EXHIBIT 10.16

                      INTERCOMPANY SUBORDINATION AGREEMENT

      THIS INTERCOMPANY  SUBORDINATION  AGREEMENT (this "Agreement") dated as of
September  22,  2003 is made and  entered  into by and among THE OLD  EVANGELINE
DOWNS,  L.L.C., a Louisiana  limited  liability  company  ("Parent") and THE OLD
EVANGELINE  DOWNS  CAPITAL  CORP.,  a Delaware  corporation  (collectively  with
Parent, the "Borrowers" and each individually,  a "Borrower"),  OED ACQUISITION,
LLC, a Delaware limited liability company (the "Subordinated Lender"), and WELLS
FARGO  FOOTHILL,  INC.,  a  California  corporation  with an office in  Atlanta,
Georgia,  as the  arranger  and the  administrative  agent for the  Lenders  (as
defined in the Senior Loan Agreement defined below) (the "Agent").

                              W I T N E S S E T H:

      WHEREAS,  the  Borrowers  are  indebted  and may from  time to time in the
future become indebted to Subordinated Lender in respect of advances,  loans and
other extensions of credit or other financial  accommodations  made from time to
time by the  Subordinated  Lender to the Borrowers (such  indebtedness  together
with all other indebtedness and obligations of the Borrowers, or either of them,
to the  Subordinated  Lender,  however  evidenced  and whether  now  existing or
hereafter arising, are referred to herein as the "Subordinated  Debt";  provided
that "Subordinated Debt" shall not include payments to the Subordinated Creditor
set forth in that certain Management Fees Subordination  Agreement,  dated as of
September 22, 2003, among the Borrowers,  the Subordinated Lender, the Agent and
Peninsula Gaming Company, LLC); and

      WHEREAS,  the  Borrowers,  the Agent and the  Lenders  are parties to that
certain  Loan  and   Security   Agreement   dated  as  of  even  date   herewith
(collectively,  as amended,  restated,  supplemented or otherwise  modified from
time to time,  the  "Senior  Loan  Agreement"),  whereby  the  Borrowers  may be
indebted to the Lenders for certain  extensions of credit  outstanding from time
to time (all such  indebtedness  including  principal,  interest,  fees,  costs,
expenses and other sums  chargeable to the Borrowers by the Agent or the Lenders
(including  interest,  fees,  costs and expenses  accruing  after an  Insolvency
Proceeding (as hereafter defined) commences regardless of whether such interest,
fees,  costs and expenses are deemed  allowed or  recoverable  in any Insolvency
Proceeding (as hereinafter  defined) together with any modification,  amendment,
refinancing or supplement thereto, and any other obligations of the Borrowers to
the Agent or the Lenders are hereinafter referred to as the "Senior Debt"); and

      WHEREAS,  as security for the payment of all  liabilities  and obligations
due under the Senior Debt, the Borrowers,  pursuant to the Senior Loan Agreement
and the other Loan  Documents  (as defined in the Senior Loan  Agreement),  have
granted to the Agent,  for the benefit of the Lenders,  a first priority lien on
and unconditional security interest in and to certain personal and real property
assets of the Borrowers as set forth in the Senior Loan Agreement (collectively,
said  interests  in and assets of the  Borrowers  are


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referred  to  herein  as the  "Collateral;"  and,  collectively  said  liens and
security  interests of the Agent are  referred to herein as the "Senior  Lien");
and

      WHEREAS, as part of the consideration for the Lenders' extension of credit
to the  Borrowers,  the  Subordinated  Lender has agreed,  among  other  things,
subject to the terms and provisions of this  Agreement,  (i) to subordinate  the
Subordinated  Debt to the Senior Debt,  (ii) to  subordinate  any lien which the
Subordinated  Lender has or may have in the future in the assets or  property of
any Borrower or any Subsidiary or Affiliate of the Borrowers (the  "Subordinated
Lien") to the Senior Lien, and (iii) to forebear from  exercising any creditor's
remedy or taking any action against the Borrowers upon any of their  obligations
to the Subordinated Lender.

      NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
herein contained, and for other good and valuable consideration, the receipt and
sufficiency  of which are hereby  acknowledged,  the parties hereto hereby agree
that each  capitalized  term used herein and not defined  herein  shall have the
meaning  ascribed  thereto in the Senior Loan  Agreement,  and further  agree as
follows:

      1. Priority of Liens:  Subordinated Debt.  Notwithstanding anything to the
contrary  including  without  limitation  the  date,  time,  manner  or order of
perfection or attachment of the security  interests and liens on the  Collateral
granted  by  the  Borrowers  to  the  Agent  or  the  Subordinated  Lender,  and
notwithstanding  the usual application of the priority provisions of the Uniform
Commercial Code as in effect in any  jurisdiction or any other applicable law or
judicial decision of any jurisdiction,  or whether the Subordinated Lender holds
possession  of  all or  any  part  of the  Collateral,  or if the  Agent  or the
Subordinated Lender is perfected without filing or possession in any part of the
Collateral, the Senior Lien shall be a first, senior and prior security interest
in  and  lien  on  the  Collateral,  prior  in  interest  and  superior  to  any
Subordinated  Lien.  The  priority of liens set forth in the  previous  sentence
states the relative  priority of liens of the parties to this Agreement,  and no
party hereto  represents  or warrants to any other party that such other party's
liens are prior to any lien on the  Collateral  of any person who is not a party
to this  Agreement  (except that each  Borrower  represents  and warrants to the
Agent that the Senior  Lien has been  granted in  accordance  with the terms and
provisions of the Senior Loan Agreement). The Subordinated Lender agrees that if
at any time the  Subordinated  Lender  shall be in  possession  of any assets or
properties of the Borrowers, then the Subordinated Lender shall hold such assets
or properties in trust for the Agent, for the benefit of the Lenders, so long as
any Senior Debt remains  outstanding and until all obligations of the Lenders to
make loans and other financial  accommodations to the Borrowers  pursuant to the
Senior Loan Agreement (the "Commitments") are terminated.

      2. Subordination of Subordinated Debt.

            (a) The Subordinated  Lender hereby  subordinates any and all claims
now or hereafter owing to it by the Borrowers,  or either of them,  under all or
any  portion of the  Subordinated  Debt to any and all Senior  Debt  (including,
without limitation,  interest,  fees, costs or other payments on the Senior Debt
paid or accrued after the  commencement of an Insolvency  Proceeding and whether
or not  such  claims  are  deemed



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allowed or  recoverable  in any  Insolvency  Proceeding,  and  payment of or for
adequate protection pursuant to any Insolvency Proceeding),  and agrees that all
Senior Debt shall be paid in full in cash to the satisfaction of the Lenders and
the  Commitments  shall be  terminated  before  any  payment  may be made on the
Subordinated  Debt,  whether of principal or interest or other  indebtedness  or
other obligations.

            (b) The Subordinated Lender agrees not to accept, and waives any and
all rights to, any  payment of any kind or form of the  Subordinated  Debt (from
the Borrowers or otherwise)  nor make any transfer to third parties not party to
this  Agreement  or take any  other  action,  in any  case,  designed  to secure
indirectly  from the Borrowers any payment on account of the  Subordinated  Debt
without the express,  prior written consent of the Agent,  and the  Subordinated
Lender agrees to pay over to the Agent any funds that may be received by it from
the Borrowers (i) as a prepayment at any time or (ii) as a payment on account of
the Subordinated Debt at any time until the Senior Debt has been paid in full in
cash  to  the  satisfaction  of  the  Lenders  and  the  Commitments  have  been
terminated.  In case any funds shall be paid or  delivered  to the  Subordinated
Lender under the circumstances  described in clause (i) or (ii) of the preceding
sentence  before  the  Senior  Debt  shall have been paid in full in cash to the
satisfaction of the Lenders and the Commitments have been terminated, such funds
shall be held in trust by the  Subordinated  Lender for and immediately paid and
delivered to the Agent (in the form received  endorsed  over to the Agent).  The
Subordinated Lender further agrees not to sell, assign,  transfer or endorse any
Subordinated Debt to any other Person except subject to the terms and conditions
of this Agreement.

            (c) The  Subordinated  Lender agrees that the priority of the Senior
Debt set  forth  above  shall  continue  during  any  insolvency,  receivership,
bankruptcy,  dissolution,  liquidation,  or reorganization proceeding, or in any
other proceeding, whether voluntary or involuntary, by or against the Borrowers,
or either of them,  under any bankruptcy or insolvency  law or laws,  federal or
state  relating  to the relief of debtors of any  jurisdiction,  whether  now or
hereafter in effect,  and in any  out-of-court  composition,  assignment for the
benefit of creditors, readjustment of indebtedness, reorganization, extension or
other debt arrangement of any kind (collectively,  an "Insolvency  Proceeding").
In the event of any payment, distribution,  division or application,  partial or
complete,  voluntary or involuntary, by operation of law or otherwise, of all or
any part of the property,  assets or business of the Borrowers,  or the proceeds
thereof,  or any securities of the Borrowers,  to the  Subordinated  Lender,  by
reason of any  liquidation,  dissolution  or other winding up of any Borrower or
its business or by reason of any sale or  Insolvency  Proceeding,  then any such
payment or distribution of any kind or character,  whether in cash,  property or
securities,  that, but for the subordination provisions of this Section 2, would
otherwise be payable or deliverable upon or in respect of the Subordinated Debt,
shall  instead be paid over or delivered  directly to the Agent to be applied as
payment of the Senior  Debt,  to the extent  necessary  to repay the Senior Debt
remaining  unpaid after giving effect to any concurrent  payment or distribution
to the Agent. Furthermore,  no holder of the Subordinated Debt shall receive any
such payment or distribution or any benefit  therefrom until the Senior Debt has
been fully paid in cash to the  satisfaction  of the Lenders and the Commitments
have



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been terminated,  after which time such payments or distributions may be applied
to payment of the Subordinated Debt.

            (d) Subject to the  provisions  of this  Agreement,  the Agent shall
have the sole right to control all aspects of  liquidation of the Collateral and
disposition  of the  proceeds  thereof,  including  all  proceedings  pertaining
thereto  under  any  Insolvency  Proceeding  and  the  approval  of any  plan of
reorganization of the Borrowers, or either of them, thereunder.

      3.  Forbearance from Exercise of Certain  Remedies.  Until the Senior Debt
has been  paid in full in cash and the  Commitments  have been  terminated,  the
Subordinated Lender shall not (a) take any action or exercise any remedy against
the  Borrowers,  or  either  of  them,  to  enforce  all or any  portion  of the
Subordinated  Debt;  (b) take any  action or  exercise  any remedy  against  any
guarantor of or pledgor  securing the Senior Debt in order to collect any of the
Subordinated  Debt;  (c)  commence,  or join  with  any  other  creditor  of the
Borrowers,  or either of them, in commencing any Insolvency  Proceeding  against
the Borrowers,  or either of them; or (d) take any action or exercise any remedy
against  any  property or assets of any  guarantor  of or pledgor  securing  the
Senior Debt. The parties  hereto  understand and agree that the Agent shall have
the  right,  but  shall  have no  obligation,  to cure  any  default  under  the
Subordinated Debt without the prior written consent of the Subordinated  Lender.
Notwithstanding  anything  contained in this  Agreement to the  contrary,  in no
event  shall the  Subordinated  Lender be  entitled  to  receive  and retain any
securities,  equity or otherwise,  or other consideration  provided for in (i) a
plan of  reorganization  or  otherwise  in  connection  with any  bankruptcy  or
Insolvency  Proceeding or (ii) any other judicial or nonjudicial  proceeding for
the liquidation,  dissolution or winding up of the Borrowers, or any of them, or
the assets or  properties of the  Borrowers,  or any of them, in any case unless
and until the  Senior  Debt is paid in full in cash to the  satisfaction  of the
Lenders and the Commitments are terminated.

      4.  Agent's  Authority to Act. For so long as any of the Senior Debt shall
remain unpaid, the Agent shall have the right to act as attorney-in-fact for the
Subordinated  Lender and other holders of the Subordinated Debt for the purposes
specified herein and the  Subordinated  Lender hereby  irrevocably  appoints the
Agent as the Subordinated Lender's true and lawful attorney,  with full power of
substitution,  in the name of the Subordinated  Lender or in the name of holders
of the  Subordinated  Debt, for the use and benefit of the holders of the Senior
Debt  without  notice  to the  holders  of  Subordinated  Debt  or any of  their
representatives,  successors or assigns,  to perform the following  acts, at the
option of the holders of the Senior  Debt,  at any meeting of  creditors  of the
Borrowers or in connection with any Insolvency Proceeding:

            (a)  if  a  proper  claim  or  proof  of  debt  in  respect  of  the
Subordinated Debt has not been filed in the form required in any such Insolvency
Proceeding at least ten (10)  Business Days prior to the  expiration of the time
for filing such claims,  to file an  appropriate  claim for and on behalf of the
holders of Subordinated Debt;



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<PAGE>

            (b) to collect any assets of the Borrowers  distributed,  divided or
applied by way of dividend or payment,  or any securities  issued, on account of
the Subordinated  Debt and to apply the same, or the proceeds of any realization
upon the same that the Agent in its discretion  elects to effect,  to the Senior
Debt until all of the Senior Debt (including,  without limitation,  all interest
and other payments accruing or paid on the Senior Debt after the commencement of
any  Insolvency  Proceeding  at the rate  specified in the Senior Debt) has been
paid in full in cash to the  satisfaction of the Lenders,  rendering any surplus
to the holders of Subordinated Debt if and to the extent permitted by law; and

            (c)  generally  to take  any  action  in  connection  with  any such
Insolvency  Proceeding either in its own name or in the name of the Subordinated
Lender (including without limitation voting on any plan of reorganization)  that
the  holders of  Subordinated  Debt would be  authorized  to take,  but for this
Agreement,  in the event that the Agent  believes  such action is  necessary  to
protect  its  interests  in the Senior Debt and under this  Agreement  and after
first giving the Subordinated Lender five (5) days' written notice of its intent
to take such action (to the extent such notice is  practicable),  provided  that
the Agent  agrees  to  permit  the  Subordinated  Lender  to take  action on the
Subordinated  Lender's  own  behalf  in  connection  with  any  such  Insolvency
Proceeding as may be necessary to reasonably  protect the Subordinated  Lender's
interests,  as long as such action is not  contrary  to or in conflict  with the
actions and interests of the Agent and the Subordinated  Lender's  interests are
always in second position to the Senior Debt and the Senior Lien.

In no event  shall the holder or  holders  of the  Senior  Debt be liable to the
Subordinated  Lender  or any  other  holders  of the  Subordinated  Debt for any
failure to prove the  Subordinated  Debt,  to  exercise  any right with  respect
thereto or to collect any sums payable thereon.  A distribution  made under this
Agreement  to  holders  of Senior  Debt that  otherwise  would have been made to
holder or holders of  Subordinated  Debt is not,  as between the  Borrowers,  or
either of them, its other creditors and holder or holders of Subordinated  Debt,
a payment by the  Borrowers on the Senior  Debt,  it being  understood  that the
provisions of this Agreement are solely for the purpose of defining the relative
rights of the holders of Subordinated  Debt, on the one hand, and the holders of
Senior Debt on the other  hand.  The  Subordinated  Lender  represents  that the
Subordinated Lender is the sole holder of the Subordinated Debt and, except upon
satisfaction of the conditions set forth in Section 16 hereof, shall not assign,
participate,  pledge,  encumber or transfer any of the Subordinated  Debt or any
interest  therein  until  the  Senior  Debt is  repaid  in full in cash  and the
Commitments are terminated. The power-of-attorney granted hereby is coupled with
an interest and shall be irrevocable.

      5. Duration and Termination.  This Agreement shall constitute a continuing
agreement  of  subordination,  and shall  remain in  effect  until  indefeasible
payment in full in cash to the  satisfaction  of the  Lenders of the Senior Debt
and  termination of the  Commitments.  The holder or holders of Senior Debt may,
without  notice  to  the  Subordinated  Lender  or  the  other  holders  of  the
Subordinated   Debt,   extend  or  continue  credit  and  make  other  financial
accommodations  to or for the account of the  Borrowers  in  reliance  upon this
Agreement.  The obligations of the Subordinated  Lender and the other



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holders  of  Subordinated  Debt  under  this  Agreement  shall  continue  to  be
effective,  or be reinstated,  as the case may be, if at any time any payment in
respect of any  Senior  Debt is  rescinded  or must  otherwise  be  restored  or
returned by a holder of Senior Debt by reason of any Insolvency Proceeding or as
a result of the  appointment  of a receiver,  intervenor or  conservator  of, or
trustee or similar  officer for, the  Borrowers or any  substantial  part of any
Borrower's property, or otherwise, all as though such payment had not been made.

      6. Subordinated  Lender's Waivers.  All of the Senior Debt shall be deemed
to have been made or incurred in reliance upon this Agreement.  The Subordinated
Lender  expressly  waives  all  notice  of the  acceptance  by the  Agent of the
subordination  and other  provisions of this Agreement and all other notices not
specifically  required pursuant to the terms of this Agreement  whatsoever,  and
the  Subordinated  Lender  expressly  consents to reliance by the Agent upon the
subordination and other agreements as herein provided.  The Subordinated  Lender
agrees that the Agent has not made warranties or representations with respect to
the due execution,  legality,  validity,  completeness or  enforceability of the
Senior Loan  Agreement  and other Loan  Documents or the  collectibility  of the
obligations thereunder, that Agent shall be entitled to manage and supervise its
loans in accordance with applicable law and its usual  practices,  modified from
time to time as it deems appropriate under the circumstances, and that the Agent
shall  not  have  any  liability  to  the  Subordinated   Lender  for,  and  the
Subordinated Lender waives any claim (except with respect to willful misconduct)
that the Subordinated Lender may now or hereafter have against Agent arising out
of (i) any and all  actions  that the Agent  takes or omits to take  (including,
without  limitation,  actions  with  respect  to  the  creation,  perfection  or
continuation  of liens or  security  interests  in the Senior Debt or the Senior
Lien,  actions with respect to the  occurrence  of an Event of Default,  actions
with respect to the foreclosure  upon,  sale,  release,  or depreciation  of, or
failure  to  realize  upon,  the  Collateral  and  actions  with  respect to the
collection  of any claim for all or any part of the Senior Debt from any account
debtor,  guarantor or any other party) with respect to the  documents  regarding
the Senior Debt or any other  agreement  related thereto or to the collection of
the Senior Debt or the valuation,  use,  protection or release of the Collateral
and/or other  security for the Senior Debt,  (ii) the Agent's  election,  in any
proceeding instituted under Chapter 11 of Title 11 of the United States Code (11
U.S.C. ss. 101 et seq.) (the "Bankruptcy  Code"),  of the application of Section
1111(b)(2) of the Bankruptcy Code, and/or (iii) any making of loans to, or grant
of a  security  interest  under  Section  364 of the  Bankruptcy  Code  by,  the
Borrowers as debtors-in-possession.

      7. Waiver of Marshaling;  No Offset.  The Subordinated  Lender agrees that
the Agent shall have no obligation to marshal any part of the  Collateral or any
such other property,  instruments,  documents,  agreements or guaranties  before
enforcing  its rights  against  any other part of the  Collateral  or its rights
herein as against the Subordinated  Lender. In the event the Subordinated Lender
is or becomes indebted to any Borrower, including, without limitation, under any
documents or instruments  evidencing  the  Subordinated  Debt, the  Subordinated
Lender agrees that it shall pay such  indebtedness  in accordance with its terms
and shall not deduct from or set off against any amounts  owed to such  Borrower
any amounts such Borrower claims are due to it with respect to the  Subordinated
Debt.



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      8. No Contest of Security  Interest.  The  Subordinated  Lender  shall not
contest  the  validity,  perfection  or  enforceability  of any lien or security
interest  granted  to the Agent by any  Borrower,  and the  Subordinated  Lender
agrees to  cooperate  in the  defense of any  action  contesting  the  validity,
perfection or enforceability of such liens or security interests.

      9.  Subordination  Not Affected,  Etc.  Nothing in this Agreement shall be
construed as affecting or in any way limiting the extension of new or additional
financial  accommodation  by the  Lenders  to the  Borrowers  and the  terms and
conditions   hereof   shall   apply  to  such  new  and   additional   financial
accommodations.  Notwithstanding the preceding sentence or anything contained in
this Agreement to the contrary,  none of the provisions of this Agreement  shall
be deemed or construed to  constitute a commitment  or an obligation on the part
of the Lenders to make any future loans,  advances or other extensions of credit
or financial accommodation to the Borrowers. The Subordinated Lender understands
and agrees that all accrued  interest,  charges,  expenses,  attorneys' fees and
other  liabilities  and  obligations  under  the  Senior  Loan  Agreement  shall
constitute  part of the Senior  Debt,  and  nothing in this  Agreement  shall be
construed as affecting  or in any way  limiting  any  indulgence  granted by the
Lenders with respect to any existing  financial  accommodation to the Borrowers.
The  subordinations  effected,  and the  rights  created,  hereby  shall  not be
affected  by (a)  any  amendment  of or any  addition  of or  supplement  to any
instrument,  document or agreement relating to the Senior Debt, (b) any exercise
or non-exercise of any right,  power or remedy under or in respect of the Senior
Debt or any instrument, document or agreement relating thereto, (c) the release,
sale, exchange or surrender,  in whole or in part, of any part of the Collateral
or any  additional  collateral to which the Agent may become  entitled,  (d) any
release of any guarantor of or pledgor  securing the Senior Debt or any security
for such pledge or guaranty, or (e) any waiver,  consent,  release,  indulgence,
extension, renewal, modification, delay or other action, inaction or omission in
respect of the Senior Debt or any  instrument,  document or  agreement  relating
thereto or any security therefor or pledge or guaranty  thereof,  whether or not
the  Subordinated  Lender  shall  have had  notice  or  knowledge  of any of the
foregoing and regardless of whether the Subordinated Lender shall have consented
or objected  thereto.  Any  provision of any  document,  instrument or agreement
evidencing,  securing or otherwise  relating to the Subordinated Debt purporting
to  limit or  restrict  in any way any  Borrower's  ability  to  enter  into any
agreement  with the  Agent  to  amend or  modify  any  document,  instrument  or
agreement evidencing, securing or otherwise relating to the Senior Debt shall be
deemed of no force or effect  until the Senior  Debt has been  repaid in full in
cash  to  the  satisfaction  of  the  Lenders  and  the  Commitments  have  been
terminated.

      10. Voided Payments. Notwithstanding anything herein that may be construed
to the contrary, to the extent that any Borrower makes any payment on the Senior
Debt  which,  within  twelve  (12)  months  of the  date  of  such  payment,  is
subsequently invalidated,  declared to be fraudulent, avoidable or preferential,
set aside or is required to be repaid to a trustee, receiver, the estate of such
Borrower or any other  party under any  bankruptcy  act,  state or Federal  law,
common law or equitable cause (such payment being  hereinafter  referred to as a
"Voided Payment"),  then, to the extent of such Voided Payment,  that portion of
the Senior Debt that had been previously



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satisfied by such Voided Payment shall be revived and continue in full force and
effect as if such Voided Payment had never been made. In the event that a Voided
Payment is sought to be  recovered  from the Agent or any other Lender under the
Senior Loan  Agreement,  an "Event of Default"  under the Senior Loan  Agreement
shall be  deemed to have  occurred  and to be  continuing  from the date of such
recovery from the Agent or any such Lender of such Voided Payment until the full
amount of such Voided Payment is fully and finally restored to the Agent or such
Lender and until such time the  provisions  of this  Agreement  shall be in full
force and effect.

      11. Violation of Agreement by Borrowers.  Each Borrower hereby consents to
this Agreement,  agrees to abide by the terms hereof, agrees to make no payments
or distributions contrary to the terms and provisions hereof and to do every act
and thing necessary to carry out such terms and provisions. Each Borrower agrees
that  should it make any  payment  in  contravention  of any  provision  of this
Agreement the maturity of said Senior Debt may be accelerated in accordance with
the terms of the Senior Loan Agreement.

      12. Waiver.  Irrespective of the due date of any of the Subordinated Debt,
the Subordinated Lender hereby expressly waives any and all rights to payment by
any Borrower of the Subordinated  Debt prior to repayment in full in cash of the
Senior Debt and termination of the Commitments.

      13. Immediate Effect.  This Agreement shall be effective  immediately upon
its  execution  by each of the  parties  hereto,  and  there  are no  conditions
precedent or subsequent to the effectiveness of this Agreement.

      14.  Inducement.  As an inducement to, and part of the consideration  for,
the Lenders' extension of credit to the Borrowers, which the Subordinated Lender
and the Borrowers  acknowledge that the Agent and the Lenders would be unwilling
to do without  this  Agreement,  the  Subordinated  Lender  agrees,  among other
things,  (i) to subordinate  the  Subordinated  Lien to the Senior Lien, (ii) to
subordinate the Subordinated Debt to the Senior Debt, and (iii) to forebear from
exercising any creditor's  remedy or taking any action against any Borrower upon
any of its obligations to the Subordinated Lender until the Senior Debt has been
paid in full in cash to the  satisfaction  of the Lenders and termination of the
Commitments.

      15.  Successors  and Assigns;  Continuing  Effect,  etc. This Agreement is
being entered into for the benefit of, and shall be binding upon, the Agent, the
Subordinated Lender, the Borrowers and their respective  successors and assigns.
The Agent or any other  Lender  under the Senior  Loan  Agreement  may assign or
participate  out to other  parties any portion of its interest  under the Senior
Debt and no such assignee or participant shall be required to become a signatory
hereto. Any assignee or transferee of the Subordinated  Lender shall execute and
deliver to the other  parties  hereto an  agreement  pursuant to which they will
become parties hereto as fully as if they were signatories  hereto and providing
for the  effectiveness  of this Agreement as to such  transferee or assignee and
other  parties.  This  Agreement  shall  be a  continuing  agreement,  shall  be
irrevocable  and  shall  remain in full  force and  effect so long as any of



                                       8
<PAGE>

the  Senior  Debt or the  Subordinated  Debt is  outstanding  and so long as the
Senior Loan  Agreement has not been  terminated  and the  Commitments  remain in
place.

      16.  Notification of Defaults.  The Subordinated  Lender shall immediately
give  written  notice to the Agent of a default  or an event of  default  by the
Borrowers under the Subordinated Debt. The Subordinated Lender understands that,
subject to any grace or cure period under the Subordinated  Lender's  agreements
with the Borrowers, any default by the Borrowers under the Subordinated Debt is,
automatically,  an event of default  of the  Borrowers  under the  Senior  Debt.
Nothing in this Agreement shall be interpreted to limit or restrict the right of
the  Agent  and the  Subordinated  Lender  to  waive  any  default  under  their
respective documents,  and the Subordinated Lender agrees that any waiver by the
Subordinated Lender will be in writing and provided to the Agent.

      17.  Notices.  Any  notices,   consents,   requests,   demands  and  other
communications  required or permitted to be given  hereunder shall be in writing
and shall be deemed to be given to any party or parties (a) upon delivery to the
address of the party or parties  set forth  below if  delivered  in person or by
courier or if sent by certified or registered mail (return  receipt  requested),
or (b) upon  dispatch if  transmitted  by  telecopy or other means of  facsimile
transmission,  in any case to the party or parties at the  telecopy  numbers set
forth below:

      If to Borrower:         THE OLD EVANGELINE DOWNS, L.L.C.
                              c/o Peninsula Gaming Partners, LLC
                              400 E. Third Street, P.O. Box 1750
                              Dubuque, Iowa  52004
                              Attention:     Natalie Schramm
                              Fax No.  (563) 690-2190

                              and

                              THE OLD EVANGELINE DOWNS, L.L.C.
                              c/o Peninsula Gaming Partners, LLC
                              11100 Santa Monica Boulevard, 10th Floor
                              Los Angeles, California  90025
                              Attention:     M. Brent Stevens
                              Fax No.  (310) 914-6476

      with copies to:         MCGLINCHEY STAFFORD, PLLC
                              643 Magazine Street
                              New Orleans, Louisiana 70825
                              Attention:     Deborah Harkins, Esq.
                              Fax No. (504) 596-2800



                                       9
<PAGE>

      If to the Subordinated
      Lender:                 PENINSULA GAMING COMPANY, LLC
                              c/o Peninsula Gaming Partners, LLC
                              400 E. Third Street, P.O. Box 1750
                              Dubuque, Iowa  52004
                              Attention:     Natalie Schramm
                              Fax No.  (563) 690-2190

                              and

                              PENINSULA GAMING COMPANY, LLC
                              c/o Peninsula Gaming Partners, LLC
                              11100 Santa Monica Boulevard, 10th Floor
                              Los Angeles, California  90025
                              Attention:     M.  Brent Stevens
                              Fax No.  (310) 914-6476

      If to Senior
      Lender:                 WELLS FARGO FOOTHILL, INC.
                              2450 Colorado Avenue, Suite 3000 West
                              Santa Monica, California  90404
                              Attention:     SFG
                              Fax No. (310) 453-7442

      with additional
      copies to:              PAUL, HASTINGS, JANOFSKY & WALKER LLP
                              600 Peachtree Street, NE, Suite 2400
                              Atlanta, Georgia 30308
                              Attention:     Cindy J. K. Davis, Esq.
                              Fax No. (404) 815-2424

Any party  hereto  may  designate  any other  address  or  telecopy  number,  as
applicable,  to which  any  notices  or other  communications  shall be given by
notice duly given hereunder;  provided,  however,  that any such notice of other
address or telecopy  number  shall be deemed to have been given  hereunder  only
when actually received by the party to which it is addressed.

      18. Amendments; Modifications. This Agreement may not be modified, altered
or amended  except by an  agreement  in writing  executed  by all of the parties
hereto.

      19. Amendment of Loan Documents. The Subordinated Lender and the Borrowers
agree to forbear  from (a)  modifying,  altering or amending any payment term of
any loan document or any other document,  instrument or agreement evidencing the
Subordinated  Debt,  (b)  modifying,  altering or amending any other term of any
loan  document or any other  document,  instrument or agreement  evidencing  the
Subordinated  Debt in any manner  adverse to either the  Borrowers or the Agent,
and (c) from granting



                                       10
<PAGE>

(in the case of the  Borrowers)  and receiving (in the case of the  Subordinated
Lender)  any   collateral  or  other  security  of  any  nature  to  secure  the
Subordinated Debt.

      20. Cost and Expenses of Enforcement.  The  Subordinated  Lender agrees to
pay  all  costs  and  expenses  including,   without   limitation,   attorneys',
paralegals' and other professionals' fees of every kind, paid or incurred by the
Agent in  enforcing  its  rights  hereunder  against  the  Subordinated  Lender,
including,  but not  limited  to,  litigation  instituted  in a state or federal
court, as hereinafter provided (including proceedings under the Bankruptcy Code)
in endeavoring to collect the Senior Debt or in so enforcing this Agreement,  or
in defending against any defense, cause of action, counterclaim, setoff or cross
claim based on any act of  commission  or omission by the Agent with  respect to
the  Senior  Debt  promptly  on demand of the  Agent or other  person  paying or
incurring the same.

      21.  TO  INDUCE  THE AGENT  AND THE  OTHER  LENDERS  TO  AFFORD  FINANCIAL
ACCOMMODATIONS TO THE BORROWERS, THE SUBORDINATED LENDER IRREVOCABLY AGREES THAT
ALL ACTIONS ARISING DIRECTLY OR INDIRECTLY AS A RESULT OR IN CONSEQUENCE OF THIS
AGREEMENT  SHALL BE INSTITUTED  AND LITIGATED ONLY IN COURTS HAVING SITUS IN THE
CITY OF NEW YORK, NEW YORK AND THE  SUBORDINATED  LENDER HEREBY  CONSENTS TO THE
EXCLUSIVE  JURISDICTION  AND VENUE OF ANY STATE OR  FEDERAL  COURT  LOCATED  AND
HAVING ITS SITUS IN SAID CITY AND STATE. THE  SUBORDINATED  LENDER HEREBY WAIVES
ANY OBJECTION BASED ON FORUM NON CONVENIENS,  AND THE SUBORDINATED LENDER HEREBY
WAIVES  PERSONAL  SERVICE OF ANY AND ALL PROCESS.  THE PARTIES  CONSENT THAT ALL
SUCH SERVICE OF PROCESS MAY BE MADE BY CERTIFIED MAIL, RETURN RECEIPT REQUESTED,
DIRECTED TO THE AGENT OR THE SUBORDINATED LENDER AT THE RESPECTIVE ADDRESSES SET
FORTH HEREIN IN THE MANNER PROVIDED BY APPLICABLE  STATUTE,  LAW, RULE OF COURT,
OR OTHERWISE.

      22. Waiver of Claims;  Trial by Jury. THE SUBORDINATED LENDER WAIVES EVERY
DEFENSE,  CAUSE OF ACTION,  COUNTERCLAIM OR SETOFF, THAT THE SUBORDINATED LENDER
MAY NOW HAVE,  OR  HEREAFTER  MAY HAVE,  TO ANY ACTION BY THE AGENT IN ENFORCING
THIS  AGREEMENT AND RATIFIES AND CONFIRMS  WHATEVER THE AGENT MAY DO PURSUANT TO
THE TERMS HEREOF AND AGREES THAT THE AGENT SHALL NOT BE LIABLE FOR ANY ERRORS OF
JUDGMENT OR MISTAKE OF FACT OR LAW EXCEPT FOR WILLFUL  MISCONDUCT OF AGENT.  THE
AGENT AND THE SUBORDINATED LENDER, AND EACH ONE OF THEM, KNOWINGLY,  VOLUNTARILY
AND INTENTIONALLY WAIVE IRREVOCABLY,  TO THE EXTENT PERMITTED BY APPLICABLE LAW,
THE RIGHT EITHER ONE OF THEM MAY HAVE TO TRIAL BY JURY WITH RESPECT TO ANY LEGAL
PROCEEDING  BASED HEREON,  OR ARISING OUT OF, UNDER OR IN  CONNECTION  WITH THIS
AGREEMENT AND ANY AGREEMENT  CONTEMPLATED TO BE EXECUTED IN CONJUNCTION HEREWITH
OR ANY



                                       11
<PAGE>

COURSE OF CONDUCT OR COURSE OF DEALING,  IN WHICH THE AGENT AND THE SUBORDINATED
LENDER ARE ADVERSE  PARTIES.  THIS  PROVISION IS A MATERIAL  INDUCEMENT  FOR THE
AGENT TO MAKE LOANS AND OTHER FINANCIAL ACCOMMODATIONS TO THE BORROWERS.

      23. Governing Law; Benefit of Agreement.  This Agreement shall be governed
by and construed in accordance  with the internal laws of the State of New York,
without  regard to the conflict of law,  principles  thereof other than Sections
5-1401  and  5-1402  of  the  New  York  General  Obligations  Law.  All  of the
understandings,  agreements,  covenants and representations contained herein are
solely for the benefit of the Agent and the Subordinated  Lender,  and there are
no other persons who are intended to be benefited in any way  whatsoever by this
Agreement.

      24. Severability. In the event any one or more of the provisions contained
herein shall for any reason be held to be invalid,  illegal or  unenforceable in
any respect by a court of competent jurisdiction, such invalidity, illegality or
unenforceability shall not affect any other provision hereof, and this Agreement
shall be construed as if such invalid,  illegal or  unenforceable  provision had
never been contained herein.

      25.  Counterparts.   This  Agreement  may  be  executed  in  two  or  more
counterparts,  each of which shall be deemed an original, and all of which taken
together shall constitute one and the same  instrument.  Delivery of an executed
counterpart of this Agreement by facsimile transmission shall be as effective as
delivery of a manually executed counterpart hereof.

      26. Perfection and Release of Liens. Upon the Agent's  reasonable  request
(which request shall be in writing),  the  Subordinated  Lender hereby agrees to
execute and deliver such documents,  instruments, lien releases, assignments and
financing statements and do such acts as may be necessary in order for the Agent
to establish and maintain a first,  valid, prior and perfected security interest
in the Collateral.  In the event of any sale or other  disposition of all or any
part of the Collateral prior to payment in full of the Senior Debt, upon request
by the Agent, the Subordinated Lender shall execute releases,  assignments,  UCC
terminations and other similar  agreements that are reasonably  requested by the
Agent from time to time.  Until payment and  satisfaction  in full of the Senior
Debt,  the   Subordinated   Lender  shall   cooperate  fully  in  releasing  the
Subordinated Lien, if in existence at such time, as soon as practicable upon the
reasonable request of the Agent.

              [REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]


                                       12


<PAGE>

      IN WITNESS  WHEREOF,  the parties have executed  this  Agreement as of the
date first above written.

Borrowers:                          THE OLD EVANGELINE DOWNS, L.L.C.,
                                    a Louisiana limited liability company

                                    By:  /s/  Natalie Schramm
                                       --------------------------------
                                       Name:  Natalie Schramm
                                       Title: Chief Financial Officer


                                    THE OLD EVANGELINE DOWNS
                                    CAPITAL CORP., a Delaware corporation

                                    By:  /s/  Natalie Schramm
                                       --------------------------------
                                       Name:  Natalie Schramm
                                       Title: Chief Financial Officer



Subordinated Party:                 OED ACQUISITION, LLC,
                                    a Delaware limited liability company

                                    By:  /s/  Natalie Schramm
                                       --------------------------------
                                       Name:  Natalie Schramm
                                       Title: Chief Financial Officer


Agent:                              WELLS FARGO FOOTHILL, INC.,
                                    a California corporation

                                    By:  /s/  Rhonda R. Noell
                                       --------------------------------
                                       Name:  Rhonda R. Noell
                                       Title: Senior Vice President