LOAN AND SECURITY AGREEMENT

(i)  

All indebtedness guaranteed, directly, in any manner, or endorsed (other than for collection or deposit in the ordinary course of business) or discounted with recourse;

(ii)  

All indebtedness in effect guaranteed, directly or indirectly, through agreements, contingent or otherwise (a) to purchase such indebtedness, (b) to purchase, sell, or lease (as lessee or lessor) property, products, materials, or supplies or to purchase or sell services, primarily for the purpose of enabling the debtor to make payment of such indebtedness or to insure the owner of the indebtedness against loss, or (c) to supply funds to, or in any other manner invest in, the debtor;

(iii)  

All indebtedness secured by (or for which the holder of such indebtedness has a right, contingent or otherwise, to be secured by) any mortgage, deed of trust, pledge, lien, security interest, or other charge or encumbrance upon property owned or acquired subject thereto, whether or not the liabilities secured thereby have been assumed; and

(iv)  

All indebtedness incurred as the lessee of goods or services under leases that, in accordance with GAAP, should not be reflected on the lessee’s balance sheet.

(i)  

Liens permitted under any of the Senior Debt Documents (other than any such Liens securing any Indebtedness or other obligations evidenced thereby or arising thereunder on any Collateral);

(ii)  

Liens for taxes, assessments, or similar charges, incurred in the ordinary course of business, that are not yet due and payable;

(iii)  

Pledges or deposits made in the ordinary course of business to secure payment of worker’s compensation or to participate in any fund in connection with worker’s compensation, unemployment insurance, old-age pensions, or other social security programs;

(iv)  

Liens of mechanics, materialmen, warehousemen, carriers or other like liens, securing obligations incurred in the ordinary course of business that are not yet due and payable;

(v)  

Good faith pledges or deposits made in the ordinary course of business to secure performance of bids, tenders, contracts (other than for the repayment of borrowed money) or leases, or to secure statutory obligations, or surety, appeal, indemnity, performance, or other similar bonds required in the ordinary course of business;

(vi)  

Liens in favor of Bank under this Agreement; and

(vii)  

The following, if the validity or amount thereof is being contested in good faith by appropriate and lawful proceedings, so long as levy and execution thereon have been stayed and continue to be stayed and they do not, in the aggregate, materially detract from the value of the Collateral, or materially impair the use thereof in the operation of its business: (a) Claims or liens for taxes, assessments, or charges due and payable and subject to interest or penalty, (b) claims, liens, and encumbrances upon, and defects of title to the Collateral, including any attachment of Collateral or other legal process prior to adjudication of a dispute on the merits, (c) claims or liens of mechanics, materialmen, warehousemen carriers or other like liens, (d) adverse judgments on appeal, and (e) any other liens to which Bank has consented in writing.

3.1  

Note .  The Loan shall be evidenced by the Note which shall be dated the date of this Agreement, and shall mature on the Maturity Date, when the full amount of principal and unpaid interest shall be due and payable.  Any extension of time for payment of principal or interest on the Note resulting from any date on which any such payment is due falling on a Saturday, Sunday or legal holiday, shall be included in the computation of interest.

3.2  

Interest .  Interest on the unpaid principal balance of this Note shall be (i) payable monthly beginning June 1, 2008, and on the first of each month thereafter until the Maturity Date, which payment of interest shall consist of all interest billed and unpaid through the last day of the month preceding the month in which such payment of interest is due, and (ii) calculated as follows:

3.2.1  

Interest during the Draw Down Period shall accrue from the date of the Note’s execution, or the date funds are first provided, whichever is later, until December 31, 2008, on the unpaid principal balance of the Note from time to time outstanding, computed on the basis of a year of three hundred sixty (360) days and the actual number of days lapsed, at a rate equal to the Wall Street Journal Prime Rate per annum; and

3.2.2  

Interest on the Term Period of the Note shall be calculated at a rate of six and a half percent (6.5%) per annum from January 1, 2009 until the Maturity Date.

3.3  

Principal .  No principal payments shall be due during the Draw Down Period.  During the Term Period the Borrowers shall pay the outstanding balance of principal plus accrued interest in equal monthly installments commencing on February 1, 2009, and on the first day of each month thereafter, in an amount that will amortize the loan through the Maturity Date, at which time the entire principal balance and accrued interest shall be due.

3.4  

Payment .  All sums payable to Bank under the Note or this Agreement shall be paid in immediately available funds.  Bank shall send to the Borrowers periodic statements of all amounts due under the Note or this Agreement, which shall be considered correct and conclusively binding on the Borrowers unless one or more Borrowers notify Bank to the contrary within thirty (30) days of the Borrowers’ receipt of any statement that any Borrower deems to be incorrect.

3.5  

Prepayment .  The Borrowers have the right at any time to prepay the Loan in whole or in part, provided , that interest accrued to the date of such prepayment plus a fee equal to the applicable amount set forth in this Section 3.5 (the “ Prepayment Fee ”) shall be paid on such prepayment date; provided further however , that the Borrowers shall only pay a Prepayment Fee if such prepayment of the Loan is being financed with proceeds from a loan issued by a financial institution other than the Bank or an affiliate thereof.

3.5.1  

If the Borrowers prepay the Loan prior to the first anniversary of the Closing, the Prepayment Fee shall be equal to three percent (3%) of the amount prepaid on such prepayment date.

3.5.2  

If the Borrowers prepay the Loan on or after the first anniversary of the Closing but before the second anniversary of the Closing, the Prepayment Fee shall be equal to two percent (2%) of the amount prepaid on such prepayment date.

3.5.3  

If the Borrowers prepay the Loan on or after the second anniversary of the Closing, the Prepayment Fee shall be equal to one percent (1%) of the amount prepaid on such prepayment date.

3.6  

Purpose .  The purpose of this Loan is to provide the Borrowers with some of the funds necessary to finance the purchase of the FF&E for the Diamond Jo Casino located in Dubuque, Dubuque County, Iowa, and the funds provided hereunder will be used only such purpose.

3.7  

Cost of Purchase .

3.7.1  

The total purchase price of the FF&E purchased with the proceeds of the Loan is estimated to be $8,000,000.  Any amount owed for such purchase in excess of this Loan shall be the sole responsibility of the Borrowers.

3.7.2  

Each Borrower agrees that no liability shall attach to Bank, its agents or employees in connection with the purchase of the FF&E, it being understood that the Borrowers shall continue to be liable for the payment of any and all debts, actions, claims, demands, accounts or causes of action which may arise hereunder, liability on the part of Bank being expressly waived and released.

3.8  

Disbursement .

3.8.1  

Bank shall disburse to the Borrowers the Loan proceeds for the purchase of FF&E.  The net proceeds of the Loan shall be conclusively deemed a full and complete consideration for the Note.

3.8.2  

The Borrower shall use the proceeds of the Loan for the purposes set out in this Agreement.

4.  

Conditions Precedent .  The obligation of Bank to make the Loan is subject to the conditions precedent set forth in this Section 4.

4.1  

Documents Required for the Initial Disbursement.  The Borrowers shall have delivered to Bank, in form and content acceptable to Bank, prior to the initial disbursement of the Loan (the “ Closing ”), the following:

4.1.1  

The Note, duly executed by the Borrowers;

4.1.2  

The financing statements and other instruments required to be delivered by the Borrowers pursuant to Section 5;

4.1.3  

A copy, certified as of the date of the Closing, of resolutions of the members of each Borrower authorizing the execution, delivery and, performance of this Agreement and the Note and each other document to be delivered pursuant hereto;

4.1.4  

A certificate (dated the date of the Closing) of the managing members of each Borrower as to the incumbency and signature of the Officers of each Borrower signing this Agreement and the Note and each other document to be delivered pursuant hereto;

4.1.5  

A written opinion of the Borrowers’ counsel, dated the date of the Closing and addressed to Bank to the effect that:

4.1.5.1  

The Borrowers are limited liability companies organized, existing and in good standing under the laws of the State of Delaware and Louisiana, as the case may be, and are qualified to transact business and are in good standing in the States of Delaware, Louisiana, as the case may be, and Iowa;

4.1.5.2  

To the knowledge of such counsel, each Borrower has the power to execute and deliver this Agreement, to borrow money hereunder, to grant the Collateral required hereunder, to execute and deliver the Note, and to perform its obligations hereunder and thereunder;

4.1.5.3  

All actions by the Borrowers and all consents and approvals of any Persons necessary to the validity of this Agreement and the Note and such other documents to be delivered hereunder do not conflict with any provision of the Operating Agreements of the Borrowers, or of any applicable Laws, or any other agreement binding the Borrowers or their respective property of which, after reasonable inquiry, such counsel has knowledge.

4.1.5.4  

This Agreement and the Note and all other documents to be delivered hereunder have been duly executed by, and each is a valid and binding obligation of, the Borrowers, each of the foregoing documents is in all respects sufficient to achieve its purported function and is enforceable in accordance with its terms, except as limited by bankruptcy, insolvency, reorganization, moratorium, or other similar laws affecting creditors’ rights generally or by general equitable principles.

4.1.6  

At the Closing and at each subsequent disbursement of Loan proceeds, the Borrowers shall provide evidence satisfactory to Bank of the total cost of the purchase of the FF&E and a description of such FF&E.

4.2  

Certain Events .  As of the date of the Closing and the date of each subsequent disbursement of Loan proceeds, and as a condition thereof:

4.2.1  

The representations and warranties set forth herein shall be true;

4.2.2  

No Event of Default shall have occurred and be continuing, and no event shall have occurred and be continuing that, with the giving of notice or passage of time or both, would be an Event of Default;

4.2.3  

No material adverse change shall have occurred in the financial condition of the Borrowers or any of their Subsidiaries since the dates of the financial statements previously delivered to Bank;

4.2.4  

Approval of the FF&E, satisfactory to Bank, by the Iowa Racing and Gaming Commission; and

4.2.5  

All legal matters incidental to the transactions contemplated by this Agreement shall be satisfactory to Bank and its legal counsel.

4.3  

Loan Financing Fee .  A one-time financing fee of 0.25% of the principal amount of the Loan shall be paid to Bank by the Borrowers at Closing.

4.4  

Bank’s Obligation to Close .  Bank’s obligation to close or otherwise perform is excused if, before or at the time of Closing, Bank, in good faith, and in its full discretion, believes to its personal satisfaction that:  (i) The Borrowers will be unable to perform fully and completely the Obligations under the terms of this Agreement, (ii) Bank will not have, as of the time of Closing, a first lien priority in the Collateral agreed upon to fully secure the Obligations, or (iii) a change in circumstances affecting the Borrowers or Bank, or new information has been acquired since the delivery of the Commitment Letter dated January 24, 2008 by Bank or the Borrowers that significantly adversely affects Bank’s decision to loan.  For the purposes of this Section, and every other provision or duty, express or implied, of this Agreement, “good faith” means honesty in fact, determined subjectively, rather than by an objective standard.

5.  

Collateral Security .  As further security for the prompt satisfaction of all Obligations, the Borrowers hereby assign to Bank all of their right, title, and interest in and to, and grant Bank a lien upon, and a purchase money security interest in the following assets acquired with the proceeds of the Loan (the “ Collateral ”):  (i) the FF&E, wherever located, whether now owned or hereafter acquired, together with all parts, accessories and replacements, (ii) any computer programs embedded in the FF&E at the time the FF&E is purchased by the Borrowers and any supporting information relating to such programs (as provided in Section 1(ar) of Article 9 of the Iowa UCC (Iowa Code Ann. § 554.9102 (2007))), and (iii) all FF&E acquired upon the sale, lease, license, exchange, or other disposition of any FF&E.

5.2  

Financing Statements .  The Borrowers will:

5.2.1  

Assist the Bank in filing such financing statements (including amendments thereto and continuation statements thereof) in form satisfactory to Bank as Bank, from time to time, may specify;

5.2.2  

Pay, or reimburse Bank for paying, all costs and taxes of filing or recording the same in such public offices as Bank may designate;

5.2.3  

Take such other steps as Bank, from time to time, may direct, including the noting of Bank’s lien on the Collateral on any certificates of title therefor, all to perfect to the satisfaction of Bank, Bank’s interest in the Collateral; and

5.2.4  

In addition to the foregoing, and not in limitation thereof:  (i) to the extent permitted by law, carbon, photographic, or other reproduction of this Agreement shall be sufficient as a financing statement and may be filed in any appropriate office in lieu thereof, and (ii) to the extent lawful, the Borrowers hereby appoint Bank as their attorney-in-fact (without requiring Bank to act as such) to execute any financing statement in the name of the Borrowers and to perform all other acts that Bank deems appropriate to perfect and continue its security interest in, and to protect and preserve, the Collateral.

5.3   

Release of Collateral .  Upon the full and final payment of the Obligations under this Agreement and the Note, this Agreement shall terminate, and all of the liens on the Collateral created hereunder shall be released.  In addition, Bank shall release from the liens created hereunder any Collateral that is sold, transferred, disbursed or otherwise disposed of in accordance with the provisions of this Agreement (either in the ordinary course of business or otherwise).  Upon compliance with the provisions of this Section 5.3, Bank shall execute, deliver or acknowledge any necessary or proper instruments of termination, satisfaction or release to evidence the release of the Collateral.

6.   

Representations and Warranties .  To induce Bank to enter into this Agreement, the Borrowers represent and warrant that, as of the date of the Closing:

6.1  

The Borrowers are Peninsula Gaming, LLC (a Delaware limited liability company), Diamond Jo, LLC (a Delaware limited liability company), and Old Evangeline Downs, L.L.C. (a Louisiana limited liability company), all organized, existing and in good standing under the Laws of each of their respective jurisdictions of organization and authorized to conduct business under the Laws of the State of Iowa; the Borrowers have the power to own their respective properties and to engage in the businesses each conducts, and are qualified and in good standing under each of their respective jurisdictions of organization and in good

6.2  

No Borrower is directly or indirectly controlled by, or acting on behalf of, any Person which is an “Investment Company,” within the meaning of the Investment Company Act of 1940, as amended;

6.3  

The execution and performance of this Agreement and the Note will not (immediately or with the passage of time, the giving of notice, or both) (i) violate the Operating Agreement of any Borrower or violate any applicable Laws or result in a default under any contract, agreement, or instrument to which any Borrower is a party or by which any Borrower or its property is bound, or (ii) result in a violation of the terms and conditions of any of the Senior Debt Documents, or (iii) result in the creation or imposition of any security interest in, or lien or encumbrance upon, any of the assets of the Borrowers, except in favor of Bank;

6.4  

Each Borrower has the power and authority to enter into and perform this Agreement and the Note and to incur the obligations herein and therein provided for, and has taken all actions necessary to authorize the execution, delivery and performance of this Agreement and the Note;

6.5  

This Agreement and the Note are, or when delivered will be, valid, binding and enforceable in accordance with their respective terms;

6.6  

Except as set forth in the Borrowers’ filings with the Securities and Exchange Commission or as previously disclosed in writing to Bank, there is no pending order, notice, claim, litigation, proceeding, or investigation against or affecting the Borrowers, whether or not covered by insurance, that would in the aggregate involve the payment of $50,000.00 or more or would otherwise materially or adversely affect the financial condition or business prospects of the Borrowers if adversely determined;

6.7  

The Borrowers have good and merchantable title to all of the Collateral, none of which is subject to any security interest, encumbrance or lien, or claim of any third Person, except for Permitted Liens;

6.8  

Except as set forth in the Borrowers’ filings with the Securities and Exchange Commission or in Schedule B attached hereto, no Borrower has material Indebtedness of any nature, including, but without limitation, liabilities for taxes and any interest or penalties relating thereto (except to the extent such taxes, interest or penalties are being contested by the Borrowers in good faith or to the extent permitted by this Agreement), and the Borrowers do not know or have reasonable ground to know of any basis for the assertion against them of any such Indebtedness;