exv10w4



 






Exhibit 10.4




Exhibit A









The Honorable Robert A. Pastrick

Mayor, City of East Chicago

4525 Indianapolis Boulevard

East Chicago, Indiana 46312




     RE: Gaming Vessel Development Project



Dear
Mayor Pastrick:




     Since last fall Showboat Marina Partnership (“Showboat’) has had the
privilege of pursuing the development of a casino gaming vessel to be docked
on the shore of Lake Michigan in the City of East Chicago (“City”)
at the Pastrick Marina, together with additional land-based facilities to
support the gaming vessel (the “Project”). In connection with that effort,
we have conducted numerous community informational forums during which we
explained our concept of the project to the residents of the City and, even
more importantly, received comments and suggestions from them concerning our
proposal. Most recently, we had the opportunity to participate in the work
of the several gaming tasks forces that you organized to make recommendations to your office with respect to the gaming proposal and
the economic benefits expected to flow from this new industry. Based upon
the recommendations of the Mayor’s Gaming Task Force, Investing in the
People; we have engaged in negotiations with the City to identify and agree
upon certain economic incentives that the City requires of Showboat in
connection with the Project.



     This preliminary agreement (“Agreement”) is intended to memorialize the
agreements between the City and Showboat concerning development of the
Project.



A. ECONOMIC DEVELOPMENT CONTRIBUTION




     1. Upon commencement of gaming operations, Showboat agrees to contribute
annually to and for the benefit of economic development, education and
community development in the City an amount equal to three (3%) percent of
Showboat’s adjusted gross receipts (as that term is defined in the Indiana
Riverboat Gambling Act) (“Contribution”). (Based upon the pro forma financial
projections for the Project which will be included in Showboat’s final
application to the Indiana Gaming Commission, Showboat estimates that such
Contribution will range from approximately six million ($6,000,000) dollars
to seven and one-half million ($7,500,000)





 









 









The Honorable Robert A. Pastrick

April 8, 1994

Page 2



dollars annually for the initial two and one-half years of operation and from
approximately four million ($4,000,000) dollars to five million ($5,000,000)
dollars annually thereafter.




     2. Showboat proposes that its Contribution be distributed as follows:



          a. One (1%) percent to the City. Showboat suggests that the City
establish or select a board to determine the best use of these funds.





In addition to the City’s portion of the Contribution and as
more particularly described later in this Agreement, Showboat
agrees to cause certain programs to be instituted or projects to
be commenced in 1994 and 1995 (or to provide the necessary
funding therefore), without regard to the issuance of a gaming
license to Showboat for the operation of the gaming vessel.



          b. One (1%) percent to the Twin City Education Foundation, Inc.,
(“TCEF”), an Indiana nonprofit corporation. TCEF will be independent of Showboat. Members of a seven
member Board of Trustees of TCEF will be selected from or by the following entities or individuals:





	 	•	 	Two representatives of two largest employers
	 
	 	•	 	Mayor
	 
	 	•	 	Common Council
	 
	 	•	 	Board of Trustees of the School City
	 
	 	•	 	Chamber of Commerce
	 
	 	•	 	East Chicago Education Foundation






In addition, at Showboat’s option, Showboat shall be permitted to
name an individual to the Board of Trustees of TCEF




TCEF will focus on funding training programs that prepare workers
for the 21st century. Training for riverboat-related jobs will
not be funded by TCEF.




TCEF will administer as one of its programs a scholarship program
(funded initially with a minimum of $50,000) for
post-secondary education for residents of East Chicago. Showboat
agrees that at least $25,000 shall be set aside annually from
this scholarship fund for the benefit of qualifying eighth
graders entering high school. Such funds will be placed in
individual interest bearing trust accounts for the benefit of
such qualifying students and will be made available to them as
college scholarships upon their graduation from high school and
enrollment in institutions of higher education; provided that
they have




 






 









 










The Honorable Robert A. Pastrick

April 8, 1994

Page 3





complied with the requirements of the scholarship program during
their high school tenure.




Showboat further agrees that the balance of TCEF’s funds will be
dedicated to educational programs (both academic and
vocational) in and around the City, with priority being given
to programs in the City and for City residents.



          c. One (1%) percent to the East Chicago Community Foundation, Inc.
(“ECCF”), an Indiana nonprofit corporation. ECCF will be independent of
Showboat ECCF will receive, evaluate and select for funding proposals from
individuals or entities within the City, and will fund community
development projects within the City. A fifteen-to-twenty-one member Board
of Trustees will be selected by or from the following individuals or
entities:





	 	•	 	Various Neighborhood Leaders
	 
	 	•	 	Mayor
	 
	 	•	 	Common Council
	 
	 	•	 	Chamber of Commerce
	 
	 	•	 	Board of Trustees of the School City






In addition, at Showboat’s option, Showboat shall be permitted
to name an individual to the Board of Trustees of ECCF. The
majority of Board members will represent neighborhoods.



     3. Showboat intends to maximize the effectiveness of the funds
contributed to TCEF and ECCF by “leveraging” such
contributions, possibly by
ratios as high as 5 to 1 depending upon the projects undertaken by such
corporations. In this context “leveraging” includes using foundation funds
as seed money that will attract other investment and using foundation funds
to provide matching monies for university, governmental, and other
endowments. The City and Showboat acknowledge, however, that such leveraging
will be fully successful only if staff persons who are skilled and
experienced in pursing and obtaining grants from governmental and other
entities are employed by such corporations. Accordingly, Showboat will
require as a continuing condition of its Contribution that an appropriate
portion of the funds contributed to TCEF and ECCF shall be allocated to
administrative and professional salaries to support the leveraging concept.



B. EAST CHICAGO SECOND CENTURY, INC.




     1. In addition to the Contribution described above, Showboat desires to
be a catalyst for meaningful and significant economic, commercial and
housing development in the City. In order to assist in the pursuit of these
objectives, Showboat has formed East Chicago Second Century, Inc. (“Second
Century”), a for-profit corporation. Showboat agrees to fund Second Century





 









 








The Honorable Robert A. Pastrick

April 8, 1994

Page 4



annually in an amount equal to three-fourths (.75%) percent of adjusted gross
receipts from its casino vessel operation.




     2. Showboat intends to maximize the effectiveness of Second Century by
endeavoring to “leverage” the amounts with which Second Century is funded, possibly
by as much as an 8
to 1 ratio. In this context leveraging means using funds as seed money
and using Second
Century funds as equity contributions in various projects. In order to
accomplish this goal,
Second Century will employ staff persons who are experienced in
economic and housing
development, with particular expertise in applying for and obtaining
grants from governmental
and other entities.



     3. Showboat agrees further that (i) all of Second Century’s development
activities will be directed to sites located within the City, (ii) all projects pursued by
Second Century will
conform to the City’s development and master plans, and (iii) all projects
will receive prior
approval from the City. Showboat acknowledges that certain projects have
already been
Identified by the Mayor’s Gaming Task Force, which projects Second Century
is prepared to
undertake as priority projects in the manner manually determined by the
City and Second Century.



     4. By execution of this Agreement, the City authorizes Second Century, at
its option, to proceed with development of the Washington High School and
Michigan Avenues sites, subject to all required regulatory approvals. Showboat
agrees that all funds expended in connection with these projects will be funded
by and through Second Century and that such expenditures will not diminish
the amount of the Contribution in any way. Even if a gaming license is not
granted, Showboat agrees that Second Century will proceed with the development
of the Washington High School site.



C. ADDITIONAL COMMITMENTS BY SHOWBOAT




     1. Reimbursement of City Expenses. Showboat agrees to reimburse the
City certain reasonable and necessary expenses incurred by the City in
connection with development of the Project. These expresses include but are
not limited to the following:




	 	•	 	professional planning fees;
	 
	 	•	 	 professional design fees;
	 
	 	•	 	engineering;
	 
	 	•	 	construction of infrastructure, utilities or other improvements at the Pastrick Marina or elsewhere and related to the Project;
	 
	 	•	 	legal fees and costs;
	 
	 	•	 	financial consulting fees;







 









 








The Honorable Robert A. Pastrick

April 8, 1994

Page 5





	 	•	 	
consulting fees of other professionals whose services are
deemed reasonably necessary by the City.






     2. Reimbursement of Payroll Expenses of City Planner. Showboat
acknowledges that
the City requires the services of a full-time City Planner, that the
City currently does not employ
anyone in that capacity, and that the City has no funds budgeted for
such position for 1994.
Accordingly, Showboat agrees that it shall provide the funds necessary
to enable the City to hire
a professional planner in 1994 at a cost to Showboat not to exceed
$70,000 annually, with the
understanding that the City will include the expenses of the
professional planner in its 1995 municipal budget.



     3. Projects to be Funded in 1994 and 1995. The City has advised
Showboat that certain projects and programs are of great importance to the
residents of East Chicago. The City has required that Showboat agree to fund
the following programs and projects regardless of the issuance of a gaming
license to Showboat. Showboat agrees, therefore, to fund the following to a
maximum of the estimated expenditures listed for each project or program:



          a. Healthy East Chicago Wellness Program, with estimated expenditures of
$100,000 in 1994 and $100,000 in 1995.




          b.
Comprehensive market development assessment for the Main Street/Broadway,
Chicago Avenue/Indianapolis Boulevard, and Columbus Drive corridors, with
estimated expenditures of $70,000 in 1994.




          c. City capital improvement projects as determined by the City, with
expenditures of $250,000 in 1994 and $250,000 in 1995.




          d. Development of a small business incubator program at the abandoned
Pepsi-Cola Bottling Plant building,1112 W. Chicago Avenue, with estimated
expenditures of $250,000 in 1994 and $250,000 in 1995.




          e. Engineering fees related to the water marketing project for extension
of the City’s water main to south Lake County, with estimated expenditures of
$250,000 in 1994 and $250,000 in 1995.




     Showboat acknowledges that the foregoing is only a partial list of
projects and programs which the City has identified. Showboat agrees to
continue to cooperate with the Mayor’s Gaming Task Force and the City to
accomplish these and certain other projects and programs described in
Investing in the People as determined by the City.





 









 








The Honorable Robert A. Pastrick

April 8, 1994

Page 6




     The City agrees that fifty (50%) percent of the funds expended by
Showboat in connection with the projects and programs described in this paragraph
shall be credited against the City’s one (1%) percent share of the Contribution payable to the
City during the first and, if necessary, second years of operations. Credits will not be carried
over to the third and later years of operations without the City’s approval. Expenditures that are
not pre-approved by the City will not be eligible for the credit.



     4. Employment Assistance. Showboat agrees to assist the City in employing
individuals required to staff positions necessary to carry out the projects and
programs contemplated by this Agreement.



     5. Other Studies. Showboat agrees to reimburse the City for the costs of
any studies
not specifically described herein which the City is required to perform in
connection with the
Project. Such expenses incurred by Showboat shall be credited against the
City’s one percent
(1%) share of the contribution in the manner described in paragraph 3,
above.



     6. Labor. Showboat agrees to use local, unionized labor in construction of
the Project
as well as the other projects to be undertaken by TCEF, ECCF and Second
Century.



     7. Opening Day. The City and Showboat agree that time is of the essence
in this
Agreement Accordingly, Showboat agrees that it shall at all times exert
its good faith efforts
to cause the Project to be completed and open to the public for regular
gaming operations on or
before April 30, 1995. Showboat acknowledges that the agreement contained
in this paragraph
will require that Showboat continue to expend funds prior to the issuance
of a gaming license,
and Showboat hereby agrees to continue to make such expenditures.



     8. Assessment and Training Center. The Mayor’s Gaming Task Force has
identified
as a top priority the need to establish an assessment and training center
for the benefit primarily
of the youth, but ultimately of all residents, of the City. Showboat
agrees to commence
promptly the work required to organize and establish such center. Such
expenses incurred by
Showboat shall be credited against the City’s one percent (1%) share of
the contribution in the
manner described in paragraph 3, above.



     9. Training for East Chicago Residents. Showboat agrees to provide
training
scholarships in the form of cost-free training for residents of East
Chicago who are hired as
employees for the Project.





 









 








The Honorable Robert A. Pastick

April 8, 1994

Page 7




D. COMMITMENTS BY THE CITY




     In consideration of the foregoing agreements made by Showboat,
Showboat has asked that the City take certain actions for the benefit of
the Project. Your Honor’s signature below will confirm that the City agrees
to:



     1. Support Showboat’s application for an owner’s license to the Indiana
Gaming Commission.



     2. Work diligently in a cooperative effort with Showboat to achieve the following:



          a. Continued progress and ultimate completion of the Clink Avenue
extension project currently in the design phase;




          b. Construction or expansion of roadways to facilitate ingress to and
egress from
the gaming vessel site;




          c. Acquisition (either by conveyance or lease) of land necessary for
convenient
and efficient construction and operation of the Project;




          d. Construction of such infrastructure as is necessary to support the
Project;




          e. Expedited issuance of permits and approvals from all governmental
agencies having jurisdiction over the Project.




     3. Cooperate with and assist TCEF, ECCF and Second Century to facilitate
the achievement of the respective goals and objectives of each entity to the
extent that those goals
are compatible with the City’s development goals.



     4. Cooperate with and assist TCEF, ECCF, and Second Century to achieve maximum
“leveraging” of the funds made available to those corporations by Showboat and
effective use
of such corporations resources.



     5. Cooperate with Showboat to assure and promote public health, safety and
welfare.



E. OTHER MATTERS




     1. Showboat acknowledges the City’s desire that gaming operations
commence as promptly as possible and that the economic benefits of the
Project begin to flow to the City and its residents as early as possible,
with the expectation that gaming operations will commence not






 












 








The Honorable Robert A. Pastrick

April 8, 1994

Page 8






later than April 30, 1995. Accordingly, Showboat and the City agree that time is of the essence of
this Agreement.




     2. Showboat
agrees that it shall continue its negotiations with the City and that, within 90 days
of the date of this Agreement, the City and Showboat shall execute a definitive Development
Agreement, setting forth specially and in detail all obligations  of Showboat related to the
development of the Project. The parties acknowledge that achieving this goal will require
actions to be taken by governmental units and that if these actions are not completed in a timely
manner, the time table may not be met.



     3. This Agreement is subject to the approval of the Board of Directors of Showboat, Inc, at
its meeting April 26, 1994.



     We are excited about the opportunities that this Project presents for both the City and
Showboat. If this letter accurately sets forth the basis provisions of our Agreements, I request
that you sign the letter on behalf of the City and return a copy to me. Thank you for your efforts
to date in support of this Project.




Respectfully submitted,




	 	 	 
	SHOWBOAT MARINA PARTNERSHIP
	 	 
	 
	 	 
	/s/ Thomas C. Bonner

Thomas C. Bonner 

Executive Vice President and
Chief Operating Officer 

1802 East Columbus Drive

East Chicago, Indiana 46312 
(219)392-1111

April 8, 1994

	 	 





 







 









 







Agreed to and accepted by, subject to the ratification of the Common Council of the City of East
Chicago:





	 	 	 
	CITY OF EAST CHICAGO
	 	 
	 
	 	 
	/s/ Robert A. Pastrick
 

Robert A. Pastrick
Mayor

	 	 
	 
	 	 
	 
	 	 
	Date: [ILLEGIBLE] 

	 	 








 









 







Exhibit-A












April 18, 1995



The Honorable Robert A. Pastrick

Mayor, City of East Chicago 

4525 Indianapolis Boulevard
 East Chicago,
Indiana 46312




     Re: Gaming Vessel Development Project.



Dear Mayor Pastrick:






     Pursuant to the economic development agreement executed April 8, 1994 (“Agreement”) , Showboat
Marina Partnership (“Showboat”) undertook certain obligations, including the obligation to continue
to cooperate with the Mayor’s Gaming Task Force (“Task Force”) to accomplish projects and programs
described in Investing in the People, Showboat has negotiated with
City Planner [ILLEGIBLE] Taylor, who was
designated as the representative of the Task Force for this purpose. We wish to report to you that
these negotiations have resulted in Showboat’s agreement to [ILLEGIBLE] the [ILLEGIBLE] on the attached list. As
part of these negotiations, Mr. Taylor has advised us that the City does not wish Showboat to
provide funding for the small business incubator program which had originally been scheduled for a
total of $500,000 of funding. The $500,000 has been redirected to new items. When added to the
previous items in the agreement the net amount of fixed sum commitments is more than $5,800.000



     In addition to these items, Showboat will commit to four community development project as
follows:



     1. Washington School Site Residential Development. Showboat commits that East Chicago Second
Century funds will be used to build approximately 68 townhouses for moderate income citizens from
East Chicago on an abandoned school site. The project cost is estimated at $5,000,000.



     2. Michigan
Avenue Retail Development: Showboat commits that East Chicago Second Century funds
will be used to build a 5-to 8-unit retail center near the Showboat Marina Casino employee parking
lot. The project cost is estimated at $4,000,000.



Post
Office Box 777 East Chicago. N 46312 Phone(219) 392-1111 [ILLEGIBLE]








 












 







The
Honorable Robert A. Pastrick

 April 18, 1995

Page 2




     3. Homebuyer
Guarantee Program: In order to increase home ownership.
Showboat will create a pool of $5,000,000 for a minimum of 250
East Chicago residents through a mortgage guarantee program of up
to 25% of a home’s purchase price. The
result of full utilization of this program would be $20.000,000
in the residential real estate market.



     4. Down Payment Assistance: As a further step in
increased home ownership. Showboat will also create a pool of
$500,000 to provide down payment assistance of 5%
of the purchase price not to exceed $5000 for first-time home buyers
who are employees of Showboat Marina Casino.



     Please
note that Showboat has agreed that the four programs
described above and the items listed on the attachment are not subject
to the fifty percent (50%) credit against future incentive payments to
the City contained in-the Agreement. As a publicly traded company,
the expenditures described in this letter are subject to ratification
by the Board of Directors of Showboat, Inc.



     In addition, at this time we. would like to take the opportunity to briefly summarize
the revised estimates of the benefits that the City and its
residents are expected to receive under the Agreement. These estimates
are based upon our current revenue projections for the project, and
could change as we continue to refine our research.




	 	•	 	We estimate that the value of the 3% of adjusted gross gaming
revenues that will be dedicated to City, the Twin City Education
Foundation.
and the East
Chicago Community Foundation will range from $25.3 million to
$28.7 million in
the first 5 years of licensure.
	 
	 	•	 	We project that the additional .75% to be used for
community investment will
result in additional contributions ranging from $.6.6
million to $7.4 million over
that same period.
	 
	 	•	 	The value of job training to be provided to employees is
projected to be
approximately $1.3 million. In addition. Showboat intends to
develop a [Illegible] reimbursement program for non-gaming
educational endeavors which will be
open-ended. However, our experience at our other properties
shows that the
annual expenditure is likely to be approximately $50,000.
	 
	 	•	 	The contribution to the Cline Avenue Ramp is projected to be $3.5 million.












 









 







The
Honorable Robert A. Pastrick

April 18, 1995

Page 3




     Depending upon our success in achieving our revenue projections,
which we believe are realistic for the East Chicago market, the net
impact of the Agreement with the additions (and deletion) set forth in
this letter has the potential to exceed $52 million. The five-year
value of incentives per resident of the City of East Chicago is over
$1500. These figures do not include anticipated leveraged funds of
approximately $70,000,000, as estimated by our experts, nor have we
included actual hard dollar investment in the Showboat Marina Casino
project of approximately $100,000,000.



     In order to present a complete picture of the economic and
community development benefits for the City of East Chicago, Showboat
requests the opportunity to present a detailed update on the status of
the project to the Common Council.



     It continues to be our pleasure to work with the City on this project.




	 	 	 	 	 
	 	Very truly yours, 



SHOWBOAT MARINA PARTNERSHIP

 	 
	 	/s/ Thomas C. Bonuer
 	 
	 	Thomas C. Bonuer

Chief Executive Officer 	 
	 



Enclosure

cc: Russ Taylor






 









 









ITEMS TO BE PURCHASED BY SHOWBOAT FOR CITY




	 	 	 	 	 	 	 	 	 
	Item	 	Category	 	Description	 	Est. Cost	 
	1.
	 	Neigh.	 	Donation for Demolition	 	$	200.000	 
	2.
	 	Neigh.	 	Graffted  removal machine	 	$	40.000	 
	3.
	 	Neigh.	 	Donation to New Addition Revitalization (RONA)	 	$	60,000	 
	4.
	 	Neigh.	 	Rehao City Line League Fields	 	$	120,980	 
	5.
	 	Neigh.	 	Landscape end Sidewalk Program	 	$	150.000	 
	 
	 	 	 	 	 	 	 
	 
	 	 	 	neighbourhood sub total	 	$	560,360	 
	 
	 	 	 	 	 	 	 	 
	6.
	 	Law Ent.	 	Hire Gang and Violence Constant	 	$	50,000	 
	7.
	 	Law Ent.	 	5 Police Cars and 2 5.A.R.E. Vans	 	$	122,990	 
	8.
	 	Law Ent.	 	Hire  Additional Policemen	 	$	1,071,790	 
	9.
	 	Law Ent.	 	Additional Police Equipment: Evidence Collection Vehicle,. Mini Padav Wagon, Mobile Police station.	 	$	164,320	 
	10.
	 	Law Ent.	 	Emergency Management  Department	 	$	100.000	 
	 
	 	 	 	 	 	 	 
	 
	 	 	 	Law Enforcement sub-total	 	$	1,508,100	 
	 
	 	 	 	 	 	 	 	 
	11.
	 	OPS	 	Ambulance	 	$	64,650	 
	12.
	 	OPS	 	For Equipments  Apparatus	 	$	174,870	 
	13.
	 	OPS	 	Pumber Fire Truck	 	$	180,000	 
	14.
	 	OPS	 	Drug Rehabilitation Program	 	$	100.000	 
	15.
	 	OPS	 	Gamblers Anonymous Contribution	 	$	50,000	 
	 
	 	 	 	 	 	 	 
	 
	 	 	 	Othor Public Safety sub-total	 	$	579,520	 
	 
	 	 	 	 	 	 	 	 
	16.
	 	Schools	 	School City Athletic van	 	$	58,950	 
	17.
	 	Schools	 	Computer Hardware   for Schools	 	$	500,000	 
	 
	 	 	 	 	 	 	 
	 
	 	 	 	School: sub-total	 	$	558,950	 
	 
	 	 	 	 	 	 	 	 
	18.
	 	Int & East	 	Utility Boom Track	 	$	69,450	 
	19.
	 	Int & East	 	Bowne  Hyarautic
Boat Handler	 	$	150,000	 
	20.
	 	Int & East	 	Computer  with 16 meo RAM Microchio	 	$	3,700	 
	21.
	 	Int & East	 	Past Expenses of City Employee on
Showboat	 	$	1,230	 
	22.
	 	Int & East	 	Kennedy Avenue Matching funus for construction	 	$	400,000	 
	23.
	 	Int & East	 	Computer Equipt. for Public Information Office	 	$	12,020	 
	24.
	 	Int & East	 	Engineering Environment	 	$	68,360	 
	25.
	 	Int & East	 	Digital Aerial Mapping	 	$	125,000	 
	26.
	 	Int & East	 	Transportation System Maintenance Equipment	 	$	57,000	 
	27.
	 	Int & East	 	New and Relocated Sites into new haroor	 	$	404,800	 
	28.
	 	Int & East	 	Desk Top Publishing Equipment & Software	 	$	50,000	 
	 
	 	 	 	 	 	 	 
	 
	 	 	 	Intrastructure & Equipment sub-total	 	$	1,349,580	 
	 
	 	 	 	 	 	 	 	 
	 
	 	 	 	TOTAL ALL ITEMS	 	 	34,667,450	 
	 
	 	 	 	 	 	 	 	 




Configure an approval of phase 1







 











 









SIDE AGREEMENT: EAST CHICAGO SECOND CENTURY, INC.




     This Side Agreement (the “Agreement”), dated as of December 22, 1998, is entered into by and
among Showboat Marina Partnership (“SMP”), Waterfront Entertainment and Development, Inc.
(“Waterfront”), Thomas S. Cappas (“Cappas”) and Michael A. Pannos (“Pannos”).



RECITALS




     A. East Chicago Second Century, Inc. (“Second Century”) is a for-profit corporation,
incorporated under Indiana Business Corporation Law on March 16, 1994 by Michael A.
Pannos.



     B. Second Century was formed to develop housing in East Chicago, Indiana with funds from
the gaming revenues of the casino riverboat owned and operated by Showboat Marina Casino
Partnership in East Chicago, Indiana ( the “Project”)



     C. Second Century has never issued any of its stock.



     D. SMP, Waterfront, Cappas and Pannos are entering into this Agreement in connection
with that certain Stock Purchase Agreement, dated as of the date hereof, entered into by
and among Harrah’s Entertainment, Inc and Harrah’s Operating Company, Inc. and Margaret
Louise Pannos, as Trustee of the Margaret Louise Pannos Trust, Michael A. Pannos, as
Trustee of the Michael A. Pannos Trust, Samuel L. Cappas, as Trustee of the Samuel L.
Cappas as Trustee of the Samuel L. Cappas Trust, Thomas S. Cappas, as
Trustee of the Elizabeth Cappas Trust, Samuel L. Cappas and Peter T. Cappas, as Co- Trustees of the Thomas S. Cappas Grantor Trust, Thomas
S. Cappas, as Trustee of the Thomas S. Cappas Trust dated may 1, 1987, Peter T. Cappas,
Louis Gonzales and Robert Hoggs and Michael A. Pannos and Thomas S. Cappas ( the “Stock
Purchase Agreement”).



AGREEMENT




     1. Each party to this Agreement agrees to take all actions within his/its control to
effectuate, prior to the Closing Date (as defined in the Stock Purchase Agreement), the
option with respect to Second Century, from among those set forth below, that is selected
by the City of East Chicago, Indiana (“City”):




	 	(a)	 	causing Second Century to be owned and operated by SMP or an affiliate of SMP;

	 
	 	(b)	 	causing Second Century to be owned and operated by the City; or
	 
	 	(c)	 	causing Second Century to be owned and operated by Pennos and Cappas.
	 







 









 









     2. The obligations of the parties in the previous section are subject to the City not
imposing any commercially unreasonable terms or conditions, or any terms or conditions
that would be adverse to the gaming licenses of SMP or its affiliates, with respect to the
option selected by the City.



     3. The parties shall cooperate in obtaining all consents and approvals from the City,
the Indiana Gaming Commission and any other applicable regulatory authorities necessary in
connection with the disposition of Second Century pursuant to the Agreement.



     IN WITNESS WHEREOF, the parties hereto have caused the Agreement to be duly executed as of the
date first written above.




	 	 	 	 	 	 	 
	 	 	SHOWBOAT MARINA PARTNERSHIP
	 
	 	 	 	 	 	 
	 	 	By SHOWBOAT INDIANA
	 	 	INVESTMENT LIMITED
PARTNERSHIP.
	 	 	its Managing Partner
	 
	 	 	 	 	 	 
	 	 	By SHOWBOAT INDIANA. INC, its
	 	 	General Partner
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/ Colin V. Reed	 	 
	 

	 	 	 	 

	 	 
	 	 	


Name: Colin V. Reed
	 	 	Title:Executive Vice President
	 
	 	 	 	 	 	 
	 	 	WATERFRONT ENTERTAINMENT AND
	 

	 	DEVELOPMENT,
	 	INC	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	Michael A. Pannos	 	 
	 

	 	 	 	 

	 	 
	 

	 	Name:	 	Michael A. Pannos	 	 
	 

	 	 	 	 

	 	 
	 

	 	Title:	 	President	 	 
	 

	 	 	 	 

	 	 
	 
	 	 	 	 	 	 
	 	 	/s/ Michael A. Pannos
	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	Michael A. Pannos
	 
	 	 	/s/ Thomas S. Cappas
	 	 	 	 	 
	 	 	Thomas S. Cappas








 









 












Confirmation of Agreement and Implementation:

East Chicago Second Century, Inc.




     This Confirmation of Agreement and Implementation (the “Confirmation”), dated as of February
26, 1999, is entered into by and among the City of East Chicago (“City”) and the parties to a Side
Agreement entered into as of December 22, 1998 (the “Side Agreement”), which parties are Showboat
Marina Partnership, Waterfront Entertainment and Development, Inc. (“Waterfront”), Thomas S.
Cappas, and Michael A. Pannos, collectively the “Side Agreement Parties.”



Recitals





	 	A.	 	The Side Agreement Parties entered into the Side Agreement with respect to East
Chicago Second Century, Inc. (“Second Century”), a for-profit corporation, incorporated
under Indiana Business Corporation Law on

March 16, 1994. by Michael A. Pannos.
	 
	 	B.	 	The Side Agreement contained the following recitals with respect to
Second Century:






	 	     1.	 	Second Century was formed to develop housing in East
Chicago, Indiana, with funds from the gaming revenues of the casino
riverboat owned and operated by Showboat Marina Casino Partnership in East
Chicago, Indiana
(the “Project”).
	 
	 	     2.	 	Second Century has never issued any of its stock.






	 	C.	 	The Side Agreement Parties agreed to take all actions within their
control to effectuate the form of ownership and operation of Second Century that
would be selected by the City.
	 
	 	D.	 	Based upon its review of the alternatives, the City has now selected
option (c) in paragraph of the Side Agreement with respect to Second Century and
has prepared the attached letter and report (Exhibit A), which have been
transmitted to the Indiana Gaming Commission.
	 
	 	E.	 	It is now appropriate to confirm that the actions required by the
Side Agreement have been taken and to effectuate the implementation of the City’s
decision.
	 
	 	F.	 	Certain shareholders of Waterfront, namely, George Novogroden, Barry
Porter, and the Estate of Nikos [ILLEGIBLE], have withdrawn from and disclaimed any
interest in Second Century pursuant to a Withdrawal Agreement executed by them
(“Withdrawing Shareholders”).








 









 







Confirmation of Agreement and Implementation




     Section 1. The Side Agreement Parties confirm that all actions required by the Side
Agreement have been completed and that they are ready to implement the City’s selected
option with respect to the ownership and operation of Second Century.



     Section 2. Showboat Marina Partnership, for itself and on behalf of Showboat Marina
Casino Partnership, and/or any related company (“Gaming Licensee”), agrees that the
Gaming Licensee shall retain the obligation to fund Second Century on behalf of the
City and as required by the Permanent License issued by the Indiana Gaming Commission,
which funding is set at 0.75% of adjusted gross gaming revenues, but shall have no
interest in Second Century. Neither the Side Agreement nor this Confirmation is
intended to alter such funding commitment under the Permanent License, and the Gaming
Licensee has no obligation to Second Century in addition to such funding commitment.



     Section 3. The City and the Side Agreement Parties agree that the City has the sole
responsibility for assuring that Second Century will perform the duties described in
the development agreement between the City and Showboat Marina Partnership. All
projects to be constructed by Second Century are subject to the prior approval of the
City and must conform to the City’s comprehensive plan.



     Section 4. Stock of Second Century will be issued to the those individuals and/or
entities designated by Michael A. Pannos and Thomas S. Cappas other than the
Withdrawing Shareholders (i)that were shareholders in Waterfront immediately prior to
the transfer of the stock of those shareholders to Harrah’s Operating Company, Inc. or
(ii) that are directly or indirectly affiliated with such former shareholders and so
designated by such shareholders in (i) above Stock of Second Century may not be issued
to or held by any individual or entity who has an ownership interest in the Project.



     Section 5. The Side Agreement Parties and the City shall cooperate in obtaining all
consents and approvals required by the Indiana Gaming Commission and any other
applicable regulatory authorities. and in consummating the agreements herein in
connection with the disposition of Second Century pursuant to the letter of the City
set forth in Exhibit A and this Confirmation.



     Section 6. The Confirmation is governed by Indiana law.



     Section 7. This Confirmation may be executed in multiple counter parts each of which
shall be deemed an original.






-2-









 









     In witness of this Confirmation, the Side Agreement Parties and the
City
have caused the Confirmation to be duly executed as of the date first written above.





	 	 	 	 	 	 	 
	 	 	SHOWBOAT MARINA PARTNERSHIP
	 
	 	 	 	 	 	 
	 	 	By SHOWBOAT INDIANA 
INVESTMENT LIMITED PARTNERSHIP,
	 	 	its Managing Partner
	 
	 	 	 	 	 	 
	 	 	By SHOWBOAT INDIANA, INC., its
	 	 	General) Partner,
	 
	 	 	 	 	 	 
	 	 	By: /s/ Dee A. Wallace
	 	 	   
	 	 	Name: Dee A. Wallace
	 	 	Title: Assistant Secretary
	 
	 	 	 	 	 	 
	 	 	WATERFRONT ENTERTAINMENT AND
	 	 	DEVELOPMENT, INC.
	 
	 	 	 	 	 	 
	 

	 	By	 	/s/ Michael A. Pannos	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:	 	Michael A. Pannos	 	 
	 

	 	 	 	 	 	 
	 

	 	Title:	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 
	 	 	 /s/ Michael A.
Pannos
	 	 	 	 	 
	 	 	Michael A. pannos
	 
	 
	 	 	 	 	 	 
	 	 	 /s/ Thomas S. Cappas
	 	 	 	 	 
	 	 	Thomas S. Cappas
	 
	 	 	 	 	 	 
	 	 	CITY OF EAST CHICAGO
	 
	 	 	 	 	 	 
	 

	 	By	 	/s/ John D. Artis	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:	 	John D. Artis	 	 
	 

	 	 	 	 	 	 
	 

	 	Title:	 	Executive Director, East Chicago Redevelopment	 	 
	 

	 	 	 	 	 	 





Exhibit A: City Letter and Report




[Signature
Page to Confirmation of Agreement and

Implementation: East Chicago Second Century, Inc.]







-3-












 







MEMORANDUM OF UNDERSTANDING




     It is intended that this document serve as a Memorandum
of Understanding (“MOU”) resulting from a meeting held on
the 25th day of August, 2000 held at the Mayor’s
Conference Room in East Chicago, Indiana between
representatives of Showboat Marina Casino Partnership t/a
Harrah’s East Chicago, (“Harrah’s”) and representatives of
the City of East Chicago, Indiana (“City”).



     Present
on behalf of Harrah’s was Joe Domenico, Senior Vice-President
and General Manager, and Roy Evans,. Director of Finance, present on behalf of
the City was James Fife, Special Assistant to the Mayor, Dr. Tim Raykovich,
Special Assistant to the Mayor, Robert Hoggs, Mayor’s Chief of Staff, Kimberly
Julkes, Director of Planning, John D. Artis, Director of the
East Chicago Department of Redevelopment (“Redevelopment
Department”), George Weems, Business Development, Kevin
Pastrick consultant to the Mayor, Gilbert Diaz, Building
Commissioner, Russell G. Taylor, representing East Chicago
Community Foundation, Inc. and Twin City Education
Foundation, inc., and Joseph E. Constanza, attorney for the
East Chicago Redevelopment Commission.



     The meeting was conducted by James Fife.








 









 







I.


Continuation of Existing Economic Incentive Agreements 




     Mr. Fife noted that in prior discussions with representatives from Harrah’s it had been agreed that the
economic incentives originally committed to by the
Showboat Marina Partnership for the gaming project (“Project”) would be
continued by Harrah’s during the term of the gaming
license in East Chicago
(“Term”). These economic incentives are more particularly described in a letter
dated April 8, 1994 from Showboat Marina Partnership
(“Showboat”) to Robert A.



Pastrick
and subsequent letter dated April 18, 1985 (collectively, the
“Commitment Letters”).
Harrah’s, per Mr. Domenico agreed that it would, during the Term, honor
the terms of the Commitment Letters,including but not
limited to contributing:




	 	1.	 	3% of its adjusted gross
receipts in equal shares to the City, the Twin City Education
Foundation, Inc., and the East Chicago
Community Foundation, Inc., and
	 
	 	2.	 	0.75% of its adjusted gross
receipts to East Chicago Second Century, Inc. Mr. Fife, on behalf of the City, commended
Harrah’s for its continued commitment to the economic and well-being
development of
the City of East Chicago.







2









 






Nothing in this paragraph is intended to modify,
expand or increase the commitments set forth in the letters
of 4/8/94 and 4/18/95, it being the intention of the
parties only to memorialize their understanding that;





	1.	 	the commitments set forth in the first paragraph of the letter of 4/18/95
 have been completely fulfilled. The commitments set
forth at numbered paragraphs 1 through 4 of said letter,
however, have not yet been completely fulfilled and that
Harrah’s intends to fulfill them during
the Term. The parties also understand that the
commitments set forth at paragraphs 1 and 2 of said
letter are to be satisfied by funds of East
Chicago Second Century, Inc., which funds are included in the .75% of
 gross gaming revenue contributed by Harrah’s
pursuant to paragraph
B of the letter of 4/8/94.
	 
	2.	 	the commitments set forth at
paragraphs A and B of the letter of 4/8/94
 have been fulfilled on a continuing basis to date and
Harrah’s will
continue to fulfill them upon the same terms during the
Term of this  MOU.  All of the other commitments set forth In said letter of 4/8/94
 have been completed or superceded. The City,
however, will continue to abide by Paragraph D of said letter.
	 
	3.	 	the parties further acknowledge
their understanding and agreement that SMCP’s commitment as set forth in paragraphs 1 and
2 on page 2
of this MOU (a total commitment of 3.75% of the adjusted
gross
receipts during the Term of this MOU) Is based on the
assumption that








3












 








SMCP is and will continue to be the sole holder of a gaming
license within the City of East Chicago. This commitment will continue
for so long as this status quo continues.



II.




Employment




     The parties agreed to continue to achieve the goal of maximizing the number of East Chicago
residents employed at the Project. Harrah’s, per Mr. Domenico, reaffirmed its promise under the
Commitment Letters to provide during the Term training scholarships in the form of cost-free
training residents of East Chicago who are hired as employees of the Project. Harrah’s also agreed
to continue during the Term its program of preferential hiring of East Chicago residents.



     Harrah’s agreed to develop a hotel employee-training program. Harrah’s also agreed to verify
residency of applicants in coordination with the City and track the employment of East Chicago
residents and to report such information to the City periodically, but not less frequently than
semi-annually.



     Mr. Domenico outlined Harrah’s training program and agreed to participate in the marketing of
Harrah’s employee training program to City residents and to provide advance notice to East Chicago
residents of employment opportunities.



     Mr. Artis also discussed the Empowerment Zone assessment and certification process under the
terms of which East Chicago residents are certified.






4









 







     Nothing herein or in the discussion described herein is or
was intended to require Harrah’s to utilize any particular third
party service provider which it may do in its sole, unfettered and
absolute discretion.



III.




Intentionally Omitted




IV.




Hotel Development




     The Parties understand that Harrah’s would not undertake to construct a hotel adjacent to the
gaming facility unless it can obtain the benefits of a certain level of real property tax abatement
(“Abatement”) and of tax incrementing financing (“TIF”) for certain infrastructure improvements
benefiting the Hotel. The Redevelopment Department agreed to recommend to the East Chicago
Redevelopment Commission (“Commission”) at its next meeting of the adoption of a Declaratory
Resolution to establish a TIF district that would include the boundaries of the Hotel and other
property deemed appropriate for inclusion by the City (“TIF District”). The Redevelopment
Department agreed to seek a Commission meeting on August 30, 2000 to consider the issue and express
its support. The City expressed its intent that, if the TIF District were adopted and Harrah’s
developed the Hotel as contemplated, it would support the expenditure of tax increment revenues
from the TIF District, as and when they became available, to construct infrastructure, such as
curbs, lighting, signals, landscaping, sidewalks and the like, for the benefits of the Hotel and
East Chicago.



      
 
 





5









 










V.




Abatement




     Mr. Domenico agreed to propose a schedule of Abatement for the Hotel. The City agreed to
consider support for the Abatement depending upon its review of the schedule submitted. Assuming
the City’s support for Abatement, the City would recommend to the Common Council the adoption of an
ordinance to provide Abatement for the Hotel.



VI.




Permits





     Harrah’s agreed to work with and provide all necessary and appropriate documents and other
materials to the City Planner, Building Commissioner and other officials of the City so as to
enable all permits and approvals for the construction of the Hotel to be processed. The City agrees
to cooperate with Harrah’s in processing and expediting all permits and approvals for the Hotel. Harrah,s acknowledged that but for
obtaining the requisite approvals and permits it would not develop the Hotel.






6









 







VII.




Marina Easement




     Harrah’s will grant to the City a marina access easement
substantially in the form of the easement document attached hereto
as Exhibit A.



VIII.




Construction of Hotel





     Harrah’s agreed to use its best efforts to engage local contractors and
suppliers for the construction of the Hotel and all other
construction during the
Term. Harrah’s agreed to comply and agreed to cause its contractors, construction managers and subcontractors to comply
with all applicable local ordinances, including but not limited to
those relating to affirmative action and
equal employment opportunities.



IX.




Communication




     Harrah’s
agreed to communicate regularly with representatives and officials of the City respecting the progress of the Hotel
and any other construction project during the Term and to coordinate activities respecting the same with City officials so as to minimizing disruption of or
impact on municipal operations and services.



      
 
 






7









 







X.





Miscellaneous



     The persons executing this MOU are authorized to enter into it and to make these agreements on
behalf of their respective parties. This MOU will be governed by Indiana law. If any provisions of
the MOU is held unenforceable, the other terms shall remain in force. The Term shall be coextensive
with the existing term of the gaming license in East Chicago and all renewals, extensions and
replacements thereof. This MOU shall be binding on and inure to the parties’ successors and
assigns. In accordance with Indiana Gaming Commission regulations 68 IAC 1-4-1, Section 1 (d), this
MOU may subsequently be disapproved by the Indiana Gaming Commission in accordance with its rules.



     Dated this 25th day of August, 2000.



 




8









 








	 	 	 	 	 	 	 
	 	 	CITY OF EAST CHICAGO
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Robert A. Pastrick	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Robert A. Pastrick, Mayor	 	 
	 
	 	 	 	 	 	 
	 	 	SMCP, t/a Harrah’s East Chicago
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Joseph A. Domenico	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Joseph Domenico 

Senior Vice President and
General Manager	 	 




 





9