Exhibit 10.16


 


ELEVENTH AMENDMENT TO OPERATING AGREEMENT


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 





















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 





















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 





















 


separate contributions to the City and charities.


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 





















 


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


 


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


 


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


 


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


 


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


 


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


 





















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 





















 


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


 


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


 


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


 


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


 


 


	
  Dubuque
  Racing Association, Ltd.

  
	
   

  
	
  /s/
  Bruce W. Wentworth

  	
   

  
	
  By: 
  Bruce W. Wentworth, General Manager

  
	
   

  
	
   

  
	
  Diamond
  Jo, LLC

  
	
   

  
	
  /s/
  Natalie Schramm

  	
   

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

  
	
   

  
	
   

  
	
  Peninsula
  Gaming, LLC

  
	
   

  
	
  /s/
  Natalie Schramm

  	
   

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

  



 





















 


STATE
OF IOWA


COUNTY
OF DUBUQUE


 


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


 


 


	
  /s/
  Kathryn Malone

  	
   

  
	
  Notary
  Public in the State of Iowa

  	
   

  



 


 


STATE
OF IOWA


COUNTY
OF DUBUQUE


 


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


 


 


	
  /s/ Kathryn Malone

  	
   

  
	
  Notary Public in the State
  of Iowa