in a Material Adverse Change (as
defined in the Loan Agreement).  The Mortgagor will not cause or
permit the Vessel to be operated in any manner contrary to law and the Mortgagor
will not engage in any unlawful act or violate any law or expose the Vessel to
penalty, forfeiture or capture, and will not do or suffer or permit to be done,
anything which can or may injuriously affect the documentation of the Vessel
under the laws and regulations of the United States of America and will at all
times keep the Vessel duly documented thereunder.  Mortgagor will
never operate the Vessel outside the navigation limits of the insurance carried
pursuant to Section
1.6 of this Mortgage.
  4
 Section
1.4                      Liens.  This
Mortgage is and shall be maintained by the Mortgagor as a valid first mortgage
lien and first security interest in the Vessel, subject only to the Permitted
Maritime Liens.  Except as otherwise provided in the Loan Agreement,
the Mortgagor shall not, directly or indirectly, create or suffer, or permit to
be created or suffered, against the Vessel or any part thereof, and the
Mortgagor will promptly discharge any Lien or other Imposition that may affect
the Vessel or any part thereof, or any interest therein, except the Permitted
Maritime Liens.  If any Lien not permitted hereunder is filed, the
Mortgagor will cause the same to be discharged promptly by payment or bonding or
otherwise to the satisfaction of Mortgagee and will exhibit to Mortgagee
evidence of payment, discharge, bonding or other disposition satisfactory to
Mortgagee.
  Section
1.5                      Copy of Mortgage. The
Mortgagor will place, and at all times, will retain a properly certified copy of
the Mortgage on board the Vessel with her papers and will cause such certified
copy and the Vessel's Certificate of Documentation to be exhibited to
(i) any and all persons having business therewith which might give rise to
any Lien thereon other than Permitted Encumbrances and (ii) to any
representative of the Mortgagee; and will place and keep prominently displayed a
framed printed notice in plain type reading as follows:
  NOTICE
OF MORTGAGE
 This
Vessel is owned by Belle of Orleans, L.L.C., a Louisiana limited liability
company ("Mortgagor"), and is
covered by a First Preferred Ship Mortgage under 46 U.S.C.  Section
31301, et seq., in favor of Wells Fargo Foothill, Inc., a California
corporation, as agent for certain lenders, to secure payment of
indebtedness.  Under the terms of said Preferred Ship Mortgage,
neither the Mortgagor, any charterer, the master of this Vessel, nor any other
person has any right, power or authority to create, incur or permit to be
imposed upon this Vessel any Lien whatsoever other than Permitted Maritime Liens
(as defined in such Preferred Ship Mortgage).
  Section
1.6                      Insurance.
  (a)           Without
limiting the below provisions, the Mortgagor shall maintain insurance on the
Vessel as specified in Section 6.8 of the Loan Agreement.
  (b)           The
Mortgagor shall at all times and at its sole cost and expense cause to be
carried and maintained in respect of the Vessel (and all additions, improvements
and replacements made in and to the Vessel, or any part thereof) payable in
United States Dollars insurance coverage against such risks as are generally
covered by marine hull and machinery insurance, marine protection and indemnity
insurance, public and general liability insurance, in such form (including,
without limitation, the form of the loss payable clause and the designation of
named insureds) and with such insurance companies, underwriters, funds, mutual
insurance associations or clubs as shall be selected by the Mortgagor and are
acceptable to Mortgagee in its reasonable discretion; provided, however, that in
the event any coverage required by this Section 1.6 may be
obtained through commercially reasonable efforts on a seasonal basis only
(including, specifically, named windstorm coverage), the Mortgagor shall only be
required to carry and maintain such insurance coverage during such time periods
as is commercially reasonable for similar vessels located in Louisiana (it being
understood that Mortgagor does not currently have named windstorm coverage in
place as of the date hereof, and that named windstorm coverage will not be
obtained with respect to the Vessel until June 1, 2010).
  5
 (c)           In
the case of all marine hull and machinery policies, the Mortgagor will cause the
Mortgagee to be named an additional insured and will (and cause its insurance
broker to) use commercially reasonable efforts to cause the insurers under such
policies to waive any liability of the Mortgagee for premiums payable under such
policies.  Such marine hull and machinery insurance shall cover, among
other things, all loss or damage caused by or resulting from fire, lightning,
wind, tornado, hail and such other further additional hazards of whatever kind
or nature as now or hereafter may be covered by standard extended coverage "all
risks" or equivalent special purpose endorsements of whatsoever kind, all as
reasonably acceptable to Mortgagee.  In the case of all protection and
indemnity insurance, the Mortgagor will cause the Mortgagee to be named as an
additional insured.  Notwithstanding the foregoing, at no time shall
there be recourse against the Mortgagee under such policies for payment of any
premium, assessment, advance or commission.
  (d)           For
the purposes of insurance against total loss, the Vessel, its equipment,
appurtenances, etc., shall be insured for a declared value in a commercially
reasonable amount determined by the Mortgagor and acceptable to the Mortgagee in
its reasonable discretion (but in no event greater than the replacement value of
the Vessel), and for purposes of insurance against liability, such coverage
shall be in an amount from time to time as is commercially reasonable for
similar vessels engaged in the business of passenger cruising and gaming in
Louisiana.  Protection and indemnity insurance (as well as insurance
against liability for pollution) in respect of the Vessel shall be in a
commercially reasonable amount from time to time determined by the Mortgagor and
acceptable to the Mortgagee in its reasonable discretion for vessels of the same
type, size, age and flag as the Vessel.
  (e)           The
Mortgagor agrees that it will not knowingly do or permit or willingly allow to
be done any act by which any insurance required by the terms of this Mortgage
may be suspended, impaired or canceled, and that it will not knowingly permit or
allow the Vessel to undertake any voyage or run any risk or transport any cargo
which is not permitted by the policies in force, without having previously
insured the Vessel by additional coverage to extend to such voyages, risks or
cargoes.
  (f)           Subject
to the provisions of Section 3.1 hereof,
nothing contained in this Section or elsewhere in this Mortgage shall relieve
the Mortgagor of its duty to maintain, repair, replace or restore the Vessel
from time to time in accordance with the applicable provisions of the Loan
Documents, and nothing in this Section or elsewhere in this Mortgage shall
relieve the Mortgagor of its duty to pay the Secured Obligations, which shall be
absolute, regardless of the occurrence of damage to or destruction of all or any
portion of the Vessel.
  6
 Section
1.7                      Books and Records; Financial
Information.  The Mortgagor shall (i) keep complete and
accurate books and records with respect to the Vessel; (ii) permit Mortgagee to
inspect such books and records during normal business hours and make copies
thereof at Mortgagee’s expense; and (iii) provide Mortgagee such information as
is required by Section 6.3 of the Loan Agreement.
  Section
1.8                      Mortgage, Sale, Lease of the
Vessel.
  (a)           The
Mortgagor will not, now or in the future, mortgage, pledge or encumber or place
any Lien or encumbrance (or permit the same to exist) on the Vessel, or any part
thereof, without the prior written consent of Mortgagee, except for Permitted
Maritime Liens (including Liens that are replacements of Permitted Maritime
Liens to the extent that the original Indebtedness is refinanced, renewed, or
extended pursuant to the terms of the Loan Agreement).
  (b)           The
Mortgagor shall not sell, convey, transfer, charter or otherwise alienate in any
manner, whether directly or indirectly, any right, title or interest in the
Vessel, or any part thereof, without obtaining in each such instance the prior
written consent of Mortgagee, such consent not to be unreasonably withheld,
except as expressly permitted under the Loan Agreement.
  Section
1.9                      Maintenance of
Vessel.  The Mortgagor agrees:
  (a)           The
Mortgagor will at all times and without cost or expense to the Mortgagee
maintain and preserve, or cause to be maintained and preserved, the Vessel in
good running order and repair, so that the Vessel shall be, insofar as due
diligence can make her so, tight, staunch, strong and well and sufficiently
tackled, appareled, furnished, equipped and in every respect seaworthy and in
compliance with all applicable United States Coast Guard
requirements.
  (b)           The
Mortgagee shall have the right at any time, on reasonable notice, to inspect or
survey the Vessel to ascertain its condition and to satisfy itself that the
Vessel is being properly repaired and maintained, and the Mortgagor shall cause
to be made all such repairs, without expense to the Mortgagee, as such
inspection or survey may show to be required.  The Mortgagor shall
also permit the Mortgagee to inspect the Vessel's logs whenever requested, on
reasonable notice, and shall furnish the Mortgagee with full information
regarding any material casualties or other accidents or damage to the
Vessel.
  (c)           The
Vessel shall, and the Mortgagor covenants that she will, at all times comply
with all applicable laws, treaties and conventions of the United States, and
rules and regulations issued thereunder, and shall have on board as and when
required thereby valid certificates showing compliance therewith.
  7
 (d)           The
Mortgagor will not make, or permit to be made, any substantial change in the
structure, type or speed of the Vessel or change in her rig, without first
receiving the written approval thereof of the Mortgagee.
  Section
1.10                      Access to
Vessel.  The Mortgagor will permit the Mortgagee or any agents
or representatives thereof from time to time, upon prior reasonable notice, full
and complete access to the Vessel for the purpose of inspecting the Vessel and
her papers and, at the reasonable request of the Mortgagee, the Mortgagor will
deliver for inspection copies of any and all contracts and documents relating to
the Vessel, whether on board or not.
  Section
1.11                      Flag of
Vessel.  The Mortgagor will not transfer or change the flag of
the Vessel unless and until, upon thirty (30) days' prior written notice to the
Mortgagee, all filings, recordations or other actions necessary to perfect and
protect the Lien created by this Mortgage and to enable the Mortgagee to
exercise and enforce its rights and remedies hereunder with respect to the
Vessel after giving effect to such transfer or change of flag shall have been
completed (including, without limitation, opinions of counsel as to the
perfected status of the Mortgagee after giving effect to such transfer or change
of flag)
  ARTICLE
II
 REPRESENTATIONS AND
WARRANTIES
  The
Mortgagor makes the following representations and warranties:
  Section
2.1                      Existence and Powers.
The Mortgagor is a limited liability company duly created and validly existing
and in good standing under the laws of the State of Louisiana.  The
Mortgagor has the power to own its property and to carry on its business and to
execute and perform the Loan Documents.  The Mortgagor has obtained
all material licenses and permits necessary to conduct its business in the
manner presently conducted.   The Mortgagor is and will remain a
citizen of the United States of America within the meaning of 46 U.S.C. Sec.
50501, or its successor statutes, entitled to own and document the Vessel under
the laws of the United States of America and operate the Vessel in the coastwise
trade.
  Section
2.2                      Ownership, Liens, Compliance
with Laws.  The Mortgagor lawfully owns the whole of and is
lawfully possessed of the Vessel free from any Lien, encumbrances or taxes
whatsoever, except for Permitted Maritime Liens.  All applicable
zoning and environmental, fire, safety or health laws, ordinances and
regulations affecting the Vessel permit the current use and occupancy thereof,
and the Mortgagor has obtained all necessary consents, permits and licenses
required for such use.  The Mortgagor will comply with and satisfy all
applicable formalities and provisions of the laws and regulations of the United
States of America and the laws of the State of Louisiana in order to perfect,
establish and maintain this Mortgage, and any supplement or amendment
hereto.
  Section
2.3                      Authority,
Consents.  The execution, delivery and performance of the Loan
Documents have been duly authorized by all necessary action of the
Mortgagor.  Except for consents and approvals previously obtained, no
consent or approval of, or exemption by, any person or entity, governmental or
private, is required to authorize the execution, delivery and performance of the
Loan Documents or the validity thereof.
  8
 Section
2.4                      Binding
Agreement.  The Loan Documents are the valid and legally
binding obligations of the Mortgagor enforceable against the Mortgagor in
accordance with their respective terms, except to the extent limited by
equitable principles or bankruptcy, insolvency or similar laws affecting the
rights of creditors generally.
  Section
2.5                      No Conflict,
Default.  The execution, delivery and performance by the
Mortgagor of the Loan Documents will not violate or cause default under or
permit acceleration of any material agreement to which the Mortgagor is a party
or by which it or the Vessel is bound.  To the Mortgagor’s best
knowledge, it is not in default (beyond any applicable grace period) in the
performance of any agreement, order, writ, injunction, decree or demand to which
it is a party or by which it is bound.
  Section
2.6                      Litigation.  Except
as otherwise disclosed in the Loan Agreement, there is no litigation,
arbitration or other proceeding in process or to the Mortgagor’s best knowledge
pending or threatened against the Vessel or the Mortgagor except for (a) matters
that are fully covered by insurance (subject to customary deductibles), and (b)
matters arising after the date hereof that if decided adversely to the
Mortgagor, reasonably could not be expected to have a materially adverse effect
on the ability of the Mortgagor to fulfill its obligations under the Loan
Documents or on the condition, financial or otherwise, of the Mortgagor’s
business, properties or assets.
  Section
2.7                      First Mortgage
Lien.  This Mortgage constitutes a valid mortgage and, upon
proper recording hereof, will constitute a valid and perfected first priority
mortgage lien, and security interest in the Vessel (subject only to the
Permitted Maritime Liens and any mortgage filed pursuant to the provisions of
the Intercreditor Agreement (as defined in the Loan Agreement)), and there are
no defenses or offsets to the Mortgagor’s obligations pursuant to this Mortgage
or the other Loan Documents, including without limitation, the Mortgagor’s
applicable obligations to pay and perform the Secured Obligations.
  Section
2.8                      Tax Liens; Bankruptcy.  There
are no federal, state or local tax claims or liens assessed or filed against the
Mortgagor or the Vessel for taxes which are due and payable, unsatisfied of
record or docketed in any court of the state in which the Vessel is located or
in any other court located in the United States, and no petition in bankruptcy
has ever been filed by the Mortgagor, or, to the Mortgagor’s knowledge, against
the Mortgagor, and the Mortgagor has never made any assignment for the benefit
of creditors or taken advantage of any insolvency act or any act for the benefit
of debtors.
  Section
2.9                      Damage.  The
Vessel has not been damaged or destroyed by fire or other casualty.
  Section
2.10                      Documentation.  The
Vessel is duly documented in the name of the Mortgagor under the laws and flag
of the United States of America, with the National Vessel Documentation Center,
entitled to engage in operations conducted by the Mortgagor, and the Mortgagor
will, at its own expense, cause the Vessel to remain so
documented.  The Mortgagor will cause this Mortgage immediately after
its execution and delivery, to be filed for recordation with the National Vessel
Documentation Center in accordance with the Ship Mortgage Act and will comply
with and satisfy all of the provisions of the United States law and all other
provisions and requirements of law from time to time in force so as to establish
and maintain the Lien of this Mortgage, as at any time amended, supplemented or
assigned, as a valid and enforceable preferred ship mortgage under the Ship
Mortgage Act upon the Vessel and upon all additions, improvements and
replacements hereafter made on or to the Vessel or any part thereof for the
amount of the Secured Obligations.  The Mortgagor shall promptly pay
and discharge all United States Coast Guard fees and expenses in connection with
the recordation of this Mortgage and any supplement or amendment
thereto.
  9
 ARTICLE
III
 CASUALTY–CONDEMNATION
  Section
3.1                      Damage or
Destruction.  During the period the indebtedness remains
outstanding, in the event that the Vessel shall be damaged or destroyed in whole
or in part, by fire or other casualty covered by insurance, the Mortgagor shall
give prompt written notice thereof to Mortgagee.  At such time as such
damage, destruction or casualty shall occur, the insurance proceeds with respect
thereto shall be payable to Mortgagee and applied in accordance with Sections
2.4(b)(i) and 6.8(c) of the Loan Agreement, as applicable.  Upon the
occurrence of an Event of Default which has not been waived in writing by
Mortgagee, Mortgagee shall have the right to apply such insurance proceeds in
accordance with Section 2.4(b)(i) of the Loan Agreement.
  Section
3.2                      Requisition.  In
the event of the requisition (whether of title or use), condemnation,
sequestration, seizure or forfeiture of the Vessel by any governmental or
purported authority or by anyone else, the security of this Mortgage shall be
deemed to attach to, and to the Mortgagor’s claim for, any compensation,
purchase price, reimbursement or award therefor payable from any source
(including, without limitation, any insurance proceeds in respect thereof), and
any payments in respect thereof shall be paid to the Mortgagee and applied in
accordance with the terms of the Loan Agreement.  The Mortgagor shall
promptly execute and deliver to Mortgagee such documents and do and perform such
acts as in the opinion of the Mortgagee acting reasonably may be necessary or
useful to facilitate or expedite the collection by the Mortgagee of such
compensation, purchase price, reimbursement or award.
  ARTICLE
IV
 DEFAULTS AND
REMEDIES
  Section
4.1                      Events of
Default.  Each of the following shall constitute an Event of
Default hereunder:
  (a)           the
occurrence of an “Event of Default” as defined in Article 8 of the Loan
Agreement; or
  (b)           the
failure of the Mortgagor to observe and perform any covenant, condition or
agreement on its part to be observed or performed in this Mortgage (other than
an occurrence which may sooner constitute an “Event of Default” under the Loan
Agreement) including, without limitation, the covenants contained in Article I
herein for a period of thirty (30) days after written notice specifying such
failure and requesting that it be remedied, given to the Mortgagor by Mortgagee,
unless Mortgagee agrees in writing to an extension of such time prior to its
expiration.
  10
 Section
4.2                      Remedies.  Upon
the occurrence of an Event of Default, all Secured Obligations, at the option of
Mortgagee, shall be accelerated and become immediately due and payable upon
notice to the Mortgagor.  The outstanding principal amount and the
interest accrued thereon of the Secured Obligations shall be due and payable
without presentment, demand or further notice of any kind, all of which are
hereby expressly waived by the Mortgagor.  The Mortgagor will pay to
Mortgagee the entire Secured Obligations or portions thereof, as applicable, and
to the extent permitted by law, the premiums and penalties, if any, provided in
this Mortgage and each other Loan Document, as applicable, and such payment
shall be applied in accordance with Section 2.4(b)(i) of the Loan
Agreement.
  In the
event of any Event of Default, whether or not an acceleration shall occur,
Mortgagee shall have the right to proceed to protect and enforce its rights by
one or more of the following remedies:
  (a)           MORTGAGEE
SHALL HAVE THE RIGHT TO BRING SUIT at law, in equity or in admiralty, either for
damages, specific performance of any agreement contained in any Loan Document,
or for the foreclosure of this Mortgage, or for the enforcement of any other
appropriate legal or equitable remedy.
  (b)           MORTGAGEE
SHALL HAVE THE RIGHT TO OBTAIN A RECEIVER for the Vessel and of the freight,
hire, earnings, issues, revenues, income and profits (“Vessell Income”) due
or to become due and arising from the operation thereof at any time after an
Event of Default, whether or not an action for foreclosure has been commenced.
Any court having jurisdiction shall at the request of Mortgagee following an
Event of Default appoint a receiver to take immediate possession of the Vessel
and to charter or operate the same as he may deem best for the interest of all
parties concerned, and such receiver shall be liable to account to the Mortgagor
only for the net profits, after application of Vessel Income upon the costs and
expenses of the receivership and upon the Secured Obligations.
  (c)           MORTGAGEE
SHALL HAVE THE RIGHT, AT ANY TIME, TO ADVANCE MONEY TO THE RECEIVER to pay any
part or all of the items which the receiver should otherwise pay if cash were
available from the Vessel and sums so advanced, with interest (“Additional Interest”)
at the per annum rate equal to the default rate as specified in Section 2.6(c)
of the Loan Agreement (the “Default Rate”), shall
be secured hereby, or if advanced during the period of redemption shall be a
part of the sum required to be paid to redeem from the sale.
  (d)           MORTGAGEE
SHALL HAVE THE RIGHT TO COLLECT THE VESSEL INCOME and apply the same in the
manner hereinbefore provided with respect to a receiver.  For that
purpose, Mortgagee may enter and take possession of the Vessel and manage and
operate the same and take any action which, in Mortgagee’s judgment, is
necessary or proper to collect the Vessel Income and to conserve the value of
the Vessel.  Mortgagee may also take possession of, and for these
purposes use, any and all of the Security Interests Property.  The
expense (including any receiver’s fees, attorneys’ fees, costs and agent’s
compensation) incurred pursuant to the powers herein contained shall be secured
by this Mortgage.  Mortgagee shall not be liable to account to the
Mortgagor for any action taken pursuant hereto other than to account for any
Vessel Income actually received by Mortgagee.  Enforcement hereof
shall not cause Mortgagee to be deemed a trustee in possession unless Mortgagee
elects in writing to be a trustee in possession.
  11
 (e)           MORTGAGEE
SHALL HAVE THE RIGHT TO ENTER AND TAKE possession of the Vessel, at any time,
wherever the same may be, without legal process (except to the extent required
by applicable law), and, except to the extent caused by the Mortgagee's gross
negligence or bad faith, without being responsible for loss or damage, and the
Mortgagor or other person in possession forthwith upon demand of the Mortgagee,
shall surrender to the Mortgagee possession of the Vessel, and the Mortgagee
may, without being responsible for loss or damage, except to the extent caused
by the Mortgagee's gross negligence or bad faith, hold, lay up, lease, charter,
operate or otherwise use the Vessel for such time and upon such terms as it may
deem to be for its best advantage, and demand, collect and retain all hire,
freights, earnings, issues, revenues, income, profits, return premiums, salvage
awards or recoveries, recoveries in general average, and all other sums due or
to become due in respect of the Vessel or in respect of any insurance thereon
from any person whomsoever, accounting only for the net profits, if any, arising
from such use of the Vessel and charging upon all receipts from the use of the
Vessel or from the sale thereof by court proceedings or pursuant to subsection
(4.3) next following, all costs, expenses, charges, damages or losses by reason
of such use; and if at any time the Mortgagee shall avail itself of the right
herein given it to take the Vessel, the Mortgagee shall have the right to dock
the Vessel at any dock, pier or other premises of the Mortgagor without charge,
or to dock her at any other place at the cost and expense of the
Mortgagor.
  (f)           MORTGAGEE
SHALL HAVE THE RIGHT TO ENTER AND TAKE possession of the Vessel, upon reasonable
notice, wherever the same may be, without legal process (except to the extent
required by applicable law), and if it seems desirable to the Mortgagee and
without being responsible for loss or damage, except to the extent caused by the
Mortgagee's gross negligence or bad faith, sell the Vessel, at any place and at
such time as the Mortgagee may specify and in such manner and such place
(whether by public or private sale) as the Mortgagee may deem advisable (without
necessity of bringing the Vessel to the place designated for such sale), free
from any claim by the Mortgagor in admiralty, in equity, at law or by statute,
after first giving notice of the time and place of any public sale with a
general description of the property in the following manner:
  (1)           by
publishing such notice for ten consecutive days in a daily newspaper of general
circulation published in Morgan City, Louisiana;
  (2)           if
the place of sale should not be Morgan City, Louisiana, then also by publication
of a similar notice in a daily newspaper, if any, published at the place of
sale; and
  12
 (3)           by
mailing a similar notice to the Mortgagor at its last known address on the day
of first publication and notice of the time and place of any private sale by
mailing such notice to the Mortgagor at its last known address.
  (4)           The
notice provisions contained in this Section are not exclusive, and to the extent
that Mortgagee elects to foreclose or enforce its interests in a court of
admiralty, Mortgagee will comply with the notice provisions required by any
applicable federal statutes and procedural rules.
  (g)           MORTGAGEE
SHALL HAVE THE RIGHT TO FILE PROOF OF CLAIM and other documents as may be
necessary or advisable in order to have its claims allowed in any receivership,
insolvency, bankruptcy, reorganization, arrangement, adjustment, composition or
other judicial proceedings affecting the Mortgagor, its creditors or its
property, for the entire amount due and payable by the Mortgagor under the
Secured Obligations, this Mortgage and any other instrument securing the Secured
Obligations, at the date of the institution of such proceedings, and for any
additional amounts which may become due and payable by the Mortgagor after such
date.
  (h)           MORTGAGEE
SHALL HAVE THE RIGHT TO EXERCISE ALL of the rights and remedies in foreclosure
and otherwise given to mortgagees by the provisions of applicable law,
including, but not limited to, the provisions of the Ship Mortgage Act and
Louisiana Law (if applicable).
  Each
remedy herein specifically given shall be in addition to every other right now
or hereafter given or existing at law or in equity, and each and every right may
be exercised from time to time and as often and in such order as may be deemed
expedient by Mortgagee and the exercise or the beginning of the exercise of one
right shall not be deemed a waiver of the right to exercise at the same time or
thereafter any other right.  Mortgagee shall have all rights and
remedies available under the law in effect now and/or at the time such rights
and remedies are sought to be enforced, whether or not they are available under
the law in effect on the date hereof.
  Section
4.3                      Sale of Vessel; Credit
Bid. Any sale of the Vessel made pursuant to terms of this Mortgage shall
operate to divest all right, title and interest of any nature whatsoever of the
Mortgagor therein and thereto and shall bar any claim from the Mortgagor, its
successors and assigns, and all persons claiming by, through or under
them.  No purchaser shall be bound to inquire whether notice has been
given, or whether any default has occurred, or as to the property of the sale,
or as to the application of the proceeds thereof.  In the case of any
such sale, the Mortgagee shall be entitled to bid for the purchase of the Vessel
and, for the purpose of making settlement or payment for the property purchased,
to use and apply the Secured Obligations in order that there may be credited
against the amount remaining due and unpaid thereon the sums payable out of the
net proceeds of such sale with respect to the Secured Obligations after allowing
for the costs and expense of sale and other charges; and thereupon such
purchaser shall be credited, on account of such purchase price, with the net
proceeds that shall have been so credited with respect to the Secured
Obligations.  At any such sale, the Mortgagee may bid for and purchase
such property and upon compliance with the terms of sale may hold, retain and
dispose of such property without further accountability therefor.
  13
 Section
4.4                      Expenses of Exercising
Rights, Powers and Remedies.  The reasonable expenses
(including any receiver’s fees, attorneys’ fees, appraisers’ fees, environmental
engineers’ and/or consultants’ fees, costs incurred for documentary and expert
evidence, stenographers’ charges, publication costs, and costs (which may be
estimated as to items to be expended after entry of the decree of foreclosure)
of procuring all abstracts of title, as Mortgagee may deem reasonably necessary
either to prosecute any foreclosure action or to evidence to bidders at any sale
which may be had pursuant to any foreclosure decree the true condition of the
title to or the value of the Vessel, and Mortgagee’s compensation) incurred by
Mortgagee after the occurrence of any Event of Default under this Mortgage
and/or in pursuing the rights, powers and remedies contained in this Mortgage
shall be immediately due and payable by the Mortgagor, with interest thereon at
the Default Rate, and shall be added to the indebtedness secured by this
Mortgage.
  Section
4.5                      Restoration of
Position.  In case Mortgagee shall have proceeded to enforce
any right under this Mortgage by foreclosure, sale, entry or otherwise, and such
proceedings shall have been discontinued or abandoned for any reason or shall
have been determined adversely, then, and in every such case, the Mortgagor and
Mortgagee shall be restored to their former positions and rights hereunder with
respect to the Vessel subject to the lien hereof.
  Section
4.6                      Marshalling.  The
Mortgagor, for itself and on behalf of all persons, parties and entities which
may claim under the Mortgagor, hereby waives all requirements of law relating to
the marshalling of assets, if any, which would be applicable in connection with
the enforcement by Mortgagee of its remedies for an Event of Default hereunder,
absent this waiver.  Mortgagee shall not be required to sell or
realize upon any portion of the Vessel before selling or
realizing  upon any other portion thereof.
  Section
4.7                      Waivers.  No
waiver of any provision hereof shall be implied from the conduct of the
parties.  Any such waiver must be in writing and must be signed by the
party against which such waiver is sought to be enforced.  The waiver
or release of any breach of the provisions set forth herein to be kept and
performed shall not be a waiver or release of any preceding or subsequent breach
of the same or any other provision.  No receipt of partial payment
after acceleration of any of the Secured Obligations shall waive the
acceleration.  No payment by the Mortgagor or receipt by Mortgagee of
a lesser amount than the full amount secured hereby shall be deemed to be other
than on account of the sums due and payable hereunder, nor shall any endorsement
or statement on any check or any letter accompanying any check or payment be
deemed an accord and satisfaction, and Mortgagee may accept any check or payment
without prejudice to Mortgagee’s right to recover the balance of such sums or to
pursue any other remedy provided in this Mortgage.  The consent by
Mortgagee to any matter or event requiring such consent shall not constitute a
waiver of the necessity for such consent to any subsequent matter or
event.
  14
 Section
4.8                      Mortgagee’s Right to Cure
Defaults.  If the Mortgagor shall fail to comply with any of
the terms hereof with respect to the procuring of insurance, the payment of
taxes, assessments and other charges, the keeping of the Vessel in repair, the
payment and satisfaction of Liens and encumbrances against the Vessel, the
payment of any other sum or deposit required under this Mortgage, or any other
term herein contained, Mortgagee may make advances or take other actions to
perform the same without releasing the Mortgagor from any Secured Obligations
and may enter upon the Vessel for any such purpose and take all such action
thereon as Mortgagee or any of its duly appointed agents may deem necessary or
appropriate therefor.  The Mortgagor agrees to repay upon demand all
sums so advanced and all sums expended by Mortgagee in connection with such
performance, including, without limitation, reasonable attorneys’ fees, with
Additional Interest at the Default Rate from the dates such advances are made,
and all sums so advanced and/or expenses incurred, with Additional Interest at
the Default Rate, shall be secured hereby as Secured Obligations, but no such
advance and/or incurring of expense by Mortgagee, shall be deemed to relieve the
Mortgagor from any default hereunder, or to release the Mortgagor from any
Secured Obligations.  Mortgagee shall not be bound to inquire into the
validity of any Imposition or Lien which the Mortgagor fails to pay as and when
required by this Mortgage and which the Mortgagor does not contest in strict
accordance with the terms of this Mortgage and the other Loan
Documents.
  Section
4.9                      Suits and
Proceedings.  Mortgagee shall have the power and authority,
upon prior notice to the Mortgagor to institute and maintain any suits and
proceedings as Mortgagee may deem advisable to (i) prevent any impairment of the
Vessel by any acts which may be unlawful or any violation of this Mortgage,
(ii) preserve or protect its interest in the Vessel, or (iii) restrain the
enforcement of or compliance with any legislation or other governmental
enactment, rule or order that may be unconstitutional or otherwise invalid, if,
in the Permitted Discretion (as defined in the Loan Agreement) of Mortgagee, the
enforcement of or compliance with such enactment, rule or order might impair the
security hereunder or be prejudicial to Mortgagee’s interest.
  Section
4.10                      Application of
Proceeds.  The proceeds from the foreclosure or sale hereunder
shall be applied to the payment of the Secured Obligations in accordance with
the Loan Agreement if such Secured Obligations have been deemed due and payable
upon the Event of Default.  Any surplus of the proceeds shall be paid
to the Mortgagor.
  Section
4.11                      Sale
Proceeds.  The proceeds of any sale of the Vessel and the net
earnings of any charter operation or other use of the Vessel by the Mortgagee
under any of the powers herein specified in this Article 4, as well as
any and all other moneys received by the Mortgagee pursuant to or under any of
the provisions of this Mortgage, shall be held and applied by the Mortgagee from
time to time as set forth in the Loan Agreement, any other provision in this
Mortgage to the contrary notwithstanding.
  Section
4.12                      Mortgagor’s License to
Possession.  Unless and until one or more Events of Default
shall occur and be continuing, the Mortgagor (a) shall be suffered and permitted
to retain actual possession and use of the Vessel and (b) shall have the right,
from time to time, in its Permitted Discretion, and without application to the
Mortgagee, and without obtaining a release therefrom by the Mortgagee, to
dispose of, free from the Lien hereof, any boilers, engines, machinery, masts,
spars, sails, rigging, boats, anchors, cables, chains, tackle, apparel,
furniture, fittings, equipment or any other appurtenances of the Vessel that are
no longer useful, necessary, profitable or advantageous in the operation of the
Vessel, by first or simultaneously replacing the same by new boilers, engines,
machinery, masts, spars, sails, rigging, boats, anchors, cables, chains, tackle,
apparel, furniture, fittings, equipment or other appurtenances of not less than
equal value, which shall forthwith become subject to the Lien of this Mortgage
as a preferred ship mortgage thereon unless otherwise permitted by the Loan
Agreement.
  15
 Section
4.13                      Notice.  The
notice provisions contained in this Article 4 are not
exclusive, and to the extent that the Mortgagee elects to foreclose or enforce
its interests in a court of admiralty, the Mortgagee will comply with the notice
provisions required by any applicable federal statutes and procedural
rules.
  ARTICLE
V
 MISCELLANEOUS
  Section
5.1                      Binding Effect; Survival;
Number; Gender.  This Mortgage shall be binding on the
Mortgagor and its successors and assigns and inure to the benefit of Mortgagee
and its successors and assigns for the benefit of the Lender
Group.  All representations and warranties contained herein or
otherwise heretofore made by the Mortgagor to Mortgagee shall survive the
execution, delivery and foreclosure hereof.  The singular of all terms
used herein shall include the plural, the plural shall include the singular, and
the use of any gender herein shall include all other genders, where the context
so requires or permits.
  Section
5.2                      Severability.  The
unenforceability or invalidity of any provision of this Mortgage as to any
persons or circumstances shall not render that provision unenforceable or
invalid as to any other persons or circumstances and shall not affect the
enforceability of the remaining provisions hereof.
  Section
5.3                      Mortgage Amount.The
total amount of the direct and contingent obligations secured by this Mortgage
is US $58,500,000 (excluding interest, expenses and fees).  The
discharge amount of this Mortgage is the same as the total amount, and there is
no separate discharge amount.  Notwithstanding the foregoing or any
other statement contained herein regarding the maturity of this Mortgage, this
Mortgage shall remain in full force and effect until the full and final payment
in cash of the Secured Mortgage Obligations and the termination of all
Commitments.
  Section
5.4                      Notices.   All
notices and demands required or permitted to be given to or made upon any party
hereto under any Loan Document shall be in writing and shall be personally
delivered or sent by certified mail, postage prepaid, return receipt requested
or by a nationally recognized courier, or by telecopier, and shall be deemed to
be given for purposes of this Mortgage on the day that such writing is delivered
or sent to the intended recipient thereof in accordance with the provisions of
this Section.  Notices shall be given to or made upon the respective
parties hereto at their respective addresses set forth below:
  16
 If to the
Mortgagor:
  Diamond
Jo Worth, LLC
 c/o
Peninsula Gaming Partners, LLC
 400 E.
Third Street, P.O. Box 1750
 Dubuque,
Iowa 52004
 Attn:  Natalie
Schramm
 Fax
No.  (563) 690-2190
  If to
Mortgagee:
 Wells
Fargo Foothill, Inc.
 2450
Colorado Avenue, Suite 3000 West
 Los
Angeles, California 90404
 Attention:
Business Finance Division Manager
  Either
party may change the address for notices by a notice given not less than five
(5) business days prior to the effective date of the change.
  Section
5.5                      Survival of Warranties,
Etc.  All agreements, representations and warranties made
herein shall survive the execution and delivery of this Mortgage.
  Section
5.6                      Applicable
Law.  The Mortgagor and Mortgagee agree that the rights and
obligations under this Mortgage regarding the creation, perfection and
enforcement of the liens and security interests herein granted shall be governed
by the Ship Mortgage Act, and where the Ship Mortgage Act is silent, by the
general maritime law of the United States.  In the event that any
provisions or clause of this Mortgage conflict with applicable laws, such
conflict shall not affect other provisions of this Mortgage which can be given
effect without the conflicting provision, and to this end the provisions of this
Mortgage are declared to be severable.
  Section
5.7                      Waiver of Jury
Trial.  EACH OF MORTGAGOR AND MORTGAGEE, BY ITS ACCEPTANCE OF
THIS MORTGAGE, IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY
LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS MORTGAGE AND ANY OF THE
OTHER SECURITY DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR
THEREBY.
  Section
5.8                      Effect.  This
Mortgage is in addition to and not in substitution for any other guaranties,
covenants, obligations or other rights now or hereafter held by Mortgagee from
any other person or entity in connection with the Secured
Obligations.
  Section
5.9                      Assignability.  Mortgagee
shall have the right to assign this Mortgage, in whole or in part or sell
participation interests herein, to any person obtaining an interest in the
Secured Obligations.
  Section
5.10                      Headings.  Headings
of the Sections of this Mortgage are inserted for convenience only and shall not
be deemed to constitute a part hereof.
  17
 Section
5.11                      Discharge of
Lien.  In accordance with the Loan Agreement and upon the
observance and performance of each and every covenant and condition set forth
herein and in the Loan Agreement, then and in that case all property, rights and
interest hereby conveyed or assigned or pledged shall revert to the Mortgagor,
and the estate, right, title and interest of Mortgagee therein shall thereupon
cease, terminate and become void; and this Mortgage, and the covenants of the
Mortgagor contained herein, shall be discharged and Mortgagee in such case on
demand of the Mortgagor and at the Mortgagor’s cost and expense, shall execute
and deliver to the Mortgagor a proper instrument or proper instruments
acknowledging the satisfaction and termination of this Mortgage, and shall
convey, assign and transfer or cause to be conveyed, assigned or transferred,
and shall deliver or cause to be delivered, to the Mortgagor, all property,
including money, then held by Mortgagee hereunder.
  Section
5.12                      Conflicts with Loan
Agreement. Notwithstanding anything to the contrary contained herein, in
the event of a conflict between the provisions of the Loan Agreement and the
provisions of this Mortgage, the provisions of the Loan Agreement shall govern
in all respects.
  Section
5.13                      Mortgage
Absolute.  The obligations of the Mortgagor under this Mortgage
are independent of the obligations of Mortgagor under the other Loan Documents,
and a separate action or actions may be brought and prosecuted against Mortgagor
to enforce this Mortgage, irrespective of whether any action is brought against
Mortgagor under such other Loan Documents.  All rights of Mortgagee
and the mortgage, assignment and security interest hereunder, and all
obligations of Mortgagor hereunder, shall be absolute and unconditional,
irrespective of:
  (a)           any
lack of validity or enforceability of any other Loan Document or any other
agreement or instrument relating thereto;
  (b)           any
change in the time, manner or place of payment of, or in any other term of, all
or any of the obligations of Mortgagor under the other Loan Documents or any
other amendment or waiver of or any consent to any departure from the other Loan
Documents, including, without limitation, any increase in such obligations
resulting from the extension of additional credit to the Mortgagor or
otherwise;
  (c)           any
taking, exchange, release or non-perfection of any other collateral, or any
taking, release or amendment or waiver of or consent to departure from any
guaranty, for all or any other of the obligations of the Mortgagor under the
other Loan Documents;
  (d)           any
manner of application of collateral, or proceeds thereof, to all or any of the
obligations of Mortgagor under the other Loan Documents, or any manner of sale
or other disposition of any collateral for all or any of such obligations or any
other assets of the Mortgagor;
  (e)           any
change, restructuring or termination of the corporate restructure or existence
of the Mortgagor; or
  (f)           any
other circumstance that might otherwise constitute a defense available to, or a
discharge of, the Mortgagor or a third party the Mortgagor of a security
interest or mortgage.
  18
 Anything
herein to the contrary notwithstanding, it is intended that nothing herein shall
waive the preferred status of this Mortgage and that, if any provision or
portion of this Mortgage shall be construed to waive its preferred status, then
such provision or portion to such extent shall be void and of no effect without
affecting the remaining provisions, which shall remain in full force and
effect.
  Section
5.14                      Interaction with Loan
Agreement.  All terms, covenants, conditions, provisions and
requirements of the Loan Agreement are incorporated by reference in this
Mortgage.  Notwithstanding any other provision of this Mortgage, the
terms and provisions of this Mortgage shall be subject and subordinate to the
terms of the Loan Agreement.  To the extent that the Loan Agreement
provides the Mortgagor with a particular cure or notice period, or establishes
any limitations or conditions on Mortgagee’s actions with regard to a particular
set of facts, the Mortgagor shall be entitled to the same cure periods and
notice periods, and Mortgagee shall be subject to the same limitations and
conditions, under this Mortgage, as under the Loan Agreement, in place of the
cure periods, notice periods, limitations and conditions provided for under this
Mortgage; provided, however, that such
cure periods, notice periods, limitations and conditions shall not be cumulative
as between the Loan Agreement and this Mortgage.  In the event of any
conflict or inconsistency between the provisions of this Mortgage and those of
the Loan Agreement, including, without limitation, any conflicts or
inconsistencies in any definitions herein or therein, the provisions or
definitions of the Loan Agreement shall govern.
  Section
5.15                      Indemnity.  The
Mortgagor hereby agrees to indemnify, defend and hold Mortgagee (and its
directors, officers, agents and employees) harmless from and against any and all
loss, liability, damage, claim, judgment or expense (including reasonable
attorneys’ fees and expenses, bond expenses, printing and automated document
preparation and retention expenses and other ordinary litigation expenses)
incurred by it (or such director, officer, agent or employee) in connection with
the acceptance or administration of Mortgagee’s duties under this Mortgage, any
action or proceeding to foreclose this Mortgage or in or to which Mortgagee may
be made a party due to the existence of this Mortgage or the other Loan
Documents or to which action or proceeding Mortgagee may become a party for the
purpose of protecting the lien of this Mortgage.  All sums paid by
Mortgagee to prosecute or defend the rights herein set forth shall be deemed a
part of the Secured Obligations and shall be paid by the Mortgagor to Mortgagee
within ten (10) days after written demand, and if not paid within that period,
shall accrue interest from and including the date of disbursement or advance by
Mortgagee to and including the date of payment by the Mortgagor at the Default
Rate.
  Section
5.16                      Mortgagee as Agent;
Successor Agents.
  (a)           Agent
has been appointed to act as Agent hereunder by the Lender
Group.  Agent shall have the right hereunder to make demands, to give
notices, to exercise or refrain from exercising any rights, and to take or
refrain from taking any action (including, without limitation, the release or
substitution of the Vessel) in accordance with the terms of the Loan Agreement,
any related agency agreement among Agent and the Lender Group (collectively, as
amended, supplemented or otherwise modified or replaced from time to time, the
“Agency
Documents”) and this Mortgage.  The Mortgagor and all other
persons shall be entitled to rely on releases, waivers, consents, approvals,
notifications and other acts of Agent, without inquiry into the existence of
required consents or approvals of the Lender Group therefor.
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 (b)           Mortgagee
shall at all times be the same Person that is Agent under the Agency
Documents.  Written notice of resignation by Agent pursuant to the
Agency Documents shall also constitute notice of resignation as Agent under this
Mortgage.  Removal of Agent pursuant to any provision of the Agency
Documents shall also constitute removal as Agent under this
Mortgage.  Appointment of a successor Agent pursuant to the Agency
Documents shall also constitute appointment of a successor Agent under this
Mortgage.  Upon the acceptance of any appointment as Agent by a
successor Agent under the Agency Documents, that successor Agent shall thereupon
succeed to and become vested with all the rights, powers, privileges and duties
of the retiring or removed Agent as Mortgagee under this Mortgage, and the
retiring or removed Agent shall promptly (i) assign and transfer to such
successor Agent all of its right, title and interest in and to this Mortgage and
the Vessel, and (ii) execute and deliver to such successor Agent such
assignments and amendments and take such other actions, as may be necessary or
appropriate in connection with the assignment to such successor Agent of the
liens and security interests created hereunder, whereupon such retiring or
removed Agent shall be discharged from its duties and obligations under this
Mortgage.  After any retiring or removed Agent’s resignation or
removal hereunder as Agent, the provisions of this Mortgage and the Agency
Documents shall inure to its benefit as to any actions taken or omitted to be
taken by it under this Mortgage while it was Mortgagee hereunder.
  (c)           Each
reference herein to any right granted to, benefit conferred upon or power
exercisable, exercised or action taken by “Mortgagee” shall be deemed to be a
reference to or be deemed to have been so taken, as the case may be, by
Mortgagee in its capacity as Agent pursuant to the Loan Agreement for the
benefit of the Lender Group, all as more fully set forth in the Loan
Agreement.
  Section
5.17                      Non-Foreign
Disposition. Notwithstanding any other provision herein to the contrary,
no sale, charter, transfer or other disposition of the Vessel or any interest
therein may be made to any entity not a citizen of the United States within the
meaning of Section 2 of the Shipping Act of 1916, as amended, without the
approval of the Secretary of Transportation of the United States.
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  IN
WITNESS WHEREOF, the Mortgagor has executed this Mortgage as of the date first
written above.
   BELLE OF ORLEANS, L.L.C., a
      Louisiana limited liability companyBy:
                /s/Natalie
      SchrammName: 
      Natalie SchrammTitle: 
      CFOWitness:
                /s/Janet
      Bevan-BriesPrinted
      Name: Janet Bevan-BriesWitness:
                /s/Dustin
      ManternachPrinted
      Name:  Dustin Manternach
 /s/Karen
      M. BeetemPrinted
      Name:  Karen M. BeetemMy
      commission expires: 10/20/10
   21