Document:

EXHIBIT 10.21

                      INTERCOMPANY SUBORDINATION AGREEMENT

      THIS INTERCOMPANY  SUBORDINATION  AGREEMENT (this "Agreement") dated as of
June 16, 2004, is made and entered into by and among THE OLD  EVANGELINE  DOWNS,
L.L.C., a Louisiana limited liability company ("OED"), DIAMOND JO, LLC (formerly
known as Peninsula Gaming Company,  LLC), a Delaware limited  liability  company
("DJO";  together  with  OED,  hereinafter   collectively  referred  to  as  the
"Borrowers"  and each  individually,  a "Borrower"),  THE OLD  EVANGELINE  DOWNS
CAPITAL CORP., a Delaware corporation ("OED Capital"),  PENINSULA GAMING, LLC, a
Delaware  limited  liability  company  ("Peninsula  Gaming";  together  with the
Borrowers and OED Capital, hereinafter collectively referred to as the "Debtors"
and each  individually,  a "Debtor")  OED  ACQUISITION  LLC, a Delaware  limited
liability company ("OEDA";  together, in their respective capacity as a creditor
to a Debtor,  each of OED,  DJO, OED Capital and Peninsula  Gaming,  hereinafter
collectively referred to as the "Subordinated Lenders" and each individually,  a
"Subordinated   Lender"),   and  WELLS  FARGO   FOOTHILL,   INC.,  a  California
corporation,  as agent for the Lenders (as defined in the Senior Loan  Agreement
defined below) (the "Agent").

                              W I T N E S S E T H:

      WHEREAS,  the Debtors are indebted and may from time to time in the future
become indebted to a Subordinated Lender in respect of advances, loans and other
extensions of credit or other financial accommodations made from time to time by
the Subordinated  Lenders to the Debtors (such  indebtedness,  together with all
other  indebtedness  and  obligations  of the Debtors,  or any of them,  to each
Subordinated  Lender,  however  evidenced  and whether now existing or hereafter
arising,  is  referred  to  herein as the  "Subordinated  Debt";  provided  that
"Subordinated Debt" shall not include payments to OEDA and DJO set forth in that
certain Management Fees Subordination Agreement,  dated as of June , 2004, among
OED, the Agent, DJO and OEDA); and

      WHEREAS,  the  Borrowers,  the Agent and the  Lenders  are parties to that
certain  Loan  and   Security   Agreement   dated  as  of  even  date   herewith
(collectively,  as amended,  restated,  supplemented or otherwise  modified from
time to time,  the  "Senior  Loan  Agreement"),  whereby  the  Borrowers  may be
indebted  to the Lender  Group (as  defined in the Senior  Loan  Agreement)  for
certain   extensions  of  credit   outstanding  from  time  to  time  (all  such
indebtedness,  including, without limitation,  principal, interest, fees, costs,
expenses and other sums  chargeable  to the  Borrowers by the Agent or the other
members  of the Lender  Group  (including  interest,  fees,  costs and  expenses
accruing  after  an  Insolvency  Proceeding  (as  hereafter  defined)  commences
regardless of whether such interest, fees, costs and expenses are deemed allowed
or recoverable in any Insolvency  Proceeding (as hereinafter  defined),  and the
Secured  Obligations  (as  defined  below),   together  with  any  modification,
amendment,  refinancing or supplement thereto,  and any other obligations of the
Debtors to the Agent or the other  members of the Lender  Group are  hereinafter
referred to as the "Senior Debt"); and

      WHEREAS,  as an  inducement  to the  Lender  Group to enter  into the Loan
Agreement  and to extend the credit  therein,  each of OED Capital and Peninsula
Gaming has entered into a

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Guaranty  dated as of the date hereof in favor of the Agent,  for the benefit of
the  Lender  Group,  whereby  each  of OED  Capital  and  Peninsula  Gaming  has
guaranteed  the Secured  Obligations  (as defined in the  Guaranty to which such
Person is a party);

      WHEREAS,  as security for the payment of all  liabilities  and obligations
due under the Senior  Debt,  the  Debtors,  pursuant to the Loan  Documents  (as
defined in the  Senior  Loan  Agreement),  have  granted  to the Agent,  for the
benefit of the Lender Group, a first priority lien on and unconditional security
interest in and to certain  personal and real property  assets of the Debtors as
set forth in the Loan Documents  (collectively,  said interests in and assets of
the Debtors are referred to herein as the "Collateral;"  and,  collectively said
liens and security  interests of the Agent are referred to herein as the "Senior
Lien"); and

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

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

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

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accommodations  to the  Borrowers  pursuant  to the Senior Loan  Agreement  (the
"Commitments") are terminated.

      2. Subordination of Subordinated Debt.

            (a) Each Subordinated  Lender hereby subordinates any and all claims
now or hereafter  owing to it by the Debtors,  or any of them,  under all or any
portion of the Subordinated Debt to any and all Senior Debt (including,  without
limitation,  interest,  fees, costs or other payments on the Senior Debt paid or
accrued after the  commencement  of an Insolvency  Proceeding and whether or not
such claims are deemed allowed or recoverable in any Insolvency Proceeding,  and
payment of or for adequate  protection  pursuant to any Insolvency  Proceeding),
and  agrees  that  all  Senior  Debt  shall  be  paid  in  full  in  cash to the
satisfaction of the Lender Group and the Commitments  shall be terminated before
any  payment  may be made on the  Subordinated  Debt,  whether of  principal  or
interest or other indebtedness or other obligations.

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

            (c) Each Subordinated  Lender agrees that the priority of the Senior
Debt set  forth  above  shall  continue  during  any  insolvency,  receivership,
bankruptcy,  dissolution,  liquidation,  or reorganization proceeding, or in any
other proceeding,  whether voluntary or involuntary,  by or against the Debtors,
or any of them,  under any  bankruptcy  or  insolvency  law or laws,  federal or
state,  relating  to the relief of debtors of any  jurisdiction,  whether now or
hereafter in effect,  and in any  out-of-court  composition,  assignment for the
benefit of creditors, readjustment of indebtedness, reorganization, extension or
other debt arrangement of any kind (collectively,  an "Insolvency  Proceeding").
In the event of any payment, distribution,  division or application,  partial or
complete,  voluntary or involuntary, by operation of law or otherwise, of all or
any part of the  property,  assets or business of the  Debtors,  or the proceeds
thereof, or any securities of the Debtors, to any Subordinated Lender, by reason
of any  liquidation,  dissolution  or  other  winding  up of any  Debtor  or its
business  or by  reason  of any  sale or  Insolvency  Proceeding,  then any such
payment or distribution of any kind or character,  whether in cash,  property or
securities,  that, but for the subordination provisions of this Section 2, would

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otherwise be payable or deliverable upon or in respect of the Subordinated Debt,
shall  instead be paid over or delivered  directly to the Agent to be applied as
payment of the Senior  Debt,  to the extent  necessary  to repay the Senior Debt
remaining  unpaid after giving effect to any concurrent  payment or distribution
to the Agent. Furthermore,  no holder of the Subordinated Debt shall receive any
such payment or distribution or any benefit  therefrom until the Senior Debt has
been  fully  paid  in cash  to the  satisfaction  of the  Lender  Group  and the
Commitments   have  been   terminated,   after  which  time  such   payments  or
distributions may be applied to payment of the Subordinated Debt.

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

      3.  Forbearance from Exercise of Certain  Remedies.  Until the Senior Debt
has been  paid in full in cash and the  Commitments  have  been  terminated,  no
Subordinated Lender shall (a) take any action or exercise any remedy against the
Debtors, or any of them, to enforce all or any portion of the Subordinated Debt;
(b) take any action or exercise any remedy  against any  guarantor of or pledgor
securing the Senior Debt in order to collect any of the  Subordinated  Debt; (c)
commence,  or join with any other  creditor of the Debtors,  or any of them,  in
commencing any Insolvency Proceeding against the Debtors, or any of them; or (d)
take any action or exercise  any remedy  against  any  property or assets of any
guarantor of or pledgor securing the Senior Debt. The parties hereto  understand
and agree that the Agent shall have the right, but shall have no obligation,  to
cure any default under the  Subordinated  Debt without the prior written consent
of  each  Subordinated  Lender.   Notwithstanding  anything  contained  in  this
Agreement to the contrary, in no event shall any Subordinated Lender be entitled
to  receive  and  retain  any   securities,   equity  or  otherwise,   or  other
consideration  provided  for in (i) a plan of  reorganization  or  otherwise  in
connection  with any  bankruptcy  or  Insolvency  Proceeding  or (ii) any  other
judicial or nonjudicial  proceeding for the liquidation,  dissolution or winding
up of the Debtors,  or any of them,  or the assets or properties of the Debtors,
or any of them,  in any case unless and until the Senior Debt is paid in full in
cash to the satisfaction of the Lender Group and the Commitments are terminated.

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

            (a)  if  a  proper  claim  or  proof  of  debt  in  respect  of  the
Subordinated Debt has not been filed in the form required in any such Insolvency
Proceeding at least ten (10) Business

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<PAGE>

Days prior to the  expiration  of the time for filing  such  claims,  to file an
appropriate claim for and on behalf of the holders of Subordinated Debt;

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

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

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

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

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

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

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

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      8. No Contest of Security Interest.  No Subordinated  Lender shall contest
the validity,  perfection  or  enforceability  of any lien or security  interest
granted to the Agent by any Debtor in connection  with the Senior Debt, and each
Subordinated  Lender agrees to cooperate in the defense of any action contesting
the validity, perfection or enforceability of such liens or security interests.

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

      10. Voided Payments. Notwithstanding anything herein that may be construed
to the  contrary,  to the extent that any Debtor makes any payment on the Senior
Debt  which,  within  twelve  (12)  months  of the  date  of  such  payment,  is
subsequently invalidated,  declared to be fraudulent, avoidable or preferential,
set aside or is required to be repaid to a trustee, receiver, the estate of such
Debtor or any other party under any bankruptcy act, state or Federal law, common
law or equitable cause (such payment being hereinafter  referred to as a "Voided
Payment"),  then,  to the extent of such  Voided  Payment,  that  portion of the
Senior Debt that had been  previously  satisfied by such Voided Payment shall be
revived  and  continue  in full force and effect as if such  Voided  Payment had
never been made. In the event that a Voided Payment is sought to be

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recovered  from the Agent or any  other  member of the  Lender  Group  under the
Senior Loan  Agreement,  an "Event of Default"  under the Senior Loan  Agreement
shall be  deemed to have  occurred  and to be  continuing  from the date of such
recovery  from the Agent or any such other  member of the  Lender  Group of such
Voided Payment until the full amount of such Voided Payment is fully and finally
restored  to the Agent or such other  member of the Lender  Group and until such
time the provisions of this Agreement shall be in full force and effect.

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

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

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

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

      15.  Successors  and Assigns;  Continuing  Effect,  etc. This Agreement is
being  entered  into for the benefit of, and shall be binding  upon,  the Agent,
each  Subordinated  Lender,  the Debtors  and their  respective  successors  and
assigns. The Agent or any other member of the Lender Group under the Senior Loan
Agreement  may assign or  participate  out to other  parties  any portion of its
interest  under the Senior  Debt and no such  assignee or  participant  shall be
required to become a  signatory  hereto.  Any  assignee  or  transferee  of each
Subordinated  Lender shall  execute and deliver to the other  parties  hereto an
agreement  pursuant to which they will become parties hereto as fully as if they
were signatories hereto and providing for the effectiveness of this Agreement as
to such  transferee or assignee and other  parties.  This  Agreement  shall be a
continuing  agreement,  shall be irrevocable  and shall remain in full force and
effect so long as any of the Senior Debt or the Subordinated Debt is outstanding
and so  long as the  Senior  Loan  Agreement  has not  been  terminated  and the
Commitments remain in place.

                                       8
<PAGE>

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

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

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

                        and

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

      with copies to:   MAYER, BROWN, ROWE & MAW LLP
                        1675 Broadway
                        New York, New York 10019
                        Attn: Ron Brody, Esq.
                        Fax No. (212) 262-1910

                                       9
<PAGE>

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

                        and

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

      with copies to:   MAYER, BROWN, ROWE & MAW LLP
                        1675 Broadway
                        New York, New York 10019
                        Attn: Ron Brody, Esq.
                        Fax No.  (212) 262-1910
      If to Senior
      Lender:           WELLS FARGO FOOTHILL, INC.
                        2450 Colorado Avenue, Suite 3000 West
                        Santa Monica, California 90404
                        Attention:  Business Finance Division Manager
                        Fax No. (310) 453-7413

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

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

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

      19. Amendment of Loan Documents.  Each Subordinated Lender and the Debtors
agree to forbear  from (a)  modifying,  altering or amending any payment term of
any loan document or any other document,  instrument or agreement evidencing the
Subordinated  Debt,  (b)  modifying,  altering or amending any other term of any
loan document or any other document,

                                       10
<PAGE>

instrument or agreement  evidencing the Subordinated  Debt in any manner adverse
to either the Debtors or the Agent,  and (c) from  granting  (in the case of the
Debtors) and receiving (in the case of any  Subordinated  Lender) any collateral
or other security of any nature to secure the Subordinated Debt.

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

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

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

                                       11
<PAGE>

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

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

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

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

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

                [REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

                                       12
<PAGE>

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

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

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

                              DIAMOND JO, LLC, (formerly known as Peninsula
                              Gaming Company, LLC), a Delaware limited
                              liability company

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

                              THE OLD EVANGELINE DOWNS CAPITAL
                              CORP., a Delaware corporation

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

                              OED ACQUISITION LLC,
                              a Delaware limited liability company

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

<PAGE>

                              PENINSULA GAMING, LLC, a Delaware
                              limited liability company

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

                              WELLS FARGO FOOTHILL, INC.,
                              a California corporation, as administrative agent

                              By:  /s/  Todd R. Nakamoto
                                 --------------------------------------
                              Name:   Todd R. Nakamoto
                              Title:  Vice PresidentEXHIBIT 10.22

                     MANAGEMENT FEES SUBORDINATION AGREEMENT

      THIS MANAGEMENT FEES SUBORDINATION  AGREEMENT (this "Agreement") dated as,
June 16, 2004, is made and entered into by and among THE OLD  EVANGELINE  DOWNS,
L.L.C.,  a Louisiana  limited  liability  company  ("OED"),  and DIAMOND JO, LLC
(formerly known as Peninsula Gaming Company,  LLC), a Delaware limited liability
company ("DJO"; together with OED, hereinafter  collectively referred to as, the
"Borrowers"  and each  individually,  a "Borrower"),  The Old  Evangeline  Downs
Capital  Corp.,  a  Delaware  corporation   ("Guarantor";   together  with  OED,
hereinafter  collectively referred to as the "Debtors" and each individually,  a
"Debtor"),  OED ACQUISITION,  LLC, a Delaware limited liability company ("OEDA";
together with DJO,  hereinafter  collectively  referred to as the  "Subordinated
Parties"  and each  individually,  a  "Subordinated  Party"),  and  WELLS  FARGO
FOOTHILL,  INC., a California corporation,  as agent for the Lenders (as defined
in the Senior Loan Agreement defined below) (the "Agent").

                              W I T N E S S E T H:

      WHEREAS,  the Debtors are indebted and may from time to time in the future
become  indebted to a Subordinated  Party in respect of certain amounts owing to
the  Subordinated   Parties  pursuant  to  that  certain  Amended  and  Restated
Management  Services Agreement (the "Management  Agreement"),  by and among OED,
OEDA and DJO,  dated as of February 25, 2003 (such  amounts,  together  with all
other obligations of the Debtors,  or either of them, to each Subordinated Party
arising  under the  Management  Agreement,  however  evidenced  and  whether now
existing or  hereafter  arising,  are  referred  to herein as the  "Subordinated
Fees"; and

      WHEREAS,  the  Borrowers,  the Agent and the  Lenders  are parties to that
certain  Loan  and   Security   Agreement   dated  as  of  even  date   herewith
(collectively,  as amended,  restated,  supplemented or otherwise  modified from
time to time,  the  "Senior  Loan  Agreement"),  whereby  the  Borrowers  may be
indebted  to the Lender  Group (as  defined in the Senior  Loan  Agreement)  for
certain   extensions  of  credit   outstanding  from  time  to  time  (all  such
indebtedness,  including, without limitation,  principal, interest, fees, costs,
expenses and other sums  chargeable  to the  Borrowers by the Agent or the other
members  of the Lender  Group  (including  interest,  fees,  costs and  expenses
accruing  after  an  Insolvency  Proceeding  (as  hereafter  defined)  commences
regardless of whether such interest, fees, costs and expenses are deemed allowed
or recoverable in any Insolvency  Proceeding (as hereinafter  defined),  and the
Guaranteed  Obligations  (as defined  below),  together  with any  modification,
amendment,  refinancing or supplement thereto,  and any other obligations of the
Debtors to the Agent or the other  members of the Lender  Group are  hereinafter
referred to as the "Senior Debt"); and

      WHEREAS,  as an  inducement  to the  Lender  Group to enter  into the Loan
Agreement  and to extend the credit  therein,  Guarantor  has entered  into that
certain  Guaranty  dated as of the date  hereof in favor of the  Agent,  for the
benefit of the Lender Group (the  "Guaranty"),  whereby Guarantor has guaranteed
the Secured Obligations (as defined in the Guaranty);

      WHEREAS,  as security for the payment of all  liabilities  and obligations
due under the Senior  Debt,  the  Debtors,  pursuant to the Loan  Documents  (as
defined in the Senior Loan

<PAGE>

Agreement),  have granted to the Agent,  for the benefit of the Lender Group,  a
first  priority lien on and  unconditional  security  interest in and to certain
personal  and real  property  assets  of the  Debtors  as set  forth in the Loan
Documents  (collectively,  said  interests  in and  assets  of the  Debtors  are
referred  to  herein  as the  "Collateral";  and,  collectively  said  liens and
security  interests of the Agent are  referred to herein as the "Senior  Lien");
and

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

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

      1. Priority of Liens;  Subordinated Fees.  Notwithstanding anything to the
contrary,  including,  without  limitation,  the date, time,  manner or order of
perfection or attachment of the security  interests and liens on the  Collateral
granted  by  the  Debtors  to  the  Agent  or  any   Subordinated   Party,   and
notwithstanding  the usual application of the priority provisions of the Uniform
Commercial Code as in effect in any  jurisdiction or any other applicable law or
judicial decision of any jurisdiction,  or whether such Subordinated Party holds
possession  of all or any  part  of the  Collateral,  or if the  Agent  or  such
Subordinated  Party is perfected without filing or possession in any part of the
Collateral, the Senior Lien shall be a first, senior and prior security interest
in  and  lien  on  the  Collateral,  prior  in  interest  and  superior  to  any
Subordinated  Lien.  The  priority of liens set forth in the  previous  sentence
states the relative  priority of liens of the parties to this Agreement,  and no
party hereto  represents  or warrants to any other party that such other party's
liens are prior to any lien on the  Collateral  of any person who is not a party
to this Agreement  (except that each Debtor represents and warrants to the Agent
that  the  Senior  Lien has been  granted  in  accordance  with  the  terms  and
provisions  of the  Senior  Loan  Agreement  and  other  Loan  Documents).  Each
Subordinated  Party agrees that if at any time such Subordinated  Party shall be
in possession of any assets or properties of the Debtors, then such Subordinated
Party  shall  hold  such  assets  or  properties  in trust for the Agent for the
benefit of the Lender Group, so long as any Senior Debt remains  outstanding and
until  all  obligations  of the  Lenders  to  make  loans  and  other  financial
accommodations  to the  Borrowers  pursuant  to the Senior Loan  Agreement  (the
"Commitments")  are terminated.  Each Subordinated  Party represents that, as of
the date hereof,  it does not have a lien on or security  interest in any assets
of any  Debtor,  and  agrees  that it will not take  any such  lien or  security
interest  without  the prior  written  consent  of the  Agent.  Nothing  in this
Agreement shall be deemed a consent by the Agent to any such Subordinated Lien.

                                       2
<PAGE>

      2. Subordination of Subordinated Fees.

            (a) Each Subordinated  Party hereby  subordinates any and all claims
now or hereafter owing to it by the Debtors, or either of them, under all or any
portion of the Subordinated Fees to any and all Senior Debt (including,  without
limitation,  interest,  fees, costs or other payments on the Senior Debt paid or
accrued after the  commencement  of an Insolvency  Proceeding and whether or not
such claims are deemed allowed or recoverable in any Insolvency Proceeding,  and
payment of or for adequate  protection  pursuant to any Insolvency  Proceeding),
and  agrees,  except as provided in Section  2(b)  hereof,  that all Senior Debt
shall be paid in full in cash to the  satisfaction  of the Lender  Group and the
Commitments  shall  be  terminated  before  any  payment  may  be  made  on  the
Subordinated Fees.

            (b)  Except  as  set  forth  below  in  this   paragraph  (b),  each
Subordinated Party agrees not to accept any payment of the Subordinated Fees nor
make any  transfer  to third  parties not party to this  Agreement,  or take any
other action,  designed to secure  directly or indirectly from any Debtor or any
other  Person  any  payment on account of the  Subordinated  Fees,  without  the
express,  prior written consent of the Agent,  and, except as set forth below in
this  paragraph (b), each  Subordinated  Party agrees that any funds that may be
received  by it as a payment  on account  of the  Subordinated  Fees at any time
prior to the  termination  of this  Agreement  shall  be held in  trust  for the
benefit  of, and shall be  immediately  paid over and  delivered  to, the Agent.
Notwithstanding  anything  contained herein to the contrary,  (i) any Debtor may
reimburse Subordinated Parties for "Reimbursables" (as defined in the Management
Agreement) at any time in accordance with the terms of the Management  Agreement
provided  no Event of Default  (as that term is defined in the  Indenture)  then
exists or would be caused thereby, and (ii) on the date that payment of any fees
or other sums (other than Reimbursables) are owing to Subordinated Parties under
the Management  Agreement,  any Debtor may pay and each  Subordinated  Party may
receive payments of, all other  Subordinated  Fees payable on such date provided
no Event of Default then exists or would be caused thereby.

            (c) Each  Subordinated  Party agrees that the priority of the Senior
Debt set  forth  above  shall  continue  during  any  insolvency,  receivership,
bankruptcy,  dissolution,  liquidation,  or reorganization proceeding, or in any
other proceeding,  whether voluntary or involuntary,  by or against the Debtors,
or either of them,  under any bankruptcy or insolvency  law or laws,  federal or
state  relating  to the relief of debtors of any  jurisdiction,  whether  now or
hereafter in effect,  and in any  out-of-court  composition,  assignment for the
benefit of creditors, readjustment of indebtedness, reorganization, extension or
other debt arrangement of any kind (collectively,  an "Insolvency  Proceeding").
In the event of any payment, distribution,  division or application,  partial or
complete,  voluntary or involuntary, by operation of law or otherwise, of all or
any part of the  property,  assets or business of the  Debtors,  or the proceeds
thereof,  or any securities of the Debtors, to any Subordinated Party, by reason
of any  liquidation,  dissolution  or  other  winding  up of any  Debtor  or its
business  or by  reason  of any  sale or  Insolvency  Proceeding,  then any such
payment or distribution of any kind or character,  whether in cash,  property or
securities,  that, but for the subordination provisions of this Section 2, would
otherwise be payable or deliverable upon or in respect of the Subordinated Fees,
shall  instead be paid over or delivered  directly to the Agent to be applied as
payment of the Senior Debt, to the

                                       3
<PAGE>

extent  necessary to repay the Senior Debt remaining  unpaid after giving effect
to any concurrent payment or distribution to the Agent.

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

      3.  Forbearance from Exercise of Certain  Remedies.  Until the Senior Debt
has been  paid in full in cash and the  Commitments  have  been  terminated,  no
Subordinated  Party shall (a) take any action or exercise any remedy against the
Debtors,  or either of them,  to enforce all or any portion of the  Subordinated
Fees;  (b) take any action or exercise  any remedy  against any  guarantor of or
pledgor  securing  the Senior Debt in order to collect  any of the  Subordinated
Fees; (c) commence, or join with any other creditor of the Debtors, or either of
them, in commencing any Insolvency  Proceeding against the Debtors, or either of
them;  or (d) take any action or exercise  any remedy  against  any  property or
assets of any  guarantor  of or pledgor  securing  the Senior Debt or acquire or
take any lien on or  security  interest  in any of the  Collateral.  The parties
hereto  understand and agree that the Agent shall have the right, but shall have
no obligation, to cure any default with respect to the Subordinated Fees without
the prior written consent of each Subordinated Party.  Notwithstanding  anything
contained in this Agreement to the contrary,  in no event shall any Subordinated
Party be entitled to receive and retain any securities,  equity or otherwise, or
other consideration provided for in (i) a plan of reorganization or otherwise in
connection  with any  bankruptcy  or  Insolvency  Proceeding  or (ii) any  other
judicial or nonjudicial  proceeding for the liquidation,  dissolution or winding
up of the Debtors,  or any of them,  or the assets or properties of the Debtors,
or any of them,  in any case unless and until the Senior Debt is paid in full in
cash to the satisfaction of the Lender Group and the Commitments are terminated.

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

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

            (b) to collect  any assets of the  Debtors  distributed,  divided or
applied by way of dividend or payment,  or any securities  issued, on account of
the Subordinated  Fees and to apply the same, or the proceeds of any realization
upon the same that the Agent in its discretion  elects to effect,  to the Senior
Debt  until  all of the  Senior  Debt  has  been  paid  in  full  in cash to the

                                       4
<PAGE>

satisfaction  of the  Lender  Group  and any  commitment  of the Agent to extend
credit or make  other  financial  accommodations  to any  Debtor is  terminated,
rendering any surplus to the Subordinated Parties if and to the extent permitted
by law; and

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

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

      5. Duration and Termination.  This Agreement shall constitute a continuing
agreement  of  subordination,  and shall  remain in  effect  until  indefeasible
payment in full in cash to the  satisfaction  of the Lender  Group of the Senior
Debt and  termination of the  Commitments.  The holder or holders of Senior Debt
may, without notice to any Subordinated Party extend or continue credit and make
other  financial  accommodations  to or for  the  account  of the  Borrowers  in
reliance upon this Agreement.  The obligations of each Subordinated  Party under
this Agreement shall continue to be effective, or be reinstated, as the case may
be, if at any time any  payment in respect of any Senior  Debt is  rescinded  or
must  otherwise  be restored or returned by a holder of Senior Debt by reason of
any  Insolvency  Proceeding  or as a result of the  appointment  of a  receiver,
intervenor or conservator  of, or trustee or similar officer for, the Debtors or
any substantial part of any Debtor's property, or otherwise,  all as though such
payment had not been made.

      6. Subordinated Party's Waivers. All of the Senior Debt shall be deemed to
have been made or incurred in reliance upon this  Agreement.  Each  Subordinated
Party  expressly  waives  all  notice  of the  acceptance  by the  Agent  of the
subordination  and other  provisions of this Agreement and all other notices not
specifically  required pursuant to the terms of this Agreement

                                       5
<PAGE>

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

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

      8. No Contest of Security  Interest.  No Subordinated  Party shall contest
the validity,  perfection  or  enforceability  of any lien or security  interest
granted  to the  Agent by any  Debtor,  and each  Subordinated  Party  agrees to
cooperate in the defense of any action  contesting  the validity,  perfection or
enforceability of such liens or security interests.

      9.  Subordination  Not Affected,  Etc.  Nothing in this Agreement shall be
construed as affecting or in any way limiting the extension of new or additional
financial  accommodation  by the Lender Group to the Borrowers and the terms and
conditions   hereof   shall   apply  to  such  new  and   additional   financial
accommodations.  Notwithstanding the preceding sentence or anything contained in
this Agreement to the contrary,  none of the provisions of this Agreement  shall
be deemed or construed to  constitute a commitment  or an obligation on the part
of the Lender Group to make any future  loans,  advances or other  extensions of
credit or financial  accommodation  to the Borrowers.  Each  Subordinated  Party
understands and agrees that all

                                       6
<PAGE>

accrued interest,  charges, expenses,  attorneys' fees and other liabilities and
obligations  under the Senior Loan Agreement shall constitute part of the Senior
Debt,  and nothing in this  Agreement  shall be construed as affecting or in any
way  limiting  any  indulgence  granted by the Lender  Group with respect to any
existing financial accommodation to the Borrowers.  The subordinations effected,
and the rights created,  hereby shall not be affected by (a) any amendment of or
any addition of or supplement to any instrument,  document or agreement relating
to the Senior Debt,  (b) any  exercise or  non-exercise  of any right,  power or
remedy  under or in respect of the Senior  Debt or any  instrument,  document or
agreement relating thereto,  (c) the release,  sale,  exchange or surrender,  in
whole or in part, of any part of the Collateral or any additional  collateral to
which the Agent may become  entitled,  (d) any  release of any  guarantor  of or
pledgor securing the Senior Debt or any security for such pledge or guaranty, or
(e) any waiver, consent, release, indulgence,  extension, renewal, modification,
delay or other action, inaction or omission in respect of the Senior Debt or any
instrument,  document or agreement  relating thereto or any security therefor or
pledge or guaranty thereof,  whether or not each  Subordinated  Party shall have
had notice or knowledge of any of the foregoing  and  regardless of whether each
Subordinated  Party shall have consented or objected  thereto.  Any provision of
any document, instrument or agreement evidencing, securing or otherwise relating
to the Subordinated Fees purporting to limit or restrict in any way any Debtor's
ability  to enter  into any  agreement  with the  Agent to amend or  modify  any
document, instrument or agreement evidencing,  securing or otherwise relating to
the Senior Debt shall be deemed of no force or effect  until the Senior Debt has
been  repaid in full in cash to the  satisfaction  of the  Lender  Group and the
Commitments have been terminated.

      10. Voided Payments. Notwithstanding anything herein that may be construed
to the  contrary,  to the extent that any Debtor makes any payment on the Senior
Debt  which,  within  twelve  (12)  months  of the  date  of  such  payment,  is
subsequently invalidated,  declared to be fraudulent, avoidable or preferential,
set aside or is required to be repaid to a trustee, receiver, the estate of such
Debtor or any other party under any bankruptcy act, state or Federal law, common
law or equitable cause (such payment being hereinafter  referred to as a "Voided
Payment"),  then,  to the extent of such  Voided  Payment,  that  portion of the
Senior Debt that had been  previously  satisfied by such Voided Payment shall be
revived  and  continue  in full force and effect as if such  Voided  Payment had
never been made.  In the event that a Voided  Payment is sought to be  recovered
from the Agent or any other  member of the Lender  Group  under the Senior  Loan
Agreement, an "Event of Default" under the Senior Loan Agreement shall be deemed
to have  occurred and to be  continuing  from the date of such recovery from the
Agent or any such other member of the Lender Group of such Voided  Payment until
the full  amount of such  Voided  Payment is fully and  finally  restored to the
Agent  or such  other  member  of the  Lender  Group  and  until  such  time the
provisions of this Agreement shall be in full force and effect.

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

                                       7
<PAGE>

      12. Waiver.  Irrespective of the due date of any of the Subordinated Fees,
each Subordinated Party hereby expressly waives (except as expressly provided by
Section  2(b)  hereof)  any and all  rights  to  payment  by any  Debtor  of the
Subordinated  Fees prior to  repayment  in full in cash of the  Senior  Debt and
termination of the Commitments.

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

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

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

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

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

                                       8
<PAGE>

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

                                and

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

      with copies to:           MAYER, BROWN, ROWE & MAW LLP
                                1675 Broadway
                                New York, New York 10019
                                Attn: Ron Brody, Esq.
                                Fax No.  (212) 262-1910, Esq.
                                Fax No. (504) 596-2800

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

                                and

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

                                       9
<PAGE>

      with copies to:           MAYER, BROWN, ROWE & MAW LLP
                                1675 Broadway
                                New York, New York 10019
                                Attn: Ron Brody, Esq.
                                Fax No.  (212) 262-1910

      If to Agent:              WELLS FARGO FOOTHILL, INC.
                                2450 Colorado Avenue, Suite 3000 West
                                Santa Monica, California 90404
                                Attention:  Business Finance Division Manager
                                Fax No.  (310) 453-7413

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

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

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

      19.  Amendment of  Management  Agreement.  Except to the extent  expressly
provided in the Senior Loan Agreement,  each Subordinated  Party and the Debtors
agree to  forbear  from (a)  modifying,  altering  or  amending  any term of the
Management  Agreement,  and (b) from  granting  (in the case of the Debtors) and
receiving  (in the  case of any  Subordinated  Party)  any  collateral  or other
security of any nature to secure the Subordinated Fees.

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

      21. Jurisdiction.  TO INDUCE THE AGENT AND THE OTHER MEMBERS OF THE LENDER
GROUP TO AFFORD FINANCIAL  ACCOMMODATIONS  TO THE BORROWERS,  EACH  SUBORDINATED
PARTY  IRREVOCABLY  AGREES THAT ALL ACTIONS ARISING  DIRECTLY OR INDIRECTLY AS A
RESULT OR IN  CONSEQUENCE

                                       10
<PAGE>

OF THIS AGREEMENT  SHALL BE INSTITUTED AND LITIGATED ONLY IN COURTS HAVING SITUS
IN THE CITY OF NEW YORK, NEW YORK AND EACH SUBORDINATED PARTY HEREBY CONSENTS TO
THE EXCLUSIVE  JURISDICTION  AND VENUE OF ANY STATE OR FEDERAL COURT LOCATED AND
HAVING ITS SITUS IN SAID CITY AND STATE. EACH  SUBORDINATED  PARTY HEREBY WAIVES
ANY OBJECTION BASED ON FORUM NON CONVENIENS,  AND EACH SUBORDINATED PARTY HEREBY
WAIVES  PERSONAL  SERVICE OF ANY AND ALL PROCESS.  THE PARTIES  CONSENT THAT ALL
SUCH SERVICE OF PROCESS MAY BE MADE BY CERTIFIED MAIL, RETURN RECEIPT REQUESTED,
DIRECTED  TO THE AGENT OR EACH  SUBORDINATED  PARTY AT THE  ADDRESS  OF OEDA SET
FORTH HEREIN IN THE MANNER PROVIDED BY APPLICABLE  STATUTE,  LAW, RULE OF COURT,
OR OTHERWISE.

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

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

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

                                       11
<PAGE>

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

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

                [REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

                                       12
<PAGE>

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

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

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

                              THE OLD EVANGELINE DOWNS CAPITAL
                              CORP., a Delaware corporation

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

SUBORDINATED PARTIES:         OED ACQUISITION LLC,
                              a Delaware limited liability company

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

                              DIAMOND JO, LLC (FORMERLY KNOWN AS PENINSULA
                              GAMING COMPANY, LLC), a Delaware limited
                              liability company

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

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

                              By:  /s/  Todd R. Nakamoto
                                 ---------------------------------------
                              Name:  Todd R. Nakamoto
                              Title:  Vice President

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