**Exhibit 99.1**

** **

**DESCRIPTION OF GOVERNMENTREGULATIONS**

 

*The ownership and operation of casino gaming facilities aresubject to extensive state and local regulations. We are required to obtain andmaintain gaming licenses in each of the jurisdictions in which we conductgaming. The limitation, conditioning or suspension of gaming licenses could(and the revocation or non-renewal of gaming licenses, or the failure toreauthorize gaming in certain jurisdictions, would) materially adversely affectour operation in that jurisdiction. In addition, changes in law that restrictor prohibit our gaming operations in any jurisdiction could have a materialadverse effect on us.*

 

***Louisiana***

 

InJuly 1991, Louisiana enacted legislation permitting certain types ofgaming activity on certain rivers and waterways in Louisiana. The legislationgranted authority to supervise riverboat gaming activities to the LouisianaRiverboat Gaming Commission and the Riverboat Gaming Enforcement Division ofthe Louisiana State Police. The Louisiana Riverboat Gaming Commission wasauthorized to hear and determine all appeals relative to the granting,suspension, revocation, condition or renewal of all licenses, permits andapplications. In addition, the Louisiana Riverboat Gaming Commission establishedregulations concerning authorized routes, duration of excursions, minimumlevels of insurance, construction of riverboats and periodic inspections. TheRiverboat Gaming Enforcement Division of the Louisiana State Police wasauthorized to investigate applicants and issue licenses, investigate violationsof the statute and conduct continuing reviews of gaming activities.

 

InMay 1996, regulatory oversight of riverboat gaming was transferred to theLouisiana Gaming Control Board, which is comprised of nine voting membersappointed by the governor. The Louisiana Gaming Control Board now oversees alllicensing matters for riverboat casinos, land-based casinos, racinos, videopoker and certain aspects of Native American gaming other than thoseresponsibilities reserved to the Louisiana State Police.

 

TheLouisiana Gaming Control Board is empowered to issue up to 15 licenses toconduct gaming activities on a riverboat in accordance with applicable law.However, no more than six licenses may be granted to riverboats operating fromany one designated waterway.

 

TheLouisiana State Police continues to be involved broadly in gaming enforcementand reports to the Louisiana Gaming Control Board. Louisiana law permits theLouisiana State Police, among other things, to continue to (1) conductsuitability investigations, (2) audit, investigate and enforce compliancewith standing regulations, (3) initiate enforcement and administrativeactions and (4) perform “all other duties and functions necessary for theefficient, efficacious, and thorough regulation and control of gamingactivities and operations” under the Louisiana Gaming Control Board’sjurisdiction.

 

Louisianagaming law specifies certain restrictions relating to the operation ofriverboat gaming, including the following:

 
| · |   | agents  of the Louisiana State Police are permitted on board at any time during  gaming operations;                                                                                                                            |
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| · |   | gaming  devices, equipment and supplies may only be purchased or leased from  permitted suppliers and, with respect to gaming equipment, from permitted  manufacturers;                                                        |
|   |   |                                                                                                                                                                                                                           |
| · |   | gaming  may only take place in the designated gaming area while the riverboat is  docked on a designated river or waterway;                                                                                                    |
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| · |   | gaming  equipment may not be possessed, maintained or exhibited by any person on a  riverboat except in the specifically designated gaming area or in a secure  area used for inspection, repair or storage of such equipment; |
|   |   |                                                                                                                                                                                                                           |
| · |   | wagers  may be received only from a person present on a licensed riverboat;                                                                                                                                                    |
|   |   |                                                                                                                                                                                                                           |
| · |   | persons  under 21 are not permitted in designated gaming areas;                                                                                                                                                                |
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| · |   | except  for slot machine play, wagers may be made only with tokens, chips or  electronic cards purchased from the licensee aboard a riverboat;                                                                                 |
|   |   |                                                                                                                                                                                                                           |
| · |   | licensees  may only use docking facilities and routes for which they are licensed and  may only board and discharge passengers at the riverboat’s licensed berth;                                                         |

 

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| · |   | licensees  must have adequate protection and indemnity insurance;                                                                               |
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|   |   |                                                                                                                                            |
| · |   | licensees  must have all necessary federal and state licenses, certificates and other  regulatory approvals prior to operating a riverboat; and |
|   |   |                                                                                                                                            |
| · |   | gaming  may only be conducted in accordance with the terms of the license and  Louisiana law.                                                   |

 

Toreceive a gaming license in Louisiana, an applicant must be found to be aperson of good character, honesty and integrity and a person whose prioractivities, criminal record, if any, reputation, habits and associations do not(1) pose a threat to the public interest of the State of Louisiana or to theeffective regulation and control of gaming or (2) create or enhance thedangers of unsuitable, unfair or illegal practices, methods and activities inthe conduct of gaming or the carrying on of business and financial arrangementsof gaming activities. In addition, the Louisiana Gaming Control Board will notgrant a license unless it finds that, among other things:

 
| · |   | the  applicant can demonstrate the capability, either through training, education,  business experience or a combination of the preceding, to operate a gaming  operation;  |
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|   |   |                                                                                                                                                                        |
| · |   | the  proposed financing of the riverboat and the gaming operations is adequate for  the nature of the proposed operation and is from a suitable and acceptable  source;     |
|   |   |                                                                                                                                                                        |
| · |   | the  applicant demonstrates a proven ability to operate a vessel of comparable  size, capacity and complexity to a riverboat so as to ensure the safety of  its passengers; |
|   |   |                                                                                                                                                                        |
| · |   | the  applicant submits with its application for a license a detailed plan of  design of the riverboat;                                                                      |
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| · |   | the  applicant designates the docking facilities to be used by the riverboat;                                                                                               |
|   |   |                                                                                                                                                                        |
| · |   | the  applicant shows adequate financial ability to construct and maintain a  riverboat; and                                                                                 |
|   |   |                                                                                                                                                                        |
| · |   | the  applicant has a good faith plan to recruit, train and upgrade minorities in  all employment classifications.                                                           |

 

Aninitial license to conduct riverboat gaming operations is valid for a term offive years and legislation passed in the 1999 legislative session provides forrenewals every five years thereafter. Louisiana gaming law provides that arenewal application for the period succeeding the initial five-year term of anoperator’s license must be made to the Louisiana Gaming Control Board and mustinclude a statement under oath of any and all changes in information, includingfinancial information, provided in the previous application. The transfer of alicense or an interest in a license is prohibited. A gaming license is deemedto be a privilege under Louisiana law and, as such, may be denied, revoked,suspended, conditioned or limited at any time by the Louisiana Gaming ControlBoard. The Isle-Lake Charles received a five-year renewal of its license on July 20,1999.

 

OnApril 9, 2004, the Isle-Lake Charles filed applications for a secondfive-year renewal of its two licenses. These five-year renewal applicationswere approved for Grand Palais Riverboat, Inc. on August 17, 2004 andSt. Charles Gaming Company, Inc. was approved on March 29, 2005.

 

Certainpersons affiliated with a riverboat gaming licensee, including directors andofficers of the licensee, directors and officers of any holding company of thelicensee involved in gaming operations, persons holding 5% or greater interestsin the licensee and persons exercising influence over a licensee, are subjectto the application and suitability requirements of Louisiana gaming law.

 

Thesale, purchase, assignment, transfer, pledge or other hypothecation, lease,disposition or acquisition by any person of securities that represent 5% ormore of the total outstanding shares issued by a licensee is subject to theapproval of the Louisiana Gaming Control Board. A security issued by a licenseemust generally disclose these restrictions. Prior approval from the LouisianaGaming Control Board is required for the sale, purchase, assignment, transfer,pledge or other hypothecation, lease, disposition or acquisition of anyownership interest of 5% or more of any non-corporate licensee or for thetransfer of any “economic

 

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interest”of 5% or more of any licensee or affiliated gaming person. An “economicinterest” is defined as any interest whereby a person receives or is entitledto receive, by agreement or otherwise, a profit, gain, thing of value, loan,credit, security interest, ownership interest or other benefit.

 

Feespayable to the state for conducting gaming activities on a riverboat include (1) $50,000per riverboat for the first year of operation and $100,000 per year perriverboat thereafter, plus (2) 18.5% of net gaming proceeds. Legislationwas passed during the 2001 legislative session that allowed those riverboatsthat had been required to conduct cruises, including the riverboats at theIsle-Lake Charles, to remain permanently dockside beginning April 1, 2001.The legislation also increased the gaming tax for operators from 18.5% to21.5%. A statute also authorizes local governing authorities to levy boardingfees. We currently have development agreements in Lake Charles with certainlocal governing authorities in the jurisdictions in which we operate pursuantto which we make payments in lieu of boarding fees.

 

Alicensee must notify and/or seek approval from the Louisiana Gaming ControlBoard in connection with any withdrawals of capital, loans, advances ordistributions in excess of 5% of retained earnings for a corporate licensee, orof capital accounts for a partnership or limited liability company licensee,upon completion of any such transaction. The Louisiana Gaming Control Board mayissue an emergency order for not more than ten days prohibiting payment ofprofits, income or accruals by, or investments in, a licensee. Unless exceptedor waived by the Louisiana Gaming Control Board, riverboat gaming licensees andtheir affiliated gaming persons must notify the Louisiana Gaming Control Board60 days prior to the receipt by any such persons of any loans or extensions ofcredit or modifications thereof. The Louisiana Gaming Control Board is requiredto investigate the reported loan, extension of credit or modification thereofand to determine whether an exemption exists on the requirement of priorwritten approval and, if such exemption is not applicable, to either approve ordisapprove the transaction. If the Louisiana Gaming Control Board disapprovesof a transaction, the transaction cannot be entered into by the licensee oraffiliated gaming person. We are an affiliated gaming person of oursubsidiaries that hold the licenses to conduct riverboat gaming at theIsle-Lake Charles.

 

Thefailure of a licensee to comply with the requirements set forth above mayresult in the suspension or revocation of that licensee’s gaming license.Additionally, if the Louisiana Gaming Control Board finds that the individualowner or holder of a security of a corporate license or intermediary company orany person with an economic interest in a licensee is not qualified underLouisiana law, the Louisiana Gaming Control Board may require, under penalty ofsuspension or revocation of the license, that the person not:

 
| · |   | receive  dividends or interest on securities of the corporation;                     |
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|   |   |                                                                                 |
| · |   | exercise  directly or indirectly a right conferred by securities of the corporation; |
|   |   |                                                                                 |
| · |   | receive  remuneration or economic benefit from the licensee;                         |
|   |   |                                                                                 |
| · |   | exercise  significant influence over activities of the licensee; or                  |
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| · |   | continue  its ownership or economic interest in the licensee.                        |

 

Alicensee must periodically report the following information to the LouisianaGaming Control Board, which is not confidential and is available for publicinspection: (1) the licensee’s net gaming proceeds from all authorizedgames, (2) the amount of net gaming proceeds tax paid and (3) allquarterly and annual financial statements presenting historical data, includingannual financial statements that have been audited by an independent certifiedpublic auditor.

 

Duringthe 1996 special session of the Louisiana legislature, legislation was enactedplacing on the ballot for a statewide election a constitutional amendmentlimiting the expansion of gaming, which was subsequently passed by the voters.As a result, local option elections are required before new or additional formsof gaming can be brought into a parish.

 

Proposalsto amend or supplement Louisiana’s riverboat gaming statute are frequentlyintroduced in the Louisiana State Legislature. There is no assurance thatchanges in Louisiana gaming law will not occur or that such changes will nothave a material adverse effect on our business in Louisiana.

 

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InJuly 2006, the subsidiary that held the Company’s license to operate ariverboat in Bossier City transferred its license to an unrelated third party.

 

# ***Mississippi***

# *** ***

InJune 1990, Mississippi enacted legislation legalizing dockside casinogaming for counties along the Mississippi River, which is the western borderfor most of the state, and the Gulf Coast, which is the southern border formost of the state. The legislation gave each of those counties the opportunityto hold a referendum on whether to allow dockside casino gaming within itsboundaries.

 

Inits 2005 regular session, the legislature amended Mississippi law to allowgaming to be conducted on vessels or cruise vessels placed upon permanentstructures located on, in or above the Mississippi River, on, in or abovenavigable waters in eligible counties along the Mississippi River or on, in orabove the waters lying south of the counties along the Mississippi Gulf Coast.Later, after Hurricane Katrina, the Mississippi legislature again amended thelaw to allow land-based gaming along the Gulf Coast in very limitedcircumstances. Mississippi law permits unlimited stakes gaming, on a 24-hourbasis and does not restrict the percentage of space that may be utilized forgaming. There are no limitations on the number of gaming licenses that may beissued in Mississippi.

 

Theownership and operation of gaming facilities in Mississippi are subject toextensive state and local regulation intended to:

 
| · |   | prevent unsavory or unsuitable  persons from having any direct or indirect involvement with gaming at any  time or in any capacity;                                                                                                                    |
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| · |   | establish and maintain  responsible accounting practices and procedures for gaming operations;                                                                                                                                                         |
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| · |   | maintain effective control over  the financial practices of licensees, including establishing minimum  procedures for internal fiscal affairs and safeguarding of assets and  revenues, providing reliable record keeping and making periodic reports; |
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| · |   | provide a source of state and  local revenues through taxation and licensing fees;                                                                                                                                                                     |
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| · |   | prevent cheating and fraudulent  practices; and                                                                                                                                                                                                        |
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| · |   | ensure that gaming licensees, to  the extent practicable, employ Mississippi residents.                                                                                                                                                                |

 

Stategaming regulations are subject to amendment and interpretation by theMississippi Gaming Commission. Changes in Mississippi laws or regulations maylimit or otherwise materially affect the types of gaming that may be conductedin Mississippi and such changes, if enacted, could have an adverse effect on usand our Mississippi gaming operations.

 

Weare registered as a publicly traded corporation under the Mississippi GamingControl Act. Our gaming operations in Mississippi are subject to regulatorycontrol by the Mississippi Gaming Commission, the State Tax Commission andvarious other local, city and county regulatory agencies (collectively referredto as the “Mississippi Gaming Authorities”). Our subsidiaries have obtainedgaming licenses from the Mississippi Gaming Authorities. We must obtain awaiver from the Mississippi Gaming Commission before beginning certain proposedgaming operations outside of Mississippi, and we must notify the MississippiGaming Commission in writing within 30 days after commencing certain gaming operations outside the state.  The licenses held by our Mississippi gamingoperations have terms of three years and are not transferable. The Isle-Biloxi,the Isle-Natchez and the Isle-Lula hold licenses effective from May 23,2006, through May 22, 2009. In addition, our wholly-owned subsidiary, IOCManufacturing, Inc. holds a manufacturer and distributor’s license, sothat we may perform certain upgrades to our Mississippi player tracking system.This license has a term of three years, is effective from June 16, 2008 through June 15, 2011, and is not transferable.There is no assurance that new licenses can be obtained at the end of each

 

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three-yearperiod of a license. Moreover, the Mississippi Gaming Commission may, at anytime, and for any cause it deems reasonable, revoke, suspend, condition, limitor restrict a license or approval to own shares of stock in our subsidiariesthat operate in Mississippi.

 

Substantialfines for each violation of Mississippi’s gaming laws or regulations may belevied against us, our subsidiaries and the persons involved. Disciplinaryaction against us or one of our subsidiary gaming licensees in any jurisdictionmay lead to disciplinary action against us or any of our subsidiary licensees inMississippi, including, but not limited to, the revocation or suspension of anysuch subsidiary gaming license.

 

We,along with each of our Mississippi gaming subsidiaries, must periodicallysubmit detailed financial, operating and other reports to the MississippiGaming Commission and/or the State Tax Commission. Numerous transactions,including but not limited to substantially all loans, leases, sales ofsecurities and similar financing transactions entered into by any of ourMississippi gaming subsidiaries must be reported to or approved by theMississippi Gaming Commission. In addition, the Mississippi Gaming Commissionmay, at its discretion, require additional information about our operations.

 

Certainof our officers and employees and the officers, directors and certain keyemployees of our Mississippi gaming subsidiaries must be found suitable or belicensed by the Mississippi Gaming Commission. We believe that all requiredfindings of suitability and key employee licenses related to all of our Mississippiproperties have been applied for or obtained, although the Mississippi GamingCommission at its discretion may require additional persons to fileapplications for findings of suitability or key employee licenses. In addition,any person having a material relationship or involvement with us may berequired to be found suitable or licensed, in which case those persons must paythe costs and fees associated with such investigation. The Mississippi GamingCommission may deny an application for a finding of suitability for any causethat it deems reasonable. Changes in certain licensed positions must bereported to the Mississippi Gaming Commission. In addition to its authority todeny an application for a finding of suitability, the Mississippi Gaming Commissionhas jurisdiction to disapprove a change in a licensed position. The MississippiGaming Commission has the power to require us and any of our Mississippi gamingsubsidiaries to suspend or dismiss officers, directors and other key employeesor to sever relationships with other persons who refuse to file appropriateapplications or who the authorities find unsuitable to act in such capacities.

 

Employeesassociated with gaming must obtain work permits that are subject to immediatesuspension under certain circumstances. The Mississippi Gaming Commission willrefuse to issue a work permit to a person who has been convicted of a felony,committed certain misdemeanors or knowingly violated the Mississippi GamingControl Act, and it may refuse to issue a work permit to a gaming employee forany other reasonable cause.

 

Atany time, the Mississippi Gaming Commission has the power to investigate andrequire the finding of suitability of any record or beneficial stockholder ofours. The Mississippi Gaming Control Act requires any person who individuallyor in association with others acquires, directly or indirectly, beneficialownership of more than 5% of our common stock to report the acquisition to theMississippi Gaming Commission, and such person may be required to be foundsuitable. In addition, the Mississippi Gaming Control Act requires any personwho, individually or in association with others, becomes, directly orindirectly, a beneficial owner of more than 10% of our common stock, asreported to the U.S. Securities and Exchange Commission, to apply for a findingof suitability by the Mississippi Gaming Commission and pay the costs and feesthat the Mississippi Gaming Commission incurs in conducting the investigation.

 

TheMississippi Gaming Commission has generally exercised its discretion to requirea finding of suitability of any beneficial owner of more than 5% of aregistered publicly traded corporation’s stock. However, the Mississippi GamingCommission has adopted a regulation that may permit certain “institutional”investors to obtain waivers that allow them to beneficially own, directly orindirectly, up to 15% (19% in certain specific instances) of the votingsecurities of a registered publicly traded corporation without a finding ofsuitability. If a stockholder who must be found suitable is a corporation,partnership or trust, it must submit detailed business and financialinformation, including a list of beneficial owners.

 

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Anyperson who fails or refuses to apply for a finding of suitability or a licensewithin 30 days after being ordered to do so by the Mississippi GamingCommission may be found unsuitable. We believe that compliance by us with thelicensing procedures and regulatory requirements of the Mississippi GamingCommission will not affect the marketability of our securities. Any personfound unsuitable who holds, directly or indirectly, any beneficial ownership ofour securities beyond such time as the Mississippi Gaming Commission prescribesmay be guilty of a misdemeanor. We are subject to disciplinary action if, afterreceiving notice that a person is unsuitable to be a stockholder or to have anyother relationship with us or our subsidiaries operating casinos inMississippi, we:

 
| · |   | pay the unsuitable person any  dividend or other distribution upon its voting securities;                                                                                                                    |
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| · |   | recognize the exercise, directly  or indirectly, of any voting rights conferred by its securities;                                                                                                           |
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| · |   | pay the unsuitable person any  remuneration in any form for services rendered or otherwise, except in  certain limited and specific circumstances; or                                                        |
|   |   |                                                                                                                                                                                                         |
| · |   | fail to pursue all lawful efforts  to require the unsuitable person to divest itself of the securities,  including, if necessary, our immediate purchase of the securities for cash at  a fair market value. |

 

Wemay be required to disclose to the Mississippi Gaming Commission upon requestthe identities of the holders of any of our debt securities. In addition, underthe Mississippi Gaming Control Act, the Mississippi Gaming Commission may, inits discretion, (1) require holders of our securities, including ournotes, to file applications, (2) investigate such holders and (3) requiresuch holders to be found suitable to own such securities. Although the MississippiGaming Commission generally does not require the individual holders ofobligations such as the notes to be investigated and found suitable, theMississippi Gaming Commission retains the discretion to do so for any reason,including but not limited to a default, or where the holder of the debtinstrument exercises a material influence over the gaming operations of theentity in question. Any holder of debt securities required to apply for afinding of suitability must pay all investigative fees and costs of theMississippi Gaming Commission in connection with such an investigation.

 

TheMississippi regulations provide that a change in control of us may not occurwithout the prior approval of the Mississippi Gaming Commission. Mississippilaw prohibits us from making a public offering of our securities without theapproval of the Mississippi Gaming Commission if any part of the proceeds ofthe offering is to be used to finance the construction, acquisition oroperation of gaming facilities in Mississippi, or to retire or extendobligations incurred for one or more such purposes. The Mississippi GamingCommission has the authority to grant a continuous approval of securitiesofferings and has granted such approval to us, subject to renewal every threeyears.

 

Regulationsof the Mississippi Gaming Commission prohibit certain repurchases of securitiesof publicly traded corporations registered with the Mississippi GamingCommission, including holding companies such as ours, without prior approval ofthe Mississippi Gaming Commission. Transactions covered by these regulationsare generally aimed at discouraging repurchases of securities at a premium overmarket price from certain holders of greater than 3% of the outstandingsecurities of the registered publicly traded corporation. The regulations ofthe Mississippi Gaming Commission also require prior approval for a “plan ofrecapitalization” as defined in such regulations.

 

Wemust maintain in the State of Mississippi current stock ledgers, which may beexamined by the Mississippi Gaming Authorities at any time. If any securitiesare held in trust by an agent or by a nominee, the record holder may berequired to disclose the identity of the beneficial owner to the MississippiGaming Authorities. A failure to make such disclosure may be grounds forfinding the record holder unsuitable. We must render maximum assistance indetermining the identity of the beneficial owner.

 

Mississippilaw requires that certificates representing shares of our common stock bear alegend to the general effect that the securities are subject to the MississippiGaming Control Act and regulations of the Mississippi Gaming Commission. TheMississippi Gaming Commission has the authority to grant a waiver

 

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fromthe legend requirement, which we have obtained. The Mississippi GamingCommission, through the power to regulate licenses, has the power to imposeadditional restrictions on the holders of our securities at any time.

 

TheMississippi Gaming Commission enacted a regulation in 1994 requiring that, as acondition to licensure, an applicant must provide a plan to developinfrastructure facilities amounting to 25% of the cost of the casino and aparking facility capable of accommodating 500 cars. In 1999, the MississippiGaming Commission approved amendments to this regulation that increased theinfrastructure development requirement from 25% to 100% for new casinos (orupon acquisition of a closed casino), but grandfathered existing licensees anddevelopment plans approved prior to the effective date of the new regulation. “Infrastructurefacilities” include any of the following:

 
| · |   | a 250-room or larger hotel of at  least a two-star rating as defined by the current edition of the Mobil Travel  Guide; |
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|   |   |                                                                                                                    |
| · |   | theme parks;                                                                                                            |
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| · |   | golf courses;                                                                                                           |
|   |   |                                                                                                                    |
| · |   | marinas;                                                                                                                |
|   |   |                                                                                                                    |
| · |   | entertainment facilities;                                                                                               |
|   |   |                                                                                                                    |
| · |   | tennis complexes; or                                                                                                    |
|   |   |                                                                                                                    |
| · |   | any other facilities approved by  the Mississippi Gaming Commission.                                                    |

 

Parkingfacilities, roads, sewage and water systems or civic facilities are notconsidered “infrastructure facilities.” The Mississippi Gaming Commission mayreduce the number of rooms required in a hotel if it is satisfied thatsufficient rooms are available to accommodate the anticipated number of visitors.In 2003 and in 2006, the Mississippi Gaming Commission again amended itsregulation regarding development plan approval but left the 100% infrastructurerequirement intact. In 2007, the Mississippi Gaming Commission further amendedthis regulation. Among other things, the 2007 amendment retained the 100%infrastructure requirement and added a requirement that the qualifiedinfrastructure be owned or leased by certain specified persons.

 

Licensefees and taxes are payable to the State of Mississippi and to the counties andcities in which a Mississippi gaming subsidiary’s respective operations will beconducted. The license fee payable to the state of Mississippi is based upongross revenue of the licensee (generally defined as gaming receipts less payoutto customers as winnings) and equals 4% of gross revenue of $50,000 or less permonth, 6% of gross revenue in excess of $50,000 but less than $134,000 percalendar month, and 8% of gross revenue in excess of $134,000 per calendarmonth. The foregoing license fees are allowed as a credit against the licensee’sMississippi income tax liability for the year paid. Additionally, a licenseemust pay a $5,000 annual license fee and an annual fee based upon the number ofgames it operates. The gross revenue tax imposed by the Mississippi communitiesand counties in which our casino operations are located equals 0.4% of grossrevenue of $50,000 or less per calendar month, 0.6% of gross revenue over$50,000 and less than $134,000 per calendar month and 0.8% of gross revenuegreater than $134,000 per calendar month. These fees have been imposed in,among other cities and counties, Biloxi and Coahoma County. Certain local andprivate laws of the state of Mississippi may impose fees or taxes on theMississippi gaming subsidiaries in addition to the fees described above.

 

TheMississippi Gaming Commission requires, as a condition of licensure or licenserenewal, that casino vessels on the Mississippi Gulf Coast that are notself-propelled must be moored to withstand a Category 4 hurricane with 155mile-per-hour winds and 15-foot tidal surge. However, after Hurricane Katrina,Isle - Biloxi reopened its casino on shore rather than on a vessel. A 1996Mississippi Gaming Commission regulation prescribes the hurricane emergencyprocedure to be used by the Mississippi Gulf Coast casinos.

 

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Thesale of food or alcoholic beverages at our Mississippi gaming locations issubject to licensing, control and regulation by the applicable state and localauthorities. The agencies involved have full power to limit, condition, suspendor revoke any such license, and any such disciplinary action could (andrevocation would) have a material adverse effect upon the operations of theaffected casino or casinos. Certain of our officers and managers and our  Mississippi gaming subsidiaries must beinvestigated by the Alcoholic Beverage Control Division of the State TaxCommission in connection with liquor permits that have been issued. TheAlcoholic Beverage Control Division of the State Tax Commission must approveall changes in licensed positions.

 

Onthree separate occasions since 1998, certain anti-gaming groups have proposedreferenda that, if adopted, would have banned gaming in Mississippi andrequired that gaming entities cease operations within two years after the ban.All three referenda were declared invalid by Mississippi courts because eachlacked a required government revenue impact statement.

 

***Missouri***

 

Conductinggambling activities and operating an excursion gambling boat in Missouri aresubject to extensive regulation under Missouri’s Riverboat Gambling Act and therules and regulations promulgated thereunder. The Missouri GamingCommission was created by the Missouri Riverboat Gambling Act and is chargedwith regulatory authority over riverboat gaming operations in Missouri,including the issuance of riverboat gaming licenses to owners, operators,suppliers and certain affiliates of riverboat gaming facilities. In June 2000,IOC-Kansas City, Inc., a subsidiary of ours, was issued a riverboat gaminglicense in connection with our Kansas City operation. In December 2001,IOC-Boonville, Inc., a subsidiary of ours, was issued a riverboat gaminglicense for our Boonville operation. Additionally, in June of 2007,IOC-Caruthersville, LLC f/k/a Aztar Missouri Riverboat Gaming Company, LLC wasacquired by us and operates as a subsidiary of ours under a Missouri riverboatgaming license.

 

Inorder to obtain a license to operate a riverboat gaming facility, the proposedoperating business entity must complete a Riverboat Gaming Application Form requestinga Class B License.  In order toobtain a license to own and/or control a riverboat gaming facility as itsultimate holding company, the proposed parent company must complete a RiverboatGaming Application Form requesting a Class A License.  The Riverboat Gaming Application Form iscomprised of comprehensive application forms, including corroboratingattachments.  Applicants who submit theRiverboat Gaming Application Form requesting either a Class A or Class Blicense undergo an extensive background investigation by the Missouri GamingCommission. In addition, each key person associated with the applicant(including directors, officers, managers and owners of a significant direct orindirect interest in the Class A or Class B applicant) must completea Key Person and Level I Application Form and undergo a substantialbackground investigation. Certain key business entities closely related to theapplicant or “key person business entities” must undergo a similar applicationprocess and background check. An applicant for a Class A or Class Blicense will not receive a license if the applicant and its key persons,including key person business entities, have not established good repute andmoral character and no licensee shall either employ or contract with any personwho has pled guilty to, or been convicted of, a felony, to perform any dutiesdirectly connected with the licensee’s privileges under a license granted bythe Missouri Gaming Commission.

 

EachClass B license granted entitles a licensee to conduct gambling activitieson an excursion gambling boat or to operate an excursion gambling boat and theequipment thereon from a specific location. Each Class A license grantedentitles the licensee to develop and operate a Class B licensee or, ifauthorized, multiple Class B licensees. The duration of both the Class A and Class B license initiallyruns for two one-year terms; thereafter, two-year terms. In conjunction withthe renewal of each license, the Missouri Gaming Commission requires an updatedRiverboat Gaming Application Form and renewal fees.  In conjunction with each renewal, theCommission may conduct an additional investigation of the licensee withspecific emphasis on new information provided in the updated Riverboat GamingApplication Form. Each sixth year from the date of the original license acomprehensive investigation for the period since the last comprehensiveinvestigation is conducted on the Class A, Class B, supplier and keyperson licensees in

 

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thesame manner as the initial investigation. The Commission also licenses theserving of alcoholic beverages on riverboats and related facilities.

 

Indetermining whether to grant a license, the Commission considers the followingfactors, among others: (i) the integrity of the applicants; (ii) thetypes and variety of games the applicant may offer; (iii) the quality ofthe physical facility, together with improvements and equipment, and how soonthe project will be completed; (iv) the financial ability of the applicantto develop and operate the facility successfully; (v) the status ofgovernmental actions required by the facility; (vi) management ability ofthe applicant; (vii) compliance with applicable statutes, rules, chartersand ordinances; (viii) the economic, ecological and social impact of thefacility as well as the cost of public improvements; (ix) the extent ofpublic support or opposition; (x) the plan adopted by the home dock cityor county; and (xi) effects on competition.

 

Alicensee is subject to the imposition of penalties, suspension or revocation ofits license for any act that is injurious to the public health, safety, morals,good order, and general welfare of the people of the State of Missouri, or thatwould discredit or tend to discredit the Missouri gaming industry or the Stateof Missouri, including without limitation: (i) failing to comply with ormake provision for compliance with the legislation, the rules promulgatedthereunder or any federal, state or local law or regulation; (ii) failingto comply with any rules, order or ruling of the Missouri Gaming Commission orits agents pertaining to gaming; (iii) receiving goods or services from aperson or business entity who does not hold a supplier’s license but who isrequired to hold such license by the legislation or the rules; (iv) beingsuspended or ruled ineligible or having a license revoked or suspended in anystate or gaming jurisdiction; (v) associating with, either socially or inbusiness affairs, or employing persons of notorious or unsavory reputation orwho have extensive police records, or who have failed to cooperate with anyofficially constituted investigatory or administrative body and would adverselyaffect public confidence and trust in gaming; (vi) employing in anyMissouri gaming operation any person known to have been found guilty ofcheating or using any improper device in connection with any gambling game; (vii) useof fraud, deception, misrepresentation or bribery in securing any license orpermit issued pursuant to the legislation; (viii) obtaining any fee,charge, or other compensation by fraud, deception or misrepresentation; and (ix) incompetence,misconduct, gross negligence, fraud, misrepresentation or dishonesty in theperformance of the functions or duties regulated by the Missouri RiverboatGambling Act.

 

Anytransfer or issuance of ownership interest in a publicly held gaming licenseeor its holding company that results in an entity owning, directly orindirectly, an aggregate ownership interest of 5% or more in the gaminglicensee must be reported to the Missouri Gaming Commission within seven days.Further, any pledge or hypothecation of 5% or more of the ownership interest ina publicly held gaming licensee or its holding company must be reported to theMissouri Gaming Commission within seven days.

 

Everyemployee participating in a riverboat gaming operation must hold anoccupational license. In addition, the Missouri Gaming Commission issuessupplier’s licenses, which authorize the supplier licensee to sell or leasegaming equipment and supplies to any licensee involved in the operation ofgaming activities.   Class A and Class Blicensees may not be licensed as suppliers.

 

Riverboatgaming activities may only be conducted on, or within 1,000 feet of the mainchannel of, the Missouri River or Mississippi River. Although, all of theexcursion gambling facilities in Missouri are permanently moored boats orimpounded barges, a two hour simulated cruise is imposed in order to ensure theenforcement of loss limit restrictions. Missouri law imposes a maximum loss perperson per cruise of $500. Minimum and maximum wagers on games are set by the licenseeand wagering may be conducted only with a cashless wagering system, wherebymoney is converted to tokens, electronic cards or chips that can only be usedfor wagering. No person under the age of 21 is permitted to wager, and wagersmay only be taken from a person present on a licensed excursion gambling boat.

 

The Missouri Riverboat Gambling Act imposes a 20% wagering tax onadjusted gross receipts (generally defined as gross receipts less winnings paidto wagerers) from gambling games. The tax imposed is to be paid by thelicensee to the Commission on the day after the day when the wagers were made.Of the proceeds of that tax, 10% goes to the local government where the homedock is located, and the remainder goes to the State of Missouri.

 

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TheMissouri Riverboat Gambling Act also requires that licensees pay a $2.00admission tax to the Missouri Gaming Commission for each person admitted to agaming cruise. One dollar of the admission fee goes to the state and one dollargoes to the home dock city in which the licensee operates. The licensee isrequired to maintain public books and records clearly showing amounts receivedfrom admission fees, the total amount of gross receipts and the total amount ofadjusted gross receipts. In addition, all local income, earnings, use, propertyand sales taxes are applicable to licensees. There have been from time to timepending before the Missouri General Assembly several proposed bills whichindividually or in combination would, if adopted, (1) remove the losslimit restriction, (2) adjust the amount of wagering tax imposed onadjusted gross receipts of licensees and/or (3) adjust the amount ofadmission tax paid by the licensee for each person admitted for a gamingcruise.

 

***Iowa***

 

In1989, the State of Iowa legalized riverboat gaming on the Mississippi River andother waterways located in Iowa. The legislation authorized the granting oflicenses to non-profit corporations that, in turn, are permitted to enter intooperating agreements with qualified persons who also actually conduct riverboatgaming operations. Such operators must likewise be approved and licensed by theIowa Racing and Gaming Commission (the “Iowa Gaming Commission”).

 

TheIsle-Bettendorf has the right to renew its operator’s contract with the ScottCounty Regional Authority, a non-profit corporation organized for the purposeof facilitating riverboat gaming in Bettendorf, Iowa, for succeeding three-yearperiods as long as Scott County voters approve gaming in the jurisdiction.Under the operator’s contract, the Isle-Bettendorf pays the Scott CountyRegional Authority a fee equal to 4.1% of the adjusted gross receipts. Further,the Isle-Bettendorf pays a fee to the City of Bettendorf equal to 1.65% of adjustedgross receipts.

 

InJune 1994, Upper Mississippi Gaming Corporation, a non-profit corporationorganized for the purpose of facilitating riverboat gaming in Marquette, Iowa,entered into an operator’s agreement for the Isle-Marquette for a period oftwenty-five years. Under the management agreement, the non-profit organizationis to be paid a fee of $0.50 per passenger. Further, pursuant to a dock siteagreement (which also has a term of twenty-five years), the Isle-Marquette isrequired to pay a fee to the City of Marquette in the amount of $1.00 perpassenger, plus a fixed amount of $15,000 per month and 2.5% of gaming revenues(less state wagering taxes) in excess of $20.0 million but less than $40.0million; 5% of gaming revenues (less state wagering taxes) in excess of $40.0million but less than $60.0 million; and 7.5% of gaming revenues (less statewagering taxes) in excess of $60.0 million.

 

InOctober 2000, the Riverboat Development Authority, a non-profitcorporation entered into an operator’s agreement with the Isle-Davenport toconduct riverboat gaming in Davenport, Iowa. The operating agreement requiresthe Isle-Davenport to make weekly payments to the qualified sponsoringorganization equal to 4.1% of each week’s adjusted gross receipts (as definedin the enabling legislation) provided that the Isle-Davenport has agreed thatthe qualifying sponsoring organization will be paid at least the minimum amountof $2,000,000. This agreement will remain in effect through March 31,2009, provided that as long as Isle-Davenport has substantially complied withthe Agreement, gaming laws and regulations and its agreements with the City ofDavenport, the parties will enter into good faith negotiations for a newoperator’s contract with reasonable equivalent economic terms to take effect April 1,2009. In addition, the Isle-Davenport pays a docking fee, admission fee, gamingtax and a payment in lieu of taxes to the City of Davenport. Pursuant to adevelopment agreement with the City, the Isle-Davenport has exclusive dockingprivileges in the City of Davenport until March 31, 2017 in considerationfor this docking fee. The docking fee has both a fixed base and a per passengerincrement. The fixed fee commenced April 1, 1994 at $111,759 and increasesannually by 4%. The incremental component is a $0.10 charge for each passengerin excess of 1,117,579 passengers (which charge also increases by 4% peryear). The City is also guaranteed an annual gaming tax of $558,789.50 per year(based on a minimum passenger floor count of 1,117,579 passengers at $0.50 perpassenger). Finally, the Isle-Davenport is obligated to pay a payment in lieuof taxes to support the downtown development district. This annual lump sumpayment is in the

 

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amountof $123,516 plus $0.20 per passenger in excess of 1,117,579 passengers. Thispayment in lieu of taxes is further subject to a minimum $226,179 per yearpayment.

 

InNovember 2004, the Black Hawk County Gaming Association, a non-profitcorporation organized for the purpose of facilitating riverboat gaming inWaterloo, Iowa entered into an operator’s agreement with the Isle-Waterloo toconduct riverboat gaming in Waterloo, Iowa. The operating agreement requiresthat upon commencement of operations the Isle-Waterloo is to make weeklypayments to the qualified sponsoring organization equal to 4.1% of each week’sadjusted gross receipts and an additional fee of 1.65% of each week’s adjustedgross receipts in lieu of any admission or docking fee which might otherwise becharged by the county or any city (as defined in Section 99F.1(1) ofthe Iowa Code). This agreement will remain in effect through March 31,2015 and may be extended by the Isle-Waterloo so long as it holds a license toconduct gaming. In addition, the Isle-Waterloo has agreed to pay a developmentfee to the City. Pursuant to an admission fee administration and developmentagreement with the City and Black Hawk County Gaming Association theIsle-Waterloo shall pay a development fee equal to 1% of each week’s adjustedgross receipts.

 

Iowalaw permits gaming licensees to offer unlimited stakes gaming on games approvedby the Iowa Gaming Commission on a 24-hour basis. Land-based casino gaming wasauthorized on July 1, 2007 and the Iowa Gaming Commission now permitslicensees the option to operate on permanently moored vessels or approvedgambling structures. The legal age for gaming is 21.

 

AllIowa licenses were approved for renewal at the March 6, 2008 Iowa GamingCommission meeting. These licenses are not transferable and will need to berenewed in March 2009 and prior to the commencement of each subsequentannual renewal period.

 

Theownership and operation of gaming facilities in Iowa are subject to extensivestate laws, regulations of the Iowa Gaming Commission and various county andmunicipal ordinances (collectively, the “Iowa Gaming Laws”), concerning theresponsibility, financial stability and character of gaming operators andpersons financially interested or involved in gaming operations. Iowa GamingLaws seek to: (1) prevent unsavory or unsuitable persons from havingdirect or indirect involvement with gaming at any time or in any capacity; (2) establishand maintain responsible accounting practices and procedures; (3) maintaineffective control over the financial practices of licensees (including theestablishment of minimum procedures for internal fiscal affairs, thesafeguarding of assets and revenues, the provision of reliable record keepingand the filing of periodic reports with the Iowa Gaming Commission); (4) preventcheating and fraudulent practices; and (5) provide a source of state andlocal revenues through taxation and licensing fees. Changes in Iowa Gaming Lawscould have a material adverse effect on the Iowa gaming operations.

 

Gaminglicenses granted to individuals must be renewed every year, and licensingauthorities have broad discretion with regard to such renewals. Licenses arenot transferable. The Iowa gaming operations must submit detailed financial andoperating reports to the Iowa Gaming Commission. Certain contracts of licenseesin excess of $100,000 must be submitted to and approved by the Iowa GamingCommission.

 

Certainofficers, directors, managers and key employees of the Iowa gaming operations arerequired to be licensed by the Iowa Gaming Commission. Employees associatedwith gaming must obtain work permits that are subject to immediate suspensionunder specific circumstances. In addition, anyone having a materialrelationship or involvement with the Iowa gaming operations may be required tobe found suitable or to be licensed, in which case those persons would berequired to pay the costs and fees of the Iowa Gaming Commission in connectionwith the investigation. The Iowa Gaming Commission may deny an application fora license for any cause deemed reasonable. In addition to its authority to denyan application for license, the Iowa Gaming Commission has jurisdiction todisapprove a change in position by officers or key employees and the power torequire the Iowa gaming operations to suspend or dismiss officers, directors orother key employees or sever relationships with other persons who refuse tofile appropriate applications or whom the Iowa Gaming Commission findsunsuitable to act in such capacities.

 

TheIowa Gaming Commission may revoke a gaming license if the licensee:

 
| · |   | has  been suspended from operating a gaming operation in another jurisdiction by a  board or |
|--------|--------|----------------------------------------------------------------------------------------------|

 

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|   |   | commission  of that jurisdiction;                                                                                                                                                                                                                                                                                                       |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                    |
| · |   | has  failed to demonstrate financial responsibility sufficient to meet adequately  the requirements of the gaming enterprise;                                                                                                                                                                                                           |
|   |   |                                                                                                                                                                                                                                                                                                                                    |
| · |   | is  not the true owner of the enterprise;                                                                                                                                                                                                                                                                                               |
|   |   |                                                                                                                                                                                                                                                                                                                                    |
| · |   | has  failed to disclose ownership of other persons in the enterprise;                                                                                                                                                                                                                                                                   |
|   |   |                                                                                                                                                                                                                                                                                                                                    |
| · |   | is  a corporation 10% of the stock of which is subject to a contract or option to  purchase at any time during the period for which the license was issued,  unless the contract or option was disclosed to the Iowa Gaming Commission and  the Iowa Gaming Commission approved the sale or transfer during the period of  the license; |
|   |   |                                                                                                                                                                                                                                                                                                                                    |
| · |   | knowingly  makes a false statement of a material fact to the Iowa Gaming Commission;                                                                                                                                                                                                                                                    |
|   |   |                                                                                                                                                                                                                                                                                                                                    |
| · |   | fails  to meet a monetary obligation in connection with an excursion gaming boat;                                                                                                                                                                                                                                                       |
|   |   |                                                                                                                                                                                                                                                                                                                                    |
| · |   | pleads  guilty to, or is convicted of a felony;                                                                                                                                                                                                                                                                                         |
|   |   |                                                                                                                                                                                                                                                                                                                                    |
| · |   | loans  to any person, money or other thing of value for the purpose of permitting  that person to wager on any game of chance;                                                                                                                                                                                                          |
|   |   |                                                                                                                                                                                                                                                                                                                                    |
| · |   | is  delinquent in the payment of property taxes or other taxes or fees or a  payment of any other contractual obligation or debt due or owed to a city or  county; or                                                                                                                                                                   |
|   |   |                                                                                                                                                                                                                                                                                                                                    |
| · |   | assigns,  grants or turns over to another person the operation of a licensed excursion  boat (this provision does not prohibit assignment of a management contract  approved by the Iowa Gaming Commission) or permits another person to have a  share of the money received for admission to the excursion boat.                       |

 

Ifit were determined that the Iowa Gaming Laws were violated by a licensee, the gaminglicenses held by a licensee could be limited, made conditional, suspended orrevoked. In addition, the licensee and the persons involved could be subject tosubstantial fines for each separate violation of the Iowa Gaming Laws in thediscretion of the Iowa Gaming Commission. Limitations, conditioning orsuspension of any gaming license could (and revocation of any gaming licensewould) have a material adverse effect on operations.

 

TheIowa Gaming Commission may also require any individual who has a materialrelationship with the Iowa gaming operations to be investigated and licensed orfound suitable. The Iowa Gaming Commission, prior to the acquisition, mustapprove any person who acquires 5% or more of a licensee’s equity securities.The applicant stockholder is required to pay all costs of this investigation.

 

Gamingtaxes approximating 22% of the adjusted gross receipts will be payable by eachlicensee on its operations to the State of Iowa. In addition, reimbursableassessments have been in an amount equal to 2.152% of each licensee’s adjustedgross receipts for fiscal year 2004. These assessments will be offset by futurestate gaming taxes paid by each licensee with a credit for 20% of theassessments paid allowed each year beginning July 1, 2010 for fiveconsecutive years. The state of Iowa is also reimbursed by the licensees forall costs associated with monitoring and enforcement by the Iowa GamingCommission and the Iowa Department of Criminal Investigation.

 

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***Colorado***

 

TheState of Colorado created the Division of Gaming (“Colorado Division”) withinthe Department of Revenue to license, implement, regulate and supervise theconduct of limited gaming under the Colorado Limited Gaming Act. The Directorof the Colorado Division (“Colorado Director”), pursuant to regulationspromulgated by, and subject to the review of, a five-member Colorado LimitedGaming Control Commission (“Colorado Commission”), has been granted broad powerto ensure compliance with the Colorado gaming laws and regulations(collectively, the “Colorado Regulations”). The Colorado Director may inspectwithout notice, impound or remove any gaming device. The Colorado Director mayexamine and copy any licensee’s records, may investigate the background andconduct of licensees and their employees, and may bring disciplinary actionsagainst licensees and their employees. The Colorado Director may also conductdetailed background investigations of persons who loan money to, or otherwiseprovide financing to, a licensee.

 

TheColorado Commission is empowered to issue five types of gaming andgaming-related licenses, and has delegated authority to the Colorado Directorto issue certain types of licenses and approve certain changes in ownership.The licenses are revocable and non-transferable. The failure or inability ofthe Isle of Capri Black Hawk, LLC (“Isle-Black Hawk”) or CCSC/Blackhawk, Inc.(“Colorado Central Station-Black Hawk”) (each, a “Colorado Casino” orcollectively, the “Colorado Casinos”), or the failure or inability of othersassociated with any of the Colorado Casinos, including us, to maintainnecessary gaming licenses or approvals would have a material adverse effect onour operations. All persons employed by any of the Colorado Casinos, andinvolved, directly or indirectly, in gaming operations in Colorado also arerequired to obtain a Colorado gaming license. All licenses must be renewedevery two years (prior to August 6, 2008, certain licenses had to berenewed annually.)

 

Asa general rule, under the Colorado Regulations, no person may have an “ownershipinterest” in more than three retail gaming licenses in Colorado. The ColoradoCommission has ruled that a person does not have an ownership interest in aretail gaming licensee for purposes of the multiple license prohibition if:

 
| · |   | that  person has less than a 5% ownership interest in an institutional investor  that has an ownership interest in a publicly traded licensee or publicly  traded company affiliated with a licensee;                                                                                                                                                                                     |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                                                                      |
| · |   | a  person has a 5% or more ownership interest in an institutional investor, but  the institutional investor has less than a 5% ownership interest in a  publicly traded licensee or publicly traded company affiliated with a  licensee;                                                                                                                                                  |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                      |
| · |   | an  institutional investor has less than a 5% ownership interest in a publicly  traded licensee or publicly traded company affiliated with a licensee;                                                                                                                                                                                                                                    |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                      |
| · |   | an  institutional investor possesses voting securities in a fiduciary capacity  for another person, and does not exercise voting control over 5% or more of  the outstanding voting securities of a publicly traded licensee or of a  publicly traded company affiliated with a licensee;                                                                                                 |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                      |
| · |   | a  registered broker or dealer retains possession of voting securities of a publicly  traded licensee or of a publicly traded company affiliated with a licensee  for its customers and not for its own account, and exercises voting rights  for less than 5% of the outstanding voting securities of a publicly traded  licensee or publicly traded company affiliated with a licensee; |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                      |
| · |   | a  registered broker or dealer acts as a market maker for the stock of a  publicly traded licensee or of a publicly traded company affiliated with a  licensee and exercises voting rights in less than 5% of the outstanding  voting securities of the publicly traded licensee or publicly traded company  affiliated with a licensee;                                                  |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                      |
| · |   | an  underwriter is holding securities of a publicly traded licensee or publicly  traded company affiliated with a licensee as part of an underwriting for no  more than 90 days after the beginning of such underwriting if it exercises  voting rights of less than 5% of the outstanding voting securities                                                                              |

 

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|   |   | of  a publicly traded licensee or publicly traded company affiliated with a licensee;                                                                                                                                                                                 |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                  |
| · |   | a  book entry transfer facility holds voting securities for third parties, if it  exercises voting rights with respect to less than 5% of the outstanding  voting securities of a publicly traded licensee or publicly traded company  affiliated with a licensee; or |
|   |   |                                                                                                                                                                                                                                                                  |
| · |   | a  person’s sole ownership interest is less than 5% of the outstanding voting  securities of the publicly traded licensee or publicly traded company  affiliated with a licensee.                                                                                |

 

Becausewe own the Colorado Casinos, our business opportunities, and those of personswith an “ownership interest” in us, or any of the Colorado Casinos, are limitedto interests that comply with the Colorado Regulations and the ColoradoCommission’s rule.

 

Inaddition, pursuant to the Colorado Regulations, no manufacturer or distributorof slot machines or associated equipment may, without notification beingprovided to the Colorado Division within ten days, knowingly have an interestin any casino operator, allow any of its officers or any other person with asubstantial interest in such business to have such an interest, employ anyperson if that person is employed by a casino operator, or allow any casinooperator or person with a substantial interest therein to have an interest in amanufacturer’s or distributor’s business. A “substantial interest” means thelesser of (i) as large an interest in an entity as any other person or (ii) anyfinancial or equity interest equal to or greater than 5%. The ColoradoCommission has ruled that a person does not have a “substantial interest” ifsuch person’s sole ownership interest in such licensee is through the ownershipof less than 5% of the outstanding voting securities of a publicly tradedlicensee or publicly traded affiliated company of a licensee.

 

Weare a “publicly traded corporation” under the Colorado Regulations.

 

Underthe Colorado Regulations, any person or entity having any direct or indirectinterest in a gaming licensee or an applicant for a gaming license, including,but not limited to, us, Casino America of Colorado, Inc., IC HoldingsColorado, Inc., IOC Black Hawk Distribution Company, LLC or either of thetwo Colorado Casinos and their security holders, may be required to supply theColorado Commission with substantial information, including, but not limitedto, background information, source of funding information, a sworn statementthat such person or entity is not holding his or her interest for any otherparty, and fingerprints. Such information, investigation and licensing (orfinding of suitability) as an “associated person” automatically will berequired of all persons (other than certain institutional investors discussedbelow) which directly or indirectly beneficially own 10% or more of a direct orindirect beneficial ownership or interest in either of the two ColoradoCasinos, through their beneficial ownership of any class of voting securitiesof us, Casino America of Colorado, Inc., IC Holdings Colorado, Inc.,IOC Black Hawk Distribution Company, LLC or either of the two Colorado Casinos.Those persons must report their interest within 10 days (includinginstitutional investors) and file appropriate applications within 45 days afteracquiring that interest (other than certain institutional investors discussedbelow). Persons (including institutional investors) who directly or indirectlybeneficially own 5% or more (but less than 10%) of a direct or indirectbeneficial ownership or interest in either of the two Colorado Casinos, throughtheir beneficial ownership of any class of voting securities of us, CasinoAmerica of Colorado, Inc., IC Holdings Colorado, Inc., IOC Black HawkDistribution Company, LLC or either of the two Colorado Casinos, must reporttheir interest to the Colorado Commission within 10 days after acquiring thatinterest and may be required to provide additional information and to be foundsuitable. (It is the current practice of the gaming regulators to requirefindings of suitability for persons beneficially owning 5% or more of a director indirect beneficial ownership or interest, other than certain institutionalinvestors discussed below.) If certain institutional investors providespecified information to the Colorado Commission within 45 days after acquiringtheir interest (which, under the current practice of the gaming regulators isan interest of 5% or more, directly or indirectly) and are holding forinvestment purposes only, those investors,

 

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inthe Colorado Commission’s discretion, may be permitted to own up to 14.99% ofthe Colorado Casinos through their beneficial ownership in any class of votingof securities of us, Casino America of Colorado, Inc., IC HoldingsColorado, Inc., IOC Black Hawk DistributionCompany,LLC or either of the two Colorado Casinos, before being required to be foundsuitable. All licensing and investigation fees will have to be paid by theperson in question. The associated person investigation fee currently is $63per hour.

 

TheColorado Regulations define a “voting security” to be a security the holder ofwhich is entitled to vote generally for the election of a member or members ofthe board of directors or board of trustees of a corporation or a comparableperson or persons of another form of business organization.

 

TheColorado Commission also has the right to request information from any persondirectly or indirectly interested in, or employed by, a licensee, and toinvestigate the moral character, honesty, integrity, prior activities, criminalrecord, reputation, habits and associations of: (1) all persons licensedpursuant to the Colorado Limited Gaming Act; (2) all officers, directorsand stockholders of a licensed privately held corporation; (3) allofficers, directors and stockholders holding either a 5% or greater interest ora controlling interest in a licensed publicly traded corporation; (4) allgeneral partners and all limited partners of a licensed partnership; (5) allpersons that have a relationship similar to that of an officer, director orstockholder of a corporation (such as members and managers of a limitedliability company); (6) all persons supplying financing or loaning moneyto any licensee connected with the establishment or operation of limitedgaming; (7) all persons having a contract, lease or ongoing financial orbusiness arrangement with any licensee, where such contract, lease orarrangement relates to limited gaming operations, equipment devices orpremises; and (8) all persons contracting with or supplying any goods andservices to the gaming regulators.

 

Certainpublic officials and employees are prohibited from having any direct orindirect interest in a license or limited gaming.

 

Inaddition, under the Colorado Regulations, every person who is a party to a “gamingcontract” (as defined below) or lease with an applicant for a license, or witha licensee, upon the request of the Colorado Commission or the ColoradoDirector, must promptly provide the Colorado Commission or Colorado Directorall information that may be requested concerning financial history, financialholdings, real and personal property ownership, interests in other companies,criminal history, personal history and associations, character, reputation inthe community and all other information that might be relevant to adetermination of whether a person would be suitable to be licensed by theColorado Commission. Failure to provide all information requested constitutessufficient grounds for the Colorado Director or the Colorado Commission torequire a licensee or applicant to terminate its “gaming contract” or leasewith any person who failed to provide the information requested. In addition,the Colorado Director or the Colorado Commission may require changes in “gamingcontracts” before an application is approved or participation in the contractis allowed. A “gaming contract” is defined as an agreement in which a persondoes business with or on the premises of a licensed entity.

 

The Colorado Commission and the Colorado Division have interpreted theColorado Regulations to permit the Colorado Commission to investigate and findsuitable persons or entities providing financing to or acquiring securitiesfrom us, Casino America of Colorado, Inc., IC Holdings Colorado, Inc.,IOC Black Hawk Distribution Company, LLC or either of the two Colorado Casinos.As noted above, any person or entity required to file information, be licensedor found suitable would be required to pay the costs thereof and of anyinvestigation. Although the Colorado Regulations do not require the priorapproval for the execution of credit facilities or issuance of debt securities,the Colorado regulators reserve the right to approve, require changes to orrequire the termination of any financing, including if a person or entity isrequired to be found suitable and is not found suitable. In any event,lenders, note holders, and others providing financing will not be able toexercise certain rights and remedies without the prior approval of the Coloradogaming authorities. Information regarding lenders and holders of securitieswill be periodically reported to the Colorado gaming authorities.

 

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Exceptunder certain limited circumstances relating to slot machine manufacturers anddistributors, every person supplying goods, equipment, devices or services toany licensee in return for payment of a percentage, or calculated upon apercentage, of limited gaming activity or income must obtain an operatorlicense or be listed on the retailer’s license where such gaming will takeplace.

 

Anapplication for licensure or suitability may be denied for any cause deemedreasonable by the Colorado Commission or the Colorado Director, as appropriate.Specifically, the Colorado Commission and the Colorado Director must deny alicense to any applicant who, among other things: (1) fails to prove byclear and convincing evidence that the applicant is qualified; (2) failsto provide information and documentation requested; (3) fails to revealany fact material to qualification, or supplies information which is untrue ormisleading as to a material fact pertaining to qualification; (4) has beenconvicted of, or has a director, officer, general partner, stockholder, limitedpartner or other person who has a financial or equity interest in the applicantwho has been convicted of, specified crimes, including the service of asentence upon conviction of a felony in a correctional facility, city or countyjail, or community correctional facility or under the state board of parole orany probation department within ten years prior to the date of the application,gambling-related offenses, theft by deception or crimes involving fraud ormisrepresentation, is under current prosecution for such crimes (during thependency of which license determination may be deferred), is a career offenderor a member or associate of a career offender cartel, or is a professionalgambler; or (5) has refused to cooperate with any state or federal bodyinvestigating organized crime, official corruption or gaming offenses. If theColorado Commission determines that a person or entity is unsuitable todirectly or indirectly own interests in us, Casino America of Colorado, Inc.,IC Holdings Colorado, Inc., or either of the two Colorado Casinos, one ormore of the Colorado Casinos may be sanctioned, which may include the loss ofour approvals and licenses.

 

TheColorado Commission does not need to approve in advance a public offering ofsecurities but rather requires the filing of notice and additional documentsprior to a public offering of (i) voting securities, and (ii) non-votingsecurities if any of the proceeds will be used to pay for the construction ofgaming facilities in Colorado, to directly or indirectly acquire an interest ina gaming facility in Colorado, to finance the operation of a gaming facility inColorado or to retire or extend obligations for any of the foregoing. TheColorado Commission may, in its discretion, require additional information andprior approval of such public offering.

 

Inaddition, the Colorado Regulations prohibit a licensee or affiliated companythereof, such as us, Casino America of Colorado, Inc., IC HoldingsColorado, Inc., IOC Black Hawk Distribution Company, LLC or either of thetwo Colorado Casinos, from paying any unsuitable person any dividends orinterest upon any voting securities or any payments or distributions of anykind (except as set forth below), or paying any unsuitable person anyremuneration for services or recognizing the exercise of any voting rights byany unsuitable person. Further, under the Colorado Regulations, each of theColorado Casinos and IOC Black Hawk Distribution Company, LLC may repurchaseits voting securities from anyone found unsuitable at the lesser of the cashequivalent to the original investment in the applicable Colorado Casino or IOCBlack Hawk Distribution Company, LLC or the current market price as of the dateof the finding of unsuitability unless such voting securities are transferredto a suitable person (as determined by the Colorado Commission) within sixty(60) days after the finding of unsuitability. A licensee or affiliated companymust pursue all lawful efforts to require an unsuitable person to relinquishall voting securities, including purchasing such voting securities. The staffof Colorado Division has taken the position that a licensee or affiliatedcompany may not pay any unsuitable person any interest, dividends or otherpayments with respect to non-voting securities, other than with respect topursuing all lawful efforts to require an unsuitable person to relinquishnon-voting securities, including by purchasing or redeeming such securities.Further, the regulations require anyone with a material involvement with alicensee, including a director or officer of a holding company, such as us,Casino America of Colorado, Inc., IC Holdings Colorado, Inc., IOCBlack Hawk Distribution Company, LLC or either of the two Colorado Casinos, tofile for a finding of suitability if required by the Colorado Commission.

 

Becauseof their authority to deny an application for a license or suitability, theColorado Commission and the Colorado Director effectively can disapprove achange in corporate position of a licensee and with respect to any entity whichis required to be found suitable, or indirectly can cause us, Casino America ofColorado, Inc., IC Holdings Colorado, Inc., IOC Black HawkDistribution Company, LLC or the applicable

 

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ColoradoCasino to suspend or dismiss managers, officers, directors and other keyemployees or sever relationships with other persons who refuse to fileappropriate applications or who the authorities find unsuitable to act in suchcapacities.

 

Generally,a sale, lease, purchase, conveyance or acquisition of any interest in alicensee is prohibited without the Colorado Commission’s prior approval.However, because we are a publicly traded corporation, persons may acquire aninterest in us (even, under current staff interpretations, a controllinginterest) without the Colorado Commission’s prior approval, but such personsmay be required to file notices with the Colorado Commission and applicationsfor suitability (as discussed above) and the Colorado Commission may, aftersuch acquisition, find such person unsuitable and require them to dispose of theirinterest. Under some circumstances, we may not sell any interest in ourColorado gaming businesses without the prior approval of the ColoradoCommission.

 

EachColorado Casino must meet specified architectural requirements, fire safetystandards and standards for access for disabled persons. Each Colorado Casinoalso must not exceed specified gaming square footage limits as a total of eachfloor and the full building. Each Colorado Casino may operate only between 8:00 a.m.and 2:00 a.m., and may permit only individuals 21 or older to gamble inthe casino. It may permit slot machines, blackjack and poker, with a maximumsingle bet of $5.00. No Colorado Casino may provide credit to its gamingpatrons.  Each Colorado Casino mustcomply with Colorado’s Gambling Payment Intercept Act, which governs thecollection of unpaid child support costs on certain cash winnings from limitedgaming.

 

Alicensee is required to provide information and file periodic reports with theColorado Division, including identifying those who have a 5% or greaterownership, financial or equity interest in the licensee, or who have theability to control the licensee, or who have the ability to exercisesignificant influence over the licensee, or who loan money or other things ofvalue to a licensee, or who have the right to share in revenues of limitedgaming, or to whom any interest or share in profits of limited gaming has beenpledged as security for a debt or performance of an act. A licensee, and anyparent company or subsidiary of a licensee, who has applied to a foreignjurisdiction for licensure or permission to conduct gaming, or who possesses alicense to conduct foreign gaming, is required to notify the Colorado Division.Any person licensed by the Colorado Commission and any associated person of alicensee must report criminal convictions and criminal charges to the ColoradoDivision.

 

TheColorado Commission has broad authority to sanction, fine, suspend and revoke alicense for violations of the Colorado Regulations. Violations of manyprovisions of the Colorado Regulations also can result in criminal penalties.

 

TheColorado Constitution currently permits gaming only in a limited number ofcities and certain commercial districts in such cities.

 

TheColorado Constitution permits a gaming tax of up to 40% on adjusted grossgaming proceeds, and authorizes the Colorado Commission to change the rateannually. The current gaming tax rate is 0.25% on adjusted gross gamingproceeds of up to and including $2.0 million, 2% over $2.0 million up to andincluding $4.0 million, 4% over $4.0 million up to and including $5.0 million,11% over $5.0 million up to and including $10.0 million, 16% over $10.0 millionup to and including $15.0 million and 20% on adjusted gross gaming proceeds in excessof $15.0 million. The City of Black Hawk has imposed an annual device fee of$750 per gaming device and may revise it from time to time. The City of BlackHawk also has imposed other fees, including a business improvement district feeand transportation fee, calculated based on the number of devices and mayrevise the same or impose additional such fees.

 

Coloradoparticipates in multi-state lotteries.

 

Thesale of alcoholic beverages is subject to licensing, control and regulation bythe Colorado liquor agencies. All persons who directly or indirectly hold a 10%or more interest in, or 10% or more of the issued and outstanding capital stockof, any of the Colorado Casinos, through their ownership of us, Casino Americaof Colorado, Inc., IC Holdings Colorado, Inc., or either of the twoColorado Casinos, must file

 

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applicationsand possibly be investigated by the Colorado liquor agencies. The Coloradoliquor agencies also may investigate those persons who, directly or indirectly,loan money to or have any financial interest in liquor licensees. In addition,there are restrictions on stockholders, directors and officers of liquorlicensees preventing such persons from being a stockholder, director, officeror otherwise interested in some persons lending money to liquor licensees andfrom making loans to other liquor licensees. All licenses are revocable andtransferable only in accordance with all applicable laws. The Colorado liquoragencies have the full power to limit, condition, suspend or revoke any liquorlicense and any disciplinary action could (and revocation would) have amaterial adverse effect upon the operations of us, Casino America of Colorado, Inc.,IC Holdings Colorado, Inc., or the applicable Colorado Casino. EachColorado Casino holds a retail gaming tavern liquor license for its casino,hotel and restaurant operations.

 

Personsdirectly or indirectly interested in either of the two Colorado Casinos may belimited in certain other types of liquor licenses in which they may have aninterest, and specifically cannot have an interest in a retail liquor license(but may have an interest in a hotel and restaurant liquor license and severalother types of liquor licenses). No person can hold more than three retailgaming tavern liquor licenses. The remedies of certain lenders may be limitedby applicable liquor laws and regulations.

 

***Florida***

 

InJune 1995, the Florida Department of Business and Professional Regulation,acting through the Division of Pari-Mutuel Wagering (the “Florida Division”),issued its final order approving the transfer to the Company’s wholly ownedsubsidiary, PPI, Inc. (“PPI”), the pari-mutuel wagering permits whichauthorize the acceptance of pari-mutuel wagers on harness horse andquarterhorse races conducted at the Pompano Park Racetrack (“Pompano Park”)located in Pompano Beach, Florida. Harness horse racing at Pompano Park hasbeen continuously conducted by PPI since the time it acquired the foregoingdescribed harness horse permit through the present. In February 2007, TheFlorida Division issued a license to PPI to conduct 180 live evening harnessracing performances at Pompano Park during the State of Florida’s fiscal yearbeginning July 1, 2007 to June 30, 2008. PPI may also conductquaterhorse racing operations, subject to Florida Division approval.

 

TheFlorida statutes and the applicable rules and regulations of the FloridaDivision set forth in the Florida Administrative Code (the “Florida Law”)establish a regulatory framework for pari-mutuel wagering activities in theState of Florida, including licensing requirements, a taxing structure onpari-mutuel permitholders and requirements for payments to the horsemen,including owners and breeders. The Florida Law grants to the Florida Divisionfull regulatory power over all permitholders and licensees, including the powerto revoke or suspend any permit or license upon the willful violation by apermitholder or a licensee of the Florida Law. The Florida Division must approveany transfer of 10% or more of the stock or other evidence of ownership orequity in all pari-mutuel racing permitholders such as PPI. In addition to thepower to suspend or revoke a permit or license on account of a willfulviolation of the Florida Law, the Florida Division is also granted the power toimpose various civil penalties on the permitholder or licensee on account ofother violations. Penalties may not exceed $1,000 for each count or separateoffense.

 

Pursuantto the Florida Law, PPI is also authorized to conduct full-card pari-mutuelwagering on: (1) simulcast harness races from outside Florida throughoutthe racing season; and (2) night-time (after 6 p.m.) thoroughbredraces conducted outside of the State of Florida if such races are simulcastinto Florida by one of the Florida thoroughbred permitholders. PPI also has theright under the Florida Law to conduct full-card simulcasting of harness racingon days during which no live racing is held at Pompano Park. However, onnon-race days, Pompano Park must offer to rebroadcast the foregoing simulcastsignals to certain other pari-mutuel facilities located within 25 miles ofPompano Park. In addition, Pompano Park may transmit its live harness racesinto any dog racing or jai alai facility in Florida, including facilities inMiami-Dade and Broward Counties, for intertrack wagering. The Florida Lawestablishes the allocation of the pari-mutuel commission between Pompano Parkand the other facilities receiving such signals.

 

TheFlorida Law authorizes pari-mutuel facilities such as Pompano Park to operatecard rooms in those counties in which a majority vote of the County Commissionhas been obtained and a local ordinance has

 

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beenadopted. The County Commission in Broward County, where Pompano Park islocated, has approved the operation of cardrooms in Broward County. Althoughthe provisions of the Florida Law regarding cardroom operations have beenamended frequently by the Florida Legislature, the amendments have generallyresulted in the regulatory scheme becoming more liberal as opposed to beingmore restrictive. Under the most recent amendments which became effective on July 1,2007, the beneficial changes included permitting daily operations for any 12hour period without the requirement for live racing,  raising the limit on the maximum bet amountfrom $2.00 to $5.00 with up to 3 raises allowed per round, providing lessrestrictive regulations for tournaments and allowing the operator to awardprizes and create jackpots not tied to the amount bet.

 

InNovember 2004, the voters in the State of Florida amended the FloridaState Constitution to allow the voters of Miami-Dade and Broward Counties todecide whether to approve slot machines in racetracks and jai alai frontons intheir respective counties. Broward County voters approved that county’s localreferendum in March 2005. Legislation enacted by the FloridaLegislaturein 2006, and amended in 2007, became effective (the “Florida Slot Law”) whichimplemented the constitutional amendment by authorizing Pompano Park and threeother pari-mutuel facilities in Broward and Dade County to offer slot machinegaming to patrons at these facilities. Although there are pari-mutuelfacilities in numerous other counties in the State of Florida, slot machinegaming is presently authorized only in Broward and Dade County. In April 2007,a new casino facility was opened at Pompano Park adjacent to the harness racefacility.

 

Underthe Florida Slot law, the following regulatory provisions are applicable toslot machine gaming at Pompano Park:

 
| · |   | The  facility may be operated 365 days per year, 18 hours per weekday and 24 hours  on weekends.                    |
|--------|--------|---------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                |
| · |   | The  maximum number of machines is 2,000 Vegas-style (Class III) slot  machines per facility.                  |
|   |   |                                                                                                                |
| · |   | The  annual license fee is $3,000,000.00.                                                                           |
|   |   |                                                                                                                |
| · |   | The  tax payable to the State of Florida is 50% of net slot machine revenue.                                        |
|   |   |                                                                                                                |
| · |   | The  machines will not accept coins or currency, but are ticket in/ticket out.                                      |
|   |   |                                                                                                                |
| · |   | The  minimum age to play the machines is 21 years.                                                                  |
|   |   |                                                                                                                |
| · |   | ATMs  are permitted in the facility but not on the gaming floor.                                                    |
|   |   |                                                                                                                |
| · |   | The  Florida Division is the regulatory agency charged with the duty to enforce  the provisions of the Florida Law. |

 

PPIalso pays combined county and city taxes of approximately 3.5% on the first$250 million of net slot machine revenue and 5% on net slot machine revenueover $250 million.

 

Thereis currently litigation pending which could impact PPI’s rights to conduct slotmachine operations in Florida. The Florida District Court of Appeal FirstDistrict affirmed its earlier decision to reverse a lower court decisiongranting summary judgment in favor of Floridians for a Level Playing Field(FLPF), of which we are a member. The Court ruled that a trial is necessary todetermine whether FLPF failed to obtain the required number of signatures toplace the constitutional amendment authorizing slot machines on the ballotapproved by voters.  The case hasrecently been sent for trial to the Leon County Circuit Court.. We believethat  at trial FLPF would prevail on themerits. However, if FLPF is ultimately unsuccessful in the litigation, thestatewide vote amending the Florida constitution to permit slot machines atpari-mutuels would be invalidated and our right to operate slot machines atPompano Park could be eliminated.

 

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***Bahamas***

 

In1969, the Government of The Bahamas enacted the Lotteries and Gaming Act. Thislegislation, together with its regulations, governs and regulates gaming. TheGaming Board is the body that regulates the operation of casinos. The gaminglicense is renewable annually. All casino workers must be approved by the Boardand are issued certificates, which are also renewable on an annual basis. Thereis a basic annual gaming tax of $200,000 payable in six equal shares. Inaddition a winnings tax is also imposed and is based on the following scale:

 
| Winnings of: | $10,000,000                    |   | 25     | %      |
|-------------------|--------------------------------|--------|--------|--------|
|              | $10,000,001 - $16,000,000      |   | 20     | %      |
|              |                           |   |   |   |
|              | $16,000,001 - $20,000,000      |   | 10     | %      |
|              |                           |   |   |   |
|              | Amounts exceeding  $20,000,001 |   | 5      | %      |

 

TheMinister of Tourism has responsibility for gaming and acts in consultation withthe Gaming Board. A license can be cancelled if a fraudulent or misleadingrepresentation has been supplied to the Board or if there is a breach ofrestrictions or conditions imposed by the Minister. There is however a right tobe heard before cancellation is made final. Citizens, permanent residents andholders of work permits are prohibited from gambling. Those found doing so areguilty of an offense punishable by law. The operator may also be liable if itknowingly allows any such persons to gamble in its establishment.

 

Currentlythe Casino has an agreement to lease the premises housing its operations and amanagement agreement. The Casino holds a number of other licenses including onewith the Port Authority of Grand Bahama, a business license and liquor anddining and dancing licenses.

 

On the 24thApril,2007 the Isle entered into a Supplemental Heads of Agreement with theGovernment of the Bahamas and Hutchison Lucaya Ltd.,wherein certain concessionswere granted to the Isle with respect to marketing subsidy and a reduction ingaming taxes. Such taxes were reduced to 7.5% of gross win per annum. The basictax of $200,000 remains payable per annum.

 

***United Kingdom***

 

Gamingin the UK is subject to regulation under the Gambling Act (the “Act”)which  received the Royal assent on April 7,2005 and which  came  into force in its entirety on September 1,2007, replacing the Gaming Act 1968. Under the Act, a new Gambling Commission(the “Commission”) has been created to oversee license applications andestablish new regulations for gaming (including on-line gaming). It has takenover responsibilities from the Gaming Board and is working on the transition tomeet this objective. The legislation will provide a significant change inregulation of the casino industry including:

 
| · |   | removing  the requirement that gaming facilities operate as private members’ clubs,  including the statutorily prescribed 24-hour interval between membership and  play; this has now occurred; |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                 |
| · |   | extending  the gaming products available;                                                                                                                                                            |
|   |   |                                                                                                                                                                                                 |
| · |   | abolishing  the demand test and permitted area rules;                                                                                                                                                |
|   |   |                                                                                                                                                                                                 |
| · |   | allowing  casinos specific numbers of gaming machines with a broader range of stakes  and prizes;                                                                                                    |
|   |   |                                                                                                                                                                                                 |
| · |   | allowing  casinos to offer live entertainment and to advertise; and                                                                                                                                  |
|   |   |                                                                                                                                                                                                 |
| · |   | allowing  new categories of regional, large and small casinos.                                                                                                                                       |

 

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TheAct is accompanied by a significant body of detailed regulation, codes ofpractice, and guidance, which together with the Act will form the regulatoryand compliance backdrop to gaming in the UK. The Act limited the number ofregional casinos to 1 and large and small to 8 each. The Government appointed aCasino Advisory Panel to make recommendations to the Government as to locationof the 17 proposed new casinos; however the initial secondary legislationdesigned to implement the panel’s recommendation did not pass.   This has now been approved by Parliament inrelation to 8 large and 8 small casinos. Currently there are no plans to proceed with a Regional Casino.

 

Thereare detailed transitional provisions in relation to existing operators, whatthey needed to do prior to September 1, 2007 in order to keep existinglicenses current and/or convert to new licenses.

 

TheCompany is an existing operator and is currently engaged in taking thenecessary steps to maintain/convert its existing permissions in relation to itsUK operations, The Isle Casinos Ltd and Blue Chip Casinos Ltd.

 

TheCommission is primarily responsible for regulating casinos in the UK and isauthorized to enforce strict codes of responsibility and is responsible forgranting operating and personal licenses to commercial gambling operators andpersonnel working in the industry. The Commission will share, with locallicensing authorities, responsibility for granting gaming and bettingpermissions.

 

Authorityto provide facilities for gambling will be subject to varying degrees ofregulation, depending on:

 
| · |   | Type  of gambling                         |
|--------|--------|-------------------------------------------|
|   |   |                                      |
| · |   | Means  by which it is conducted           |
|   |   |                                      |
| · |   | People  by whom and to whom it is offered |

 

TheAct removes from licensing justices all responsibility for granting gaming andbetting permissions (except for certain 1968 Act transitional applications).Instead, the Commission and licensing authorities will between them assumeresponsibility for all those matters previously regulated by licensingjustices.

 

TheAct establishes a minimum size limit for new casinos and a casino’s gamingmachine entitlement will depend on its category, and power is provided forlicensing authorities to pass resolutions not to license any new casinopremises in their area.

 

TheAct introduces a new regime for gaming machines. A new definition of gamingmachine is provided, together with power to prescribe categories. The Actprovides certain entitlements for commercial operators to use specified numbersand categories of machines in consequence of their licenses. It alsoestablishes permit procedures for authorizing use of lower-stake gamingmachines in specific locations.

 

TheAct makes provision for the advertising of gambling, creating new offencesrelating to the advertising of unlawful gambling and providing reserve powersfor the Secretary of State to make regulations controlling the content ofgambling advertisements.   A voluntarycode is currently in force covering gambling advertisements.

 

Theacquisition of a 10% equity stake, or the ability to exercise significantinfluence over the management of the operator where there is a lower stake,will trigger the Controller provisionsunderthe Financial Services and Markets Act 2000. This will require notification andconsent by the Commission or Regulator who will apply a number of tests toensure that the relevant person is fit and proper, that the interests of theentity are not threatened and that compliance conditions are satisfied.

 

Weoperate casinos in Coventry, Dudley and Wolverhampton under the  Gambling Act and are dealing with theformalities for continuation rights under the Act

 

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***Non-Gaming Regulation***

 

Weare subject to certain federal, state and local safety and health, employmentand environmental laws, regulations and ordinances that apply to non-gamingbusinesses generally, such as the Clean Air Act, Clean Water Act, OccupationalSafety and Health Act, Resource Conservation Recovery Act, the ComprehensiveEnvironmental Response, Compensation and Liability Act and the Oil PollutionAct of 1990. We have not made, and do not anticipate making, materialexpenditures with respect to such environmental laws and regulations. However,the coverage and attendant compliance costs associated with such laws,regulations and ordinances may result in future additional costs to ouroperations. For example, the Department of Transportation has promulgatedregulations under the Oil Pollution Act of 1990 requiring owners and operators ofcertain vessels to establish through the Coast Guard evidence of financialresponsibility for clean up of oil pollution. This requirement has beensatisfied by proof of adequate insurance.

 

Ourriverboats operated in Louisiana and Iowa must comply with U.S. Coast Guardrequirements as to boat design, on-board facilities, equipment, personnel andsafety and hold U.S. Coast Guard Certificates of Documentation and Inspection.The U.S. Coast Guard requirements also set limits on the operation of theriverboats and require licensing of certain personnel involved with theoperation of the riverboats. Loss of a riverboat’s Certificate of Documentationand Inspection could preclude its use as a riverboat casino. Each of ourriverboats is inspected annually and, every five years, is subject todry-docking for inspection of its hull, which could result in a temporary lossof service.

 

Thebarges are inspected by third parties and certified with respect to stabilityand single compartment flooding integrity. Our casino barges must also meetlocal fire safety standards. We would incur additional costs if any of ourgaming facilities were not in compliance with one or more of these regulations.

 

Regulationsadopted by the Financial Crimes Enforcement Network of the U.S. TreasuryDepartment require us to report currency transactions in excess of $10,000occurring within a gaming day, including identification of the patron by nameand social security number. U.S. Treasury Department regulations also requireus to report certain suspicious activity, including any transaction thatexceeds $5,000 if we know, suspect or have reason to believe that thetransaction involves funds from illegal activity or is designed to evade federalregulations or reporting requirements. Substantial penalties can be imposedagainst us if we fail to comply with these regulations.

 

Allof our shipboard employees, even those who have nothing to do with ouroperation as a vessel, such as dealers, waiters and security personnel, may besubject to the Jones Act which, among other things, exempts those employeesfrom state limits on workers’ compensation awards.

 

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