As Of                Filer                Filing    For·On·As Docs:Size              Issuer               Agent

11/17/06  MTR Gaming Group Inc              S-4/A                  8:1.6M                                   Merrill Corp-MD/FA
          Speakeasy Gaming of Las Vegas Inc
          Mountaineer Park Inc
          Speakeasy Gaming of Fremont Inc.
          Presque Isle Downs Inc
          Scioto Downs Inc
          Jackson Racing Inc
          MTR-Harness Inc

Document/Exhibit                   Description                      Pages   Size 

 1: S-4/A       Registration of Securities Issued in Business       HTML    949K 
                          Combination Transactions                               
 2: EX-5.1      Opinion re: Legality                                HTML     15K 
 3: EX-12.1     Statement re: Computation of Ratios                 HTML     58K 
 4: EX-23.1     Consent of Experts or Counsel                       HTML     10K 
 5: EX-99.1     Miscellaneous Exhibit                               HTML    134K 
 6: EX-99.2     Miscellaneous Exhibit                               HTML     28K 
 7: EX-99.3     Miscellaneous Exhibit                               HTML     15K 
 8: EX-99.4     Miscellaneous Exhibit                               HTML     20K 

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 17, 2006

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

AMENDMENT NO. 1 TO
FORM S-4

REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

MTR GAMING GROUP, INC.

(Exact name of registrant as specified in its charter)

 

STATE ROUTE 2, SOUTH
P.O. BOX 358
CHESTER, WEST VIRGINIA 26034
(304) 387-8300

(Address, including zip code, and telephone number, including area code, of principal executive offices)

EDSON R. ARNEAULT
PRESIDENT AND CHIEF EXECUTIVE OFFICER
MTR GAMING GROUP, INC.
STATE ROUTE 2, SOUTH
P.O. BOX 358
CHESTER, WEST VIRGINIA 26034
(304) 387-8300

(Name, address, including zip code, and telephone number, including area code, of agent for service)

With copies to:

ROBERT L. RUBEN, ESQ.
EDWARD A. FRIEDMAN, ESQ.
RUBEN & ARONSON, LLP
4800 MONTGOMERY LANE, SUITE 150
BETHESDA, MD 20814
(301) 951-9696

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as practicable after this Registration Statement becomes effective.

If any of the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box. o

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.

ADDITIONAL REGISTRANTS:

 

 

 

OFFER TO EXCHANGE ALL OUTSTANDING
9.00% SENIOR SUBORDINATED NOTES DUE 2012, SERIES A
($125,000,000 IN AGGREGATE PRINCIPAL AMOUNT OUTSTANDING)

FOR

9.00% SENIOR SUBORDINATED NOTES DUE 2012, SERIES B

AND

GUARANTEES OF THE SERIES B SENIOR NOTES BY
MOUNTAINEER PARK, INC., SPEAKEASY GAMING OF FREMONT, INC.,
SPEAKEASY GAMING OF LAS VEGAS, INC., PRESQUE ISLE DOWNS, INC., SCIOTO DOWNS, INC.,
JACKSON RACING, INC. AND MTR-HARNESS, INC.

each a wholly-owned subsidiary of MTR Gaming Group, Inc.

THE EXCHANGE OFFER

We hereby offer to exchange all MTR Gaming 9.00% Series A Senior Subordinated Notes due 2012 tendered in accordance with the procedures described in this Prospectus, and not withdrawn, for an equal principal amount of our 9.00% Series B Senior Subordinated Notes due 2012. You may withdraw tendered Series A Notes at any time before the expiration of the exchange offer.

The exchange offer is not conditioned upon a minimum aggregate principal amount of outstanding notes being tendered. The exchange offer, however, is subject to certain conditions including that it not violate applicable laws or any applicable interpretation of the staff of the Securities and Exchange Commission.

THE SERIES B NOTES

The terms of the Series B Notes to be issued in the exchange offer are identical to the outstanding Series A Notes, except that we have registered the Series B Notes with the Securities and Exchange Commission. In addition, the Series B Notes will not be subject to the transfer restrictions applicable to the Series A Notes. We will not apply for listing any of the Series B Notes on any securities exchange or arrange for them to be quoted on any quotation system.

The Series B Notes will be our senior subordinated unsecured obligations and will be guaranteed on a senior subordinated unsecured basis by each of our current operating subsidiaries. The Series B Notes will rank junior in right of payment to all of our existing and future senior indebtedness (including our senior secured credit facility and our 93¤4% senior notes due 2010) and will rank equal in right of payment with any senior subordinated indebtedness that we may incur. However, because the Series B Notes and the guarantees are unsecured, the Series B Notes and the guarantees will also be effectively subordinated to all of our and the guarantors’ existing and future senior secured indebtedness, including borrowings under our fifth amended and restated revolving credit facility which we expect to enter into during the third quarter of our current fiscal year, to the extent of the collateral securing such indebtedness.

We will make interest payments on the Series B Notes semi-annually on each June 1 and December 1 beginning on December 1, 2006, or if later, from the most recent date of payment of interest on the Series A Notes.

The exchange offer will remain open for at least thirty (30) days after the date notice thereof is mailed to holders of the notes (or longer if required by applicable law). We will not receive any proceeds from the exchange offer.

YOU SHOULD CAREFULLY CONSIDER THE RISK FACTORS BEGINNING ON PAGE 15 OF THIS PROSPECTUS BEFORE PARTICIPATING IN THE EXCHANGE OFFER.

THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON DECEMBER 27, 2006 UNLESS EXTENDED.

NONE OF THE SECURITIES AND EXCHANGE COMMISSION (THE “SEC”), ANY STATE SECURITIES COMMISSION, ANY STATE GAMING COMMISSION OR ANY OTHER GAMING AUTHORITY OR REGULATORY AGENCY HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A PROXY.

The date of this Prospectus is November 21, 2006.

TABLE OF CONTENTS

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You should rely only upon the information contained in, or incorporated into, this Prospectus and in the applicable letter of transmittal accompanying this Prospectus. We have not authorized any other person to provide you with any other information. If anyone provides you with different or inconsistent information, you should not rely on it. We are not making an offer to sell these securities in any jurisdiction where the offer or sale is not permitted. You should assume the information appearing in this document is accurate only as of the date on the front cover of this Prospectus. Our business, financial condition, results of operations and prospects may have changed since that date.

This Prospectus incorporates important business and financial information about us that is not included in or delivered with this document. See “Incorporation By Reference” below.

INCORPORATION BY REFERENCE

We have “incorporated by reference” into this Prospectus certain information that we file with the Commission. This means that we can disclose important business, financial and other information in this Prospectus by referring you to the documents containing this information. All information incorporated by reference is part of this Prospectus, unless and until that information is updated and superseded by the information contained in this Prospectus or any information filed with the Commission and incorporated later. Any information that we subsequently file with the Commission that is incorporated by reference will automatically update and supersede any previous information that is part of this Prospectus.

We incorporate by reference our documents listed below and any future filings we make with the Commission under Sections 13(a), 13(c), 14, or 15(d) of the Exchange Act until the exchange offer is completed:

—   Annual Report on Form 10-K for the year ended December 31, 2005;

—   Quarterly Report on Form 10-Q for the quarters ended March 31, 2006, June 30, 2006 and September 30, 2006; and

—   Current Reports on Form 8-K filed on January 3, 2006, January 26, 2006, April 3, 2006, April 18, 2006, May 11, 2006, May 26, 2006, August 3, 2006, September 28, 2006, and October 24, 2006.

We will provide without charge to each person to whom a copy of this Prospectus is delivered upon the written or oral request of such person, a copy of any or all of the documents incorporated by reference (other than exhibits to such documents, unless such exhibits are specifically incorporated by reference into the information that this Prospectus incorporates). TO OBTAIN TIMELY DELIVERY OF THIS INFORMATION, WE MUST RECEIVE YOUR REQUEST NO LATER THAN FIVE (5) BUSINESS DAYS BEFORE THE EXPIRATION DATE OF THE EXCHANGE OFFER.

Requests should be directed to:

MTR Gaming Group, Inc.
State Route 2, South
P.O. Box 358
Chester, West Virginia 26034
Attention: John W. Bittner, Jr.
Telephone: (304) 387-8310

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FOR NEW HAMPSHIRE RESIDENTS ONLY

NEITHER THE FACT THAT A REGISTRATION STATEMENT OR AN APPLICATION FOR A LICENSE HAS BEEN FILED UNDER CHAPTER 421-B OF THE NEW HAMPSHIRE UNIFORM SECURITIES ACT WITH THE STATE OF NEW HAMPSHIRE NOR THE FACT THAT A SECURITY IS EFFECTIVELY REGISTERED OR A PERSON IS LICENSED IN THE STATE OF NEW HAMPSHIRE CONSTITUTES A FINDING BY THE SECRETARY OF STATE THAT ANY DOCUMENT FILED UNDER RSA 421-B IS TRUE, COMPLETE AND NOT MISLEADING. NEITHER ANY SUCH FACT NOR THE FACT THAT AN EXEMPTION OR EXCEPTION IS AVAILABLE FOR A SECURITY OR A TRANSACTION MEANS THAT THE SECRETARY OF STATE HAS PASSED IN ANY WAY UPON THE MERITS OR QUALIFICATIONS OF, OR RECOMMENDED OR GIVEN APPROVAL TO, ANY PERSON, SECURITY OR TRANSACTION. IT IS UNLAWFUL TO MAKE, OR CAUSE TO BE MADE, TO ANY PROSPECTIVE PURCHASER, CUSTOMER OR CLIENT ANY REPRESENTATION INCONSISTENT WITH THE PROVISIONS OF THIS PARAGRAPH.

DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

We make “forward-looking statements” throughout this Prospectus. Whenever you read a statement that is not solely a statement of historical fact (such as when we use words such as “believe,” “expect,” “anticipate,” “estimate,” “intend,” “plan,” “will,” “would,” “could,” “likely” and other similar words, phrases or statements), you should understand that our expectations may not be correct, although we believe they are reasonable. We do not guarantee that the transactions and events described in this Prospectus will happen as described or that any positive trends noted in this Prospectus will continue. The forward-looking information contained in this Prospectus is generally located under the headings “Summary,” “Risk Factors,” “Use of Proceeds,” “Capitalization,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business,” but may be found in other locations as well. These forward-looking statements generally relate to our strategies, plans, objectives and expectations for future operations and are based upon management’s reasonable beliefs or estimates of future results or trends. You should read this Prospectus completely and with the understanding that actual future results may be materially different from what we expect. We will not update these forward-looking statements, even if our situation changes in the future.

Specific factors that might cause actual results to differ from our expectations, might cause us to modify our plans or objectives, may affect our ability to timely pay amounts due under the notes and the subsidiary guarantees or may affect the value of the notes, include, but are not limited to:

·       weather conditions or road conditions limiting access to our properties and the cyclical and seasonal nature of our business;

·       adverse changes in West Virginia video lottery laws or the rates of taxation of video lottery operations;

·       legalization of new forms of gaming in our target markets, which would lead to increased competition;

·       other significant competition;

·       general economic conditions affecting the resort business;

·       dependence upon key personnel and the ability to attract new personnel;

·       changes in the number of diluted shares;

·       leverage and debt service;

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·       expiration, loss or non-renewal of gaming licenses, including failure, for any reason, to satisfy the conditions required to obtain our permanent Category 1 slots license for Presque Isle Downs;

·       delays experienced by the Commonwealth of Pennsylvania in commencing slot operations;

·       costs and risks relating to construction of Presque Isle Downs and our Minnesota racetrack, and expansion of our other operations;

·       continued dependence on Mountaineer for the vast majority of our revenues;

·       disruption in developing and integrating our Pennsylvania, Minnesota, Michigan and other facilities we may expand and/or acquire;

·       extensive regulation by gaming and racing authorities including the conditions of our Pennsylvania slots license;

·       regulatory approval of our building plans for Presque Isle Downs;

·       environmental laws and potential exposure to environmental liabilities;

·       limited public market and liquidity;

·       successful cross-marketing among our properties;

·       success of our planned advance deposit wagering business for Scioto Downs;

·       success of future legislation, if any, that would permit Scioto Downs to operate slot machines;

·       our management of higher leverage and debt service, including availability and adequacy of the cash flow from our operations to meet our operational and debt service requirements, including payment of amounts due under the Notes and our other indebtedness, and operating restrictions imposed by the terms of that indebtedness;

·       other factors described under “Risk Factors” in this Prospectus; and

·       other factors described from time to time in our SEC filings and press releases.

All future written and verbal forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. In light of these and other risks, uncertainties and assumptions, the forward-looking events discussed in this Prospectus might not occur.

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PROSPECTUS SUMMARY

This summary highlights information that we believe is especially important concerning our business and this offering. It does not contain all of the information that may be important to you and to your investment decision. The following summary is qualified in its entirety by the more detailed information and the financial statements and notes thereto appearing elsewhere in this Prospectus. You should carefully read this entire Prospectus and should consider, among other things, the matters set forth under “Risk Factors” before deciding to invest in the securities offered hereby. We have a December 31 fiscal year-end. Unless the context indicates otherwise and except with respect to any description or summary of the terms of the notes, all references to the “Company,” “we,” “our,” “ours” and “us” refers to MTR Gaming Group, Inc., a Delaware corporation, and its consolidated operating subsidiaries. When used in reference to the Company, “total revenues” means total revenues before deduction for promotional allowances, and “net revenues” means total revenues after deducting promotional allowances. Net revenues of the Company reflect the reclassification, due to their increasing significance, of promotional allowances from expenses to a deduction from total revenues.

Overview

We own, operate, and develop gaming, horseracing and entertainment facilities located in six states. Our portfolio includes: (i) the Mountaineer Racetrack & Gaming Resort (“Mountaineer”), a destination racino with 3,220 slot machines in Chester, West Virginia, (ii) Presque Isle Downs, which is currently under construction in Erie, Pennsylvania, and is licensed to build a racetrack that is one of only 14 sites in the state statutorily permitted to apply for a license to operate slot machines, which has recently received a conditional slot machine license, (iii) two casinos in Las Vegas, Nevada, (iv) Scioto Downs, a harness racetrack in Columbus, Ohio, (v) a 50% interest in North Metro Harness Initiative, LLC, which has a license to build and operate a racetrack and card room in Anoka County, Minnesota, and (vi) a 90% interest in Jackson Harness Raceway in Jackson, Michigan. For the year ended December 31, 2005, we generated net revenue of $349.9 million.

Our strategy has centered on the development of a destination gaming resort at Mountaineer and the surrounding area, which has been our primary operating asset for the past 14 years. Mountaineer is one of only four racetracks in West Virginia permitted to operate slot machines  (bars and fraternal organizations that sell alcohol may apply for a license to operate up to five and ten limited video lottery machines (“LVLs”), respectively). Mountaineer is strategically located at the northern tip of West Virginia’s northwestern panhandle, primarily serving residents of the Ohio Valley (including Cleveland and Youngstown) and western Pennsylvania (including Pittsburgh). From a modest beginning in 1990 with 165 video lottery terminals, Mountaineer has grown to offer 3,220 slot machines, 359 hotel rooms and a full range of other high-quality amenities. Mountaineer is the only racetrack in the state permitted to operate slot machines apart from the racetrack. Accordingly, approximately 2,770 of Mountaineer’s 3,220 slot machines are located in a casino-like gaming area which creates a distinct competitive advantage.

In addition to growing and developing Mountaineer, we believe we have successfully positioned ourselves for future diversification by securing a racing license at Presque Isle Downs in Erie, Pennsylvania and then, together with other members of the industry, successfully securing legislation for slot machines at the state’s racetracks, including Presque Isle Downs, subject to licensing by the Pennsylvania Gaming Control Board (“PGCB”). In October 2005, we commenced construction of the gaming and horseracing facility. We are nearing completion of the site development work and construction on the clubhouse facility. We anticipate opening the clubhouse for slot machine gaming in February 2007. We intend to commence live racing by September 2007, and have submitted a request to the Pennsylvania Racing Commission for 25 racing dates in 2007.  The PGCB issued conditional gaming licenses in September and October 2006 (we received our Conditional Category 1 License on October 25, 2006). The PGCB has scheduled the hearing on our permanent Category 1 License for December 13, 2006, and has announced

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that it expects to issue permanent licenses in December 2006. Licensees are permitted to operate slot machines pursuant to the conditional licenses pending issuance of the permanent licenses. Subject to compliance with applicable licensing requirements, we plan to operate 2,000 slot machines. Substantially all of the net proceeds from the offering of the Series A Notes are available to fund the development of Presque Isle Downs and to pay the $50 million slots license fee, subject to compliance with applicable licensing  requirements. Following receipt of a permanent license and commencement of slot operations, we expect Presque Isle Downs to become our second largest cash flow generator and significantly diversify our operations.

We also have (through a 50-50 joint venture) a license to construct a racetrack and, after the first 50-day race meet and regulatory approval of a card room plan of operation, a 50-table card room in Anoka County, Minnesota. Additionally, in the event that favorable gaming legislation is adopted, we have a racetrack in Ohio and in Michigan that each present further development opportunities. While we consider the prospect of new gaming legislation in Ohio and Michigan speculative, we believe that our low acquisition and carrying costs for these assets make them attractive investments for the Company. Each of these assets has the potential to become a significant cash flow generator and further diversify our operations.

Properties

Mountaineer Racetrack & Gaming Resort.   Since acquiring Mountaineer in 1992, we have aggressively renovated and expanded its facilities in order to maximize the benefits of the West Virginia Racetrack Video Lottery Act of 1994 (the ‘‘Lottery Act’’), which permits us to operate slot machines at Mountaineer, and subsequent amendments that have permitted additional types of gaming machines. We continue to focus on expanding the reach of our extensive customer base at Mountaineer and improving our operating results. We invested approximately $200 million in capital improvements and expansion projects at Mountaineer from 2000 through 2005. As a result, Mountaineer has become a diverse gaming, entertainment and convention complex and destination resort with:

·       121,956 square feet of gaming space housing 3,220 slot machines, which includes approximately 450 slot machines at the racetrack and approximately 2,770 slot machines in a 97,725 square-foot casino-like gaming area, known as the ‘‘Speakeasy Gaming Saloon,’’ integrated with the hotel rooms and convention space, spa and retail plaza;

·       359 hotel rooms, including the recently renovated 101-room Lodge Hotel and the 258-room, 219,000 square foot Grande Hotel at Mountaineer, which offers 22 suites, a full-service spa and salon, a gourmet coffee shop, a buffet, a 60-seat upscale steakhouse, a retail plaza and an indoor and outdoor swimming pool, and, generally, a level of luxury not previously seen within twenty-five miles of the resort;

·       52,750 square feet of convention space, which can accommodate seated meals for groups of up to 1,870 as well as smaller meetings in more intimate break-out rooms and concerts and boxing events for approximately 1,500 guests;

·       a 69,000 square foot theater and events center, known as the ‘‘Harv,’’ that seats approximately 5,000 patrons for concerts, boxing matches, trade shows and other entertainment offerings;

·       Woodview, an eighteen-hole par-71 golf course measuring approximately 6,550 yards on 170 acres located approximately seven miles from Mountaineer;

·       a 12,000 square foot state-of-the-art fitness center;

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·       on-site parimutuel wagering and thoroughbred, harness and greyhound racing simulcast from other prominent tracks, as well as wagering on Mountaineer’s races at over 900 sites to which the races are simulcast;

·       year-round live thoroughbred horse racing on a one-mile dirt surface or a 7¤8 mile grass surface with expansive clubhouse and grandstand viewing areas with enclosed seating for 770 patrons and 2,800 patrons, respectively;

·       surface parking for approximately 5,400 cars; and

·       approximately 2,350 acres of owned real property in Hancock County, West Virginia, of which approximately 215 acres comprise the resort site, 170 acres comprise the Woodview golf course, and approximately 1,885 acres are available for future development (including an approximately 250 acre parcel on the Ohio River which is adjacent to Mountaineer and which is intended to be developed as a championship golf course).

Presque Isle Downs.   We are developing Presque Isle Downs, a gaming, horseracing and entertainment facility in Erie, Pennsylvania. We currently hold a license to build a thoroughbred racetrack with parimutuel wagering and a Conditional Category 1 License to operate slot machines at the facility. We are nearing completion of the site development work and construction on the clubhouse facility. We anticipate opening the clubhouse for slot machine gaming in February 2007. We intend to commence live racing by September 2007 and have submitted a request to the Pennsylvania Racing Commission for 25 racing dates in 2007.  The PGCB issued conditional gaming licenses in September and October 2006 (we received our Conditional Category 1 License on October 25, 2006). The PGCB has scheduled the hearing on our permanent Category 1 License for December 13, 2006 and has announced that it expects to issue permanent licenses in December 2006. Licensees are permitted to operate slot machines pursuant to the conditional licenses pending issuance of the permanent licenses. In July 2004, the Pennsylvania legislature enacted a law permitting slot machines at the state’s licensed racetracks (including Presque Isle Downs) and certain other locations, subject to licensing by the PGCB. Subject to compliance with applicable licensing requirements, we plan to open the facility with 2,000 slot machines. These targets assume no unforeseen construction delays, permanent licensing in 2006 and the Commonwealth of Pennsylvania’s readiness to commence slot operations. We have the ability to adjust the number of slot machines as the market dictates, up to the current statutory maximum of 3,000 slot machines. Demographically, the Erie market has similar attributes to such established gaming markets as Council Bluffs, Quad Cities (IA and IL), Des Moines, and Baton Rouge, with 0.5 million and 3.8 million adults residing within 50 and 100 miles, respectively, of Presque Isle Downs, as well as 4 million tourists that visit the Erie area each year. Presque Isle Downs would primarily draw customers from residents within a 50-miles radius, the 4 million tourists, as well as potential customers that currently drive past Erie to visit the gaming facilities in western New York. We believe that Presque Isle Downs is well situated to draw customers, located at the intersection of I-90 and State Route 97 with good highway visibility.

We plan to offer a state-of-the-art gaming, horseracing and entertainment facility featuring:

·       2,000 ticket-in, ticket-out slot machines;

·       approximately 3,400 parking spaces;

·       live thoroughbred horse racing on a one-mile track;

·       multi-use clubhouse and grandstand seating for 1,000 patrons, which will also be used for other entertainment;

·       on-site parimutuel wagering and thoroughbred and harness racing simulcast from other prominent tracks; and

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·       several dining options, including an up to 600-seat buffet, a 60-seat upscale steakhouse (the only prime steakhouse in Erie), a clubhouse restaurant and several bars, as well as other entertainment.

In addition to the $50 million licensing fee we anticipate spending a total of approximately $200 million to build Presque Isle Downs, which includes $50 million for land acquisition costs, closing costs, and gaming and operations equipment. Such amounts give no effect to anticipated proceeds from the sale of our alternative sites in Erie or any contributions from the local economic development authority. These amounts are subject to the substantial risks and difficulties associated with the development of Presque Isle Downs.

Turner Construction (“Turner”) is acting as the construction advisor to the Company. Turner is the largest construction manager / general manager in the U.S. and has extensive experience in the gaming industry. We have selected WRB Architects, Inc. (“WRB”) as the project architect. WRB has done numerous projects in and around the Erie area and has experience in the hospitality industry.

In July, 2006, the Pennsylvania Department of Revenue issued temporary regulations interpreting the state’s gaming act to require Category 1 licensees to pay a minimum of $10 million annually to local government. In April of 2006, a Department spokesman had indicated that the aggregate amount payable to the host county and host municipality would be capped at 4% of gross terminal revenue (net win after payouts to players). We intend to mitigate the impact of this new regulation by pursuing agreements with Erie County for the county’s investment of part of its local share into infrastructure improvements that we believe will directly or indirectly benefit both the host municipality, Summit Township, and Presque Isle Downs. We have already entered into a similar agreement with the Summit Township Industrial and Economic Development Authority pursuant to which the Authority has agreed to apply to Erie County for certain grants contemplated by the gaming act, which would be used to fund, initially, up to $14.4 million of agreed upon on- and off-site infrastructure improvements. We remain confident, notwithstanding the new regulation, that the distribution scheme as a whole (including the creation of a Horse Racing Development Fund into which all of the state’s slot machine licensees will pay a portion of gross terminal revenue, but from which only the Category 1 licensees will receive distributions—80% of which will supplement racing purses), will provide an acceptable return on our investment.

Nevada Properties.   We own and operate two properties in Las Vegas, Nevada:

·       On March 11, 2004, we completed our acquisition of Binion’s Gambling Hall & Hotel (“Binion’s”), located in downtown Las Vegas, Nevada. Under the terms of the purchase, an affiliate of Harrah’s operated the property through March 10, 2005, at which time we assumed full control. Binion’s, rich in history stemming from its ownership by the legendary Benny Binion and as the original home of the World Series of Poker®, sits on an approximately 5.3-acre site on Fremont Street in downtown Las Vegas and currently offers 775 slot machines and 45 table games in approximately 87,000 square feet of casino space, 365 hotel rooms, meeting space, two gift shops, multiple restaurants and additional amenities such as a roof-top swimming pool. We plan to revitalize the property by increasing patronage through upgrading slot and table offerings, modest capital improvements and pursuing third-party tenants who will provide rental revenue and additional amenities at the property.

·       Our Ramada Inn and Speedway Casino (the ‘‘Speedway Property’’), located in North Las Vegas near the Las Vegas Motor Speedway, includes a 95-room hotel and a casino with approximately 400 slot machines and seven table games. As a result of its motor racing theme and proximity to the Las Vegas Motor Speedway, the property regularly draws visitors for racing events, including the March NASCAR weekend and the October NHRA races.

North Metro.   Through our wholly owned subsidiary, MTR-Harness, Inc., we own a 50% interest in North Metro Harness Initiative, LLC (“North Metro”), which in January 2005 obtained a license to

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construct and operate a harness racetrack in Columbus Township, Anoka County, Minnesota, approximately 30 miles northeast of downtown Minneapolis. Upon completion of its first 50-day live race meet, and regulatory approval of a card room plan of operation, North Metro will be permitted to operate a 50-table card room. There are approximately 2.4 million and 3.4 million adults living within 50 and 100 miles, respectively, from North Metro’s site. Through September 30, 2006, we have contributed $9.2 million in capital (exclusive of legal and other fees). In addition, North Metro has acquired at a cost of approximately $10 million all the necessary real estate to construct the proposed facility. More recently, the Minnesota Vikings announced their agreement on a new stadium project in Blaine, Minnesota, that is planned to be anchored by a $675 million, 68,000-seat retractable roof stadium, approximately 10 miles from North Metro’s site. We understand that the stadium is planned to be the anchor for a broader, mixed-use development that is projected to feature a unique mix of retail shops, office buildings, private residences and nature preserves. We expect North Metro to obtain project financing without recourse to us, though we could elect to provide a credit enhancement.

Scioto Downs and Jackson Harness.   To leverage our expertise and capitalize on new development opportunities, we have expanded our operations to Ohio and Michigan. While we consider the prospect of new gaming legislation in these states to be speculative, we believe that our low acquisition and carrying costs for these assets make them attractive investments for the Company. If these states enact gaming laws, like those in West Virginia and Pennsylvania that permit slot machines at racetracks, we would expect our revenues and cash flow to increase significantly at these racing facilities.

·       Scioto Downs, Inc. (“Scioto Downs”) owns one of only two horseracing facilities serving the Columbus, Ohio market. We acquired Scioto Downs in July 2003 to diversify our portfolio in the event that gaming is legalized in Ohio. On November 7, 2006, voters in Ohio voted on a slot referendum to permit the operation of slot machines at the state’s racetracks.  The referendum was not successful; therefore, management is considering the potential for successful future legislation and the impact on the carrying value of the $13.2 million intangible asset associated with the fair value of the racing licenses held by Scioto Downs. Such value reflected that the racing licenses would permit Scioto Downs to operate slot machines if such legislation were passed. See “Business Overview—Scioto Downs.” Even without such legislation, another opportunity for Scioto Downs includes the introduction of telephone and Internet betting on horse races. Demographically, the Columbus market has similar attributes to established gaming markets such as St. Louis, Kansas City and New Orleans, with 1.0 million, 1.6 million and 5.0 million adults residing within 25, 50 and 100 miles, respectively, of Scioto Downs. In addition, Scioto Downs’ facility is located at the intersection of two major highways, providing significantly easier access than its only competitor in the Columbus area.

·       We own a 90% interest in a horseracing and pari-mutuel wagering facility located in Jackson, Michigan (“Jackson Harness”), approximately 40 miles south of Lansing, Michigan. If Michigan enacts gaming laws that permit slot machines at racetracks, we could develop a gaming facility with slot machines, either at the existing facility (subject to County approval) or by developing a new facility on nearby property we have under option (subject to Racing Commission approval). There are approximately 1.4 million and 7.7 million adults living within 50 and 100 miles, respectively, of Jackson Harness.

Competitive Strengths

Mountaineer

Established Flagship Property with Strong Cash Flow.   Mountaineer, our largest and most profitable property, is strategically located at the northern tip of West Virginia’s northwestern panhandle and primarily serves the Ohio Valley (including Cleveland and Youngstown) and western Pennsylvania

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(including Pittsburgh) markets. These regions include approximately 2.6 million and 6.4 million adults within 50 and 100 miles, respectively, of our facility. Since 2000, we have made capital investments totaling approximately $200 million to create a full-service destination resort with world-class amenities and entertainment. These extensive facilities, in conjunction with the attractive demographics of our feeder markets and a supportive regulatory environment, have positioned Mountaineer as the preeminent gaming and entertainment resort in the surrounding area. Over the past five years, the property has achieved significant growth in its financial performance, driven mainly by expansions and improving operating margins.

Large and Growing Regional Gaming Market.   The four racetracks in West Virginia generated $909.8 million of slot revenues (27.6% by Mountaineer) in 2005. Such revenues have grown at a compound annual rate (“CAGR”) of 32.2% since 1997. For the past five years, the West Virginia gaming market was the fastest growing gaming market in the U.S., with gaming revenue growing at a CAGR of 20.1%, while Atlantic City and the Las Vegas Strip had CAGRs of 3.1% and 4.7%, respectively, over the same period. We believe we are well situated to capitalize on the strength of the West Virginia market.

Opportunities for Additional Revenue Streams.   West Virginia has considered, and we believe it will again consider, legislation allowing table games at the state’s four racetrack gaming facilities. We believe this legislation would be reintroduced in response to the operation of slot machines in Pennsylvania. Not only would this generate table revenue and incremental slot revenue from our existing customers, but we believe table games would attract a new, younger demographic to Mountaineer. In July of 2006, we began offering multi-state progressive slot jackpots, linking participating casinos in West Virginia, Delaware and Rhode Island. Multi-state progressives will allow us to offer life-changing jackpots in excess of $1 million, giving us a competitive advantage over West Virginia’s LVLs (which, as a practical matter, because of their limited number of machines, will not be able to participate) and any competition from Pennsylvania. The multi-state progressive game, called “Ca$hola,” has already yielded a jackpot in exess of $700,000 for a player in Rhode Island.

Presque Isle Downs

Significant Cash Flow Potential.   With the opening of gaming operations at Presque Isle Downs, subject to licensing by the PGCB, we believe we will be adding another significant revenue and cash flow generator to the Company. We believe Presque Isle Downs will have a strong customer base with 0.5 million and 3.8 million adults residing within 50 and 100 miles, respectively, of our property, as well as 4 million tourists that visit the Erie area each year. We believe the Erie market is underserved with respect to gaming and entertainment offerings and will support 2,000 slot machines as well as new dining and entertainment facilities. For example, our signature steak house, La Bonne Vie at Presque Isle Downs, will be the only prime steakhouse in Erie. Because Presque Isle Downs has been designed from the ground up as a racino, it will not incur the costs or suffer the inefficiencies inherent in converting an existing racetrack into a slots operation, thereby maximizing efficiency and cash flow.

Strong Barriers to Entry.   Presque Isle Downs is one of only seven racetracks (six of which have been licensed by Pennsylvania’s racing commissions to date) that Pennsylvania’s July 2004 gaming law permits to apply for a license to operate slot machines. In addition to the seven racetrack licenses, the new slot law permits only seven additional slot facilities, two of which are limited to established resort hotels that will each be limited to 500 machines that may be used only by overnight guests or patrons of other resort amenities. Presque Isle Downs, subject to compliance with applicable licensing requirements, would be the only property permitted under the new Pennsylvania slots law to have gaming operations in northwest Pennsylvania.

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Other

Diversified Operations.   In addition to the development of Presque Isle Downs, we plan to diversify our revenue and cash flow further through the development of a 50-table card room and harness racetrack at North Metro and through operational improvements at Binion’s and the Speedway Property in Las Vegas, Nevada. We expect to improve operations at our Las Vegas casinos by capitalizing on the growing Downtown and North Las Vegas markets in which they operate. We are implementing a revitalization strategy at our recently acquired Binion’s property designed to increase patronage through upgrading slot and table offerings, modest capital improvements, and pursuing third-party tenants who will provide rental revenue and additional amenities at the property.

Well Positioned for Regulatory Developments.   Through Scioto Downs and our majority interest in Jackson Harness Raceway, we expect to be well positioned to capitalize on future gaming legislation in Ohio and Michigan. With the recent legalization of gaming in Pennsylvania, we believe Ohio is more likely to enact pro-gaming legislation. If an amendment of the State constitution or other gaming legislation were to pass, we believe we would be one of two facilities with gaming operations in the Columbus market. If these states enact gaming laws that permit slot machines at racetracks, we believe that each of these assets has the potential to become a significant cash flow generator and further diversify our operations.

Proven Management Team.   We have a seasoned management team with a proven track record in developing gaming and horseracing assets. Several of our senior executive officers have been with us since the early 1990s, including our chief executive officer and chairman, Edson R. Arneault, who joined us in 1992 and became our chief executive officer in 1995. Mr. Arneault and his team have been responsible for converting Mountaineer into a regional destination resort gaming complex and assembling a diverse collection of properties to position the Company for continued growth. Our management team beneficially owns approximately 17.6% of our common equity.

The address of our principal offices is State Route 2, South, Box 356, Chester, West Virginia 26034. Our telephone number is (304) 387-8300. Our website address is www.mtrgaming.com. None of the information on our website or on the websites of any of our subsidiaries or properties constitutes part of this Prospectus.

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The Exchange Offer

On May 25, 2006, we privately placed $125,000,000 aggregate principal amount of our 9.00% Senior Subordinated Notes Due 2012, Series A, in a transaction exempt from registration under the Securities Act. In connection with such private placement, we entered into a Registration Rights Agreement, dated May 25, 2006, with the initial purchasers of the Series A Notes. In the Registration Rights Agreement, we agreed to register under the Securities Act an offer of our new 9.00% Senior Subordinated Notes Due 2012, Series B, in exchange for the Series A Notes. We also agreed to deliver this Prospectus to holders of the Series A Notes, to file the exchange offer registration statement within 90 days of the issuance of the Series A Notes, to use our reasonable best efforts to cause such registration statement to become effective within 180 days after the issuance of the Series A Notes and to consummate the exchange offer within 45 days thereafter. In this Prospectus, we refer to the Series A Notes and the Series B Notes together as the “notes.” You should read the discussion in the section entitled “Description of Notes” for information regarding the notes. The exchange offer applies to $125,000,000 aggregate principal amount of Series A Notes. The Series B Notes are substantially identical to the Series A Notes, except for transfer restrictions, rights regarding payment of liquidated damages and registration rights relating to the Series A Notes. The Series B Notes will evidence the same debt as the Series A Notes and will be entitled to the benefits of the Indenture.

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Ratio Of Earnings To Fixed Charges

The ratio of earnings to fixed charges is computed by dividing earnings by fixed charges. For this purpose, earnings consist of net income before income taxes, cumulative effect of accounting charge and minority interest, fixed charges less capitalized interest, and minority interest in pre-tax loss. Fixed charges consist of interest expense and capitalized interest, amortization of debt discount and deferred financing costs, and the portion of rental expense that is attributable to interest.

 

The pro forma ratio of earnings to fixed charges gives effect to the pro rata increase in interest expense and deferred financing costs resulting from the issuance of the $125 million Senior Notes and the use of $38.5 million of the proceeds to repay the amounts outstanding under our Fourth Amended and Restated Credit Facility, as of the earliest date of the pro forma periods presented.

RISK FACTORS

An investment in the Series B Notes involves significant risks. You should carefully consider the following factors, in addition to the other information contained in this Prospectus, before you invest in the Series B Notes.

Risks Related to this Offering and the Notes

Our substantial level of debt could materially and adversely affect our financial condition and prevent us from fulfilling our obligations under the Notes and our other debt.

We have, and will continue to have after the completion of this offering, substantial debt. After giving effect to the completion of this offering, we had total debt of $258.3 million as of September 30, 2006 (including $130.0 million aggregate principal amount of our 93¤4% senior notes due 2010 (our “senior notes”) and $125.0 million aggregate principal amount of our 9% senior subordinated notes due 2012, Series A (our Series A Notes)), and our ratio of earnings to fixed charges would have been 1.1x for the nine months ended September 30, 2006.

In addition to the Notes, we and our subsidiaries will be permitted under the indenture governing the Notes to incur additional debt, including additional debt under our secured credit facility and debt to purchase furniture, fixtures and equipment (including unlimited gaming furniture, fixtures and equipment financing). Additionally, if we satisfy debt coverage tests in our debt agreements, we could issue additional notes and incur further debt, including additional debt under our senior secured credit facility. If new debt were to be incurred in the future, the related risks could intensify.

Our substantial debt could have important consequences to you and significant effects on our business. For example, it could:

·       make it more difficult for us to satisfy our obligations under the Notes and our other debt;

·       result in an event of default if we fail to satisfy our obligations under the Notes or our other debt or fail to comply with the financial and other restrictive covenants contained in the indenture or our proposed new senior secured credit facility, which event of default could result in all of our debt becoming immediately due and payable and could permit our lenders to foreclose on our assets securing such debt;

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·       require us to dedicate a substantial portion of our cash flow from our business operations to pay our debt, thereby reducing the availability of cash flow to fund working capital, capital expenditures, development projects, general operational requirements and other purposes;

·       limit our ability to obtain additional financing for working capital, capital expenditures and other activities;

·       limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate;

·       increase our vulnerability to general adverse economic and industry conditions or a downturn in our business; and

·       place us at a competitive disadvantage compared to competitors that are not as highly leveraged.

Any of the above-listed factors could have a material adverse effect on our business, financial condition and results of operations and our ability to meet our payment obligations under the Notes and our other debt.

To service our debt, we will require a significant amount of cash. If we fail to generate sufficient cash flow from future operations, we may have to refinance all or a portion of our debt or seek to obtain additional financing.

We expect to obtain the funds to pay our expenses and to pay the amounts due under the Notes, our senior secured credit facility and our other debt primarily from our operations. Our ability to meet our expenses and make these payments thus depends on our future performance, which will be affected by financial, business, economic and other factors, many of which we cannot control. Our business may not generate sufficient cash flow from operations in the future and our currently anticipated growth in revenue and cash flow may not be realized, either or both of which could result in our being unable to pay amounts due under our debt, including the Notes, or to fund other liquidity needs, such as future capital expenditures. If we do not have sufficient cash flow from operations, we may be required to refinance all or part of our then existing debt (including the Notes), sell assets, reduce or delay capital expenditures or borrow more money. We cannot assure you that we will be able to accomplish any of these alternatives on terms acceptable to us, or at all. In addition, the terms of existing or future debt agreements, including our proposed new senior secured credit facility and the indenture governing the Notes, may restrict us from adopting any of these alternatives. The failure to generate sufficient cash flow or to achieve any of these alternatives could materially adversely affect the value of the Notes and our ability to pay the amounts due under the Notes and our other debt.

The indenture governing the Notes will contain, and our senior secured credit facility contains, covenants that significantly restrict our operations.

The indenture governing the Notes will contain, and the agreement governing our senior secured credit facility and the indenture governing our senior notes contain, and any other future debt agreements may contain, numerous covenants imposing financial and operating restrictions on our business. These restrictions may affect our ability to operate our business, may limit our ability to take advantage of potential business opportunities as they arise and may adversely affect the conduct of our current business, including by restricting our ability to finance future operations and capital needs and limiting our ability to engage in other business activities. These covenants will place restrictions on our ability and the ability of our operating subsidiaries to, among other things:

·       pay dividends, redeem stock or make other distributions or restricted payments;

·       incur debt or issue preferred equity interests;

·       make certain investments;

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·       create liens;

·       agree to payment restrictions affecting the guarantors;

·       consolidate or merge;

·       sell or otherwise transfer or dispose of assets, including equity interests of our subsidiaries;

·       enter into sale-leaseback transactions;

·       enter into transactions with our affiliates;

·       designate our subsidiaries as unrestricted subsidiaries;

·       use the proceeds of permitted sales of our assets; and

·       change our line of business.

Our senior secured credit facility also requires us to meet a number of financial ratios and tests. Compliance with these financial ratios and tests may adversely affect our ability to adequately finance our operations or capital needs in the future or to pursue attractive business opportunities that may arise in the future. Our ability to meet these ratios and tests and to comply with other provisions governing our debt may be adversely affected by our operations and by changes in economic or business conditions or other events beyond our control. Our failure to comply with our debt-related obligations could result in an event of default under the Notes and our other debt.

If we fail to meet our payment or other obligations under our secured debt, including our senior secured credit facility, the holders of our secured debt could foreclose on, and acquire control of, substantially all of our assets.

The Notes and the guarantees thereof are unsecured. Our senior secured credit facility is secured by a security interest in substantially all of our and the guarantors’ existing and future assets, subject to certain limitations. As a result of these security interests, if we fail to meet our payment or other obligations under our senior secured credit, the lenders under our senior secured credit facility would be entitled to foreclose on all of our assets and liquidate those assets. Similarly, in a bankruptcy or liquidation you may not receive any payment on your Notes, except to the extent that the value of our assets exceeds our secured debt. Accordingly, we may not have sufficient funds to pay amounts due on the Notes. As a result you may lose a portion of or the entire value of your investment in the Notes.

Your right to receive payments on the Notes or under the guarantees thereof is subordinated to our senior debt, including our senior notes and our senior secured credit facility.

The Notes and the guarantees thereof will be subordinated in right of payment to all of our and the guarantors’ existing and future senior debt, including our senior notes and our senior secured credit facility. As a result, upon any distribution to our creditors or the creditors of any of the guarantors in a bankruptcy, liquidation or reorganization or similar proceeding relating to us or any of the guarantors or our or their property, the holders of our or the guarantor’s senior debt, including our senior notes and our senior secured credit facility, will be entitled to be paid in full before any payment may be made with respect to the Notes or the guarantees thereof. In such case, holders of the Notes will participate with trade creditors, other holders of unsecured debt, and any secured creditor not already paid in full in the assets remaining after we and the guarantors have paid all of the senior debt. In these cases, we and the guarantors may not have sufficient funds to pay all of our creditors, and holders of the Notes may receive less, ratably, than the holders of our senior debt.

In addition, all payments on the Notes and the guarantees thereof, including the principal of and premium, if any, and interest (and liquidated damages, if any) on the Notes, or on account of the redemption provisions of the Notes or any repurchases of Notes, will be blocked in the event of a payment default on our designated senior debt and may be blocked for up to 179 of 360 consecutive days in the

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event of certain non-payment defaults on our designated senior debt. See “Description of Notes—Subordination to Senior Debt.”

As of September 30, 2006, the Notes and the guarantees thereof would be subordinated to approximately $133.8 million of senior debt, consisting of $130.0 million aggregate principal amount of our senior notes and $3.8 million of equipment and mortgage financing. The Fifth Amended and Restated Credit Agreement entered into on September 26, 2006, has a five year maturity and consists of a senior secured reducing revolving credit facility in the amount of $105 million (including a commitment, for an increase of the credit facility up to an additional $50 million subject to certain conditions). Of this amount, $60 million will be available for letters of credit and up to $10 million will be available for short-term funds under a “swing line” facility. Availability under the credit facility is limited to $75 million (including letters of credit) until Presque Isle Downs receives its gaming license, pays the $50 million slot license fee to the Commonwealth of Pennsylvania and the corresponding $50 million slot license letter of credit is returned. See “Description of Certain Indebtedness.’’ We may be permitted to borrow substantial additional debt, including senior debt, in the future under the terms of the indenture governing the Notes, subject to the debt incurrence test set forth in the indentures governing our existing senior and subordinated notes.

Under certain circumstances, a court could cancel the obligations under the guarantees.

Unless designated as an unrestricted subsidiary, each and any domestic subsidiary (other than any Immaterial Subsidiary as defined in the Indenture) we form or acquire will be required to guarantee the Notes. Under federal bankruptcy law and comparable provisions of state and federal nonbankruptcy fraudulent transfer laws, under certain circumstances a court could avoid (i.e., cancel) a guarantee, and order the return of any payments made thereunder to the guarantor or to a fund for the benefit of its other creditors.

A court might take these actions if it found that when the guarantor entered into its guarantee (or, in some jurisdictions, when payments became due on its guarantee), (i) it received less than reasonably equivalent value or fair consideration for its guarantee, and (ii) any of the following conditions was then satisfied:

·       the guarantor was insolvent or rendered insolvent by reason of incurring its obligations under its guarantee or granting a security interest in its assets;

·       the guarantor was engaged in a business or transaction for which its remaining assets constituted unreasonably small capital; or

·       the guarantor intended to incur, or believed (or reasonably should have believed) that it would incur, debts beyond its ability to pay as those debts matured.

In applying these factors, a court would likely find that a subsidiary guarantor did not receive fair consideration or reasonably equivalent value for its guarantee, except to the extent that it benefited directly or indirectly from the Notes’ issuance. The determination of whether a subsidiary was or was rendered “insolvent” would vary depending on the law of the jurisdiction being applied. Generally, an entity would be considered insolvent if the sum of its debts (including contingent or unliquidated debts) is greater than all of its property at a fair valuation or if the present fair salable value of its assets is less than the amount that will be required to pay its probable liability on its existing debts (including contingent or unliquidated debts) as they become absolute and matured.

A court might also void a guarantor’s guarantee if the court concluded that the guarantor entered into the guarantee with actual intent to hinder, delay, or defraud creditors. If a court voided a guarantor’s guarantee, you would no longer have a claim against that subsidiary, and the claims of creditors of the subsidiary generally would be entitled to payment in full before the subsidiary paid any dividends or made any distributions to us for the purpose of our satisfying any claims under the Notes.

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Our ability to repurchase the Notes upon a change of control may be limited.

Upon the occurrence of specific “change of control” events, as defined in the indenture, we will be required to offer to repurchase all outstanding Notes at 101% of the principal amount, plus accrued and unpaid interest to the date of repurchase. The lenders under our senior secured credit facility and holders of our senior notes will have a similar right to be repaid. Any of our future debt agreements may contain similar provisions with respect to a change of control. However, we may not have sufficient funds at the time of the change of control to make the required repurchase of Notes or repayment of our other debt. The terms of our senior secured credit facility and the indenture governing our senior notes also will limit our ability to purchase your Notes until all debt thereunder is paid in full. Any of our future debt agreements may contain similar restrictions.

In addition, all payments on the Notes and the guarantees thereof, including on account of any repurchases of Notes, will be blocked in the event of a payment default on our designated senior debt. See “—Your right to receive payments on the Notes or under the guarantees thereof is subordinated to our senior debt, including our senior notes and our senior secured credit facility” above. Under the indenture, prior to complying with any of the provisions of the change of control or asset sale covenants, but in any event within 90 days following a change in control or an asset sale, respectively, we will be required either to repay all outstanding senior debt or obtain the requisite consents, if any, under all agreements governing outstanding senior debt to permit the repurchase of Notes required by the change of control or asset sale covenants, respectively.

If we fail to repurchase any Notes submitted in a change of control or asset sale offer, it would constitute an event of default under the indenture which would, in turn, constitute an event of default under our senior secured credit facility and could constitute an event of default under our other debt, even if the change of control itself would not cause a default.

Important corporate events, such as takeovers, recapitalizations or similar transactions, may not constitute a change of control under the indenture governing the Notes and thus not permit the holders of the Notes to require us to repurchase or redeem the Notes.

You may be required to sell your Notes if any gaming authority finds you unsuitable to hold them.

The current policy of the West Virginia, Nevada, Pennsylvania, Ohio, Minnesota and Michigan gaming and racing regulatory agencies and authorities does not require you to be licensed or found suitable in order to own any Notes. However, the policy of any of these agencies could change. In the event that any of these regulatory agencies or authorities require you, as a holder of the Notes, to be licensed, qualified or found suitable under West Virginia, Nevada, Pennsylvania, Ohio, Minnesota and Michigan gaming or racing laws, you will be required to submit an application which will be investigated by such agencies or authorities. If you are unable or unwilling to obtain such license, qualification or finding of suitability, such agencies and authorities may not grant us a license or, if already granted, may suspend or revoke our licenses unless we terminate our relationship with you. Under these circumstances, we would be required to repurchase your Notes. There can be no assurance that we will have sufficient funds or otherwise will be able to repurchase any or all of your Notes. See “Regulation and Licensing” and “Description of Notes—Required Regulatory Redemption.”

We are a holding company and will depend on the business of our subsidiaries to satisfy our obligations under the Notes.

We are a holding company. Our only material assets are our ownership interests in our subsidiaries. Our subsidiaries will conduct substantially all of the operations necessary to fund payments on the Notes and our other debt. Our ability to make payments on the Notes and our other debt will depend on our

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subsidiaries’ cash flow and their payment of funds to us. Our subsidiaries’ ability to make payments to us will depend on:

·       their earnings;

·       covenants contained in our debt agreements (including the Notes, our senior notes and our senior secured credit facility) and the debt agreements of our subsidiaries;

·       covenants contained in other agreements to which we or our subsidiaries are or may become subject;

·       business and tax considerations; and

·       applicable law, including regulations of gaming and racing authorities and state laws regulating the payment of dividends and distributions.

We cannot assure you that the operating results of our subsidiaries at any given time will be sufficient to make distributions or other payments to us or that any distributions and/or payments will be adequate to pay principal and interest, and any other payments, on the Notes and our other debt when due.

Risks Related To Our Business

We will continue to depend on Mountaineer for the vast majority of our revenues, and, therefore, any risks faced by our Mountaineer operations will have a material impact on our results of operations.

Dependence Upon Mountaineer.   We currently remain dependent upon Mountaineer for the vast majority of our revenues and cash flows. We expect our full control of the Binion’s operation and, if we receive a slots license, the commencement of slot operations at Presque Isle Downs, to diversify our revenue sources. Nevertheless, we may be subject to greater risks than a geographically diversified gaming operation, including, but not limited to the following risks faced by our Mountaineer operations:

·       risks related to local and regional economic and competitive conditions, such as a decline in the number of visitors to Mountaineer, a downturn in the overall economy in Mountaineer’s market, a decrease in gaming activities in Mountaineer’s market or an increase in competition in Mountaineer’s market, including, but not limited to continuing and increasing competition from limited video lottery terminals in local bars and clubs in West Virginia and anticipated competition from gaming facilities in Pennsylvania;

·       impeded access to Mountaineer due to weather, floods, road construction or closures of primary access routes;

·       changes in local and state governmental laws and regulations (including changes in laws and regulations affecting gaming operations and taxes) applicable to Mountaineer;

·       work stoppages at Mountaineer;

·       risks related to acts of terrorism, international conflicts or breaches of security affecting Mountaineer or its market; and

·       natural and other disasters affecting Mountaineer’s market.

The occurrence of any of these or similar events could have a material adverse effect on our business, financial condition and results of operations.

Agreements with Horsemen and Parimutuel Clerks.   We depend on agreements with our horsemen and parimutuel clerks to operate our business. The Federal Interstate Horse Racing Act, the state racing laws in West Virginia, Ohio, Pennsylvania, Michigan and Minnesota require that, in order to simulcast races, we have written agreements with the horse owners and trainers at those racetracks. In addition, in order to operate slot machines in West Virginia, we are required to enter into written agreements regarding the proceeds of the slot machines (a “proceeds agreement”) with a representative of a majority of the horse

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owners, trainers and breeders and a representative of a majority of the parimutuel clerks. We have the requisite agreements in place with the Mountaineer Horsemen until December 31, 2006. With respect to the Mountaineer parimutuel clerks, we have a labor agreement in force until November 30, 2008, however, our proceeds agreement with the Mountaineer parimutuel clerks expires on April 14, 2007. We are required to have a proceeds agreement in effect on July 1 of each year as a condition to renewal of our video lottery license for such year. Therefore, prior to each of July 1, 2007 and July 1, 2008, we would need to enter into a new proceeds agreement with the union or obtain an extension of the existing proceeds agreement. If no new proceeds agreement or extension is in place as of July 1, 2007 and as of July 1, 2008, respectively, Mountaineer’s application for renewal of its video lottery license in 2007 and 2008, respectively, could be denied, in which case Mountaineer would not be permitted to operate its slot machines. With respect to the Scioto horsemen, the agreement with the Horsemen’s Benevolent & Protective Association is effective until November 29, 2012, and the agreement with the Ohio Harness Horsemen’s Association provides for automatic annual renewals. Jackson Trotting Association, LLC has the requisite agreements in place until December 31, 2008. With the exception of the Mountaineer Horsemen agreement above, each of the agreements referred to in this paragraph may be terminated upon written notice by either party. We anticipate that Presque Isle Downs and North Metro Harness will enter into any required agreements prior to commencement of racing operations.

If we fail to maintain operative agreements with the horsemen, or if we fail to reach such agreements with horsemen at Presque Isle Downs and North Metro Harness, we will not be permitted to conduct live racing and export and import simulcasting at those racetracks, and, in West Virginia and Pennsylvania, we will not be permitted to operate our slot machines (including if we do not have in place the required proceeds agreement with the Mountaineer parimutuel clerks union) and in Minnesota we will not be able to operate our card room. In addition, our simulcasting agreements are subject to the horsemen’s approval. If we fail to renew or modify existing agreements on satisfactory terms, this failure could have a material adverse effect on our business, financial condition and results of operations.

Minimum Live Racing Days.   If we fail to meet the minimum live racing day requirements at Mountaineer, we would be prohibited under West Virginia law from conducting simulcast racing or renewing our gaming license at Mountaineer. In order to conduct simulcast racing or conduct gaming operations, Mountaineer is required under West Virginia law to apply for a minimum of 210 live race days each year and to obtain Racing Commission approval for any reduction in race days actually held during that year. Live racing days typically vary in number from year to year and are based on a number of factors, including the number of suitable race horses and the occurrence of severe weather, many of which are beyond our control. If we were unable to conduct simulcast racing or offer slot machine gaming at Mountaineer, this would have a material adverse effect on our business, financial condition, results of operations and ability to meet our payment obligations under our various debt instruments.

Linkage of Slot Machines to State Central System.   Our gaming operations at Mountaineer are dependent on our linkage to the West Virginia Lottery Commission’s central system. By West Virginia Lottery Commission directive, all of our slot machines are required to be connected to the SAMS 4.6 IGT central system maintained by the Lottery Commission. Our equipment is connected to the West Virginia Central System by telephone lines. This central system tracks all gaming activity in the State of West Virginia. If the operation of the central system were disrupted for any reason, including disruption of telephone service, we believe that the Lottery Commission would suspend all gaming operations within the State until normal operation of the system was restored. Any such suspension could cause a material disruption of our gaming operations and any of the foregoing difficulties could have a material adverse effect on our business, financial condition and results of operations. Pennsylvania’s gaming law likewise calls for slot machines to be linked to a state-owned central system. Accordingly, our planned slot operations at Presque Isle Downs will be dependent upon linkage to Pennsylvania’s planned central system and subject to the same risks of disruption as our West Virginia operations. Any such disruption of our

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planned Pennsylvania gaming operations could have a material adverse effect on our business, financial condition and results of operations.

We may face disruption in developing and integrating our Pennsylvania, Michigan, and Minnesota operations and other facilities we may expand or acquire, including construction and other development risks.

The development and integration of Presque Isle Downs, North Metro Harness, Jackson Harness and any other facilities we may expand or acquire in the future will require the dedication of management resources that may temporarily detract attention from our day-to-day business. The process of developing and integrating these operations also may interrupt the activities of that business, which could have a material adverse effect on our business, financial condition and results of operations. We cannot assure you that we will be able to manage the combined operations effectively or realize any of the anticipated benefits of these new operations or any other facilities we may expand or acquire in the future.

For example, we face substantial risks and difficulties in constructing and developing Presque Isle Downs, which include, but are not limited to: unforeseen engineering, environmental, or geological problems; interference with existing operations; unanticipated cost increases; construction delays caused by, among other things, work stoppages or weather, and other risks associated with building a racing operation. In addition, our racing license requires us to commence live racing by December 29, 2007. If we do not complete the facility within this time frame, or obtain regulatory approval to complete the facility at a later date, our racing license will be canceled, and without a racing license, we could not have a slots license.

We expect to face similar risks and uncertainties in connection with the construction and integration of North Metro Harness. Moreover, we may be involved in construction of North Metro Harness and Presque Isle Downs simultaneously. Developing these two large projects simultaneously, while also maintaining and expanding our other facilities, may stress our management and financial resources as well as disrupt our business. (See “—We may elect to increase our capital investment and/or financial risk in Minnesota.”)

Any of the foregoing difficulties could have a material adverse effect on our business, financial condition and results of operations.

We do not yet have a permanent license to operate slot machines at Presque Isle Downs.

The PGCB has not yet issued any Permanent Category 1 (racetrack) slot machine licenses. Presque Isle Downs filed its application for a Category 1 license on December 28, 2005, the date established by the Gaming Control Board for such filings, and received its conditional license on October 25, 2006. The PGCB has scheduled our hearing for our Permanent Category 1 License for December 13, 2006, and announced that it expects to issue permanent licenses in December 2006. While we believe that Presque Isle Downs satisfies the statutory criteria for permanent licensure, and we are unaware of any facts or circumstances that would result in denial of a permanent license, we cannot assure you that Presque Isle Downs will obtain the permanent license. Nevertheless, we have commenced and intend to complete construction irrespective of permanent slot licensing under the assumption that we will be granted a permanent slots license as well as to satisfy the condition of our racing license that we commence live racing by December 29, 2007. Additionally, our conditional license is, and our permanent license if granted will be, subject to a number of general and specific conditions. If we fail to comply with those conditions, we could lose our license. We will be permitted to operate slot machines pursuant to our conditional license pending issuance of our permanent license. If for any reason we fail to obtain or maintain our permanent slots license, we would likely be forced to sell Presque Isle Downs and would not obtain any of the revenue and profit from the project and could suffer losses. Our failure to obtain our permanent slots

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license, or a substantial delay in obtaining that license would have a material adverse effect on our business, financial condition and results of operations.

We may elect to increase our capital investment and/or financial risk in Minnesota.

The Member Control Agreement that governs our Minnesota joint venture required us to contribute $7.5 million of capital. Through September 30, 2006, we have elected to contribute $9.2 million (exclusive of legal and other fees) and may elect to invest more. The joint venture is pursuing approximately $40 million of construction financing that would be without recourse to us. If the joint venture cannot obtain the non-recourse financing on acceptable terms, we may elect to guarantee some or all of the financing (subject to the approval of our senior secured lenders). In either event, the risk associated with our Minnesota joint venture would be greater than we originally contracted or contemplated. (See “—We may face disruption in developing and integrating our Pennsylvania, Michigan, and Minnesota operations and other facilities we may expand or acquire, including construction and other development risks.”)

Some of our intellectual property is not protected by federally registered trademarks; we rely on common law rights.

We hold eleven federally registered trademarks and own 58 internet domain names in connection with our business. Additionally, pursuant to an Intellectual Property License Agreement, Harrah’s has applied for trademarks with respect to “Binion’s,” which, if issued, will become part of our license. Apart from registered trademarks, we rely on common law rights, developed through use, with respect to our intellectual property. While we believe that our trademarks and common law rights are sufficient to permit us to use all of the intellectual property we are currently using, and that we are not infringing the intellectual property rights of others, we cannot assure you that no one will challenge our rights in the future. If we were to lose any of our intellectual property, it could have a material adverse effect on our business.

We are subject to extensive regulation by gaming and racing authorities.

Licensing Requirements.   As owners and operators of gaming and parimutuel facilities, we are subject to extensive state and local regulation. State and local authorities require us and our subsidiaries to demonstrate suitability to obtain and maintain various licenses, and require that we have registrations, permits and approvals, to conduct gaming and racing operations, to sell alcoholic beverages and tobacco in our facilities and to operate our food service facilities. These regulatory authorities may, for any reason set forth in applicable legislation or regulation, limit, condition, suspend or revoke a license or registration to conduct gaming or racing operations or prevent us from owning the securities of any of our gaming or racing subsidiaries. In addition, we must periodically apply to renew many of our licenses or registrations. We cannot assure you that we will be able to obtain such renewals. There can be no assurance that we will be able to maintain our existing licenses, registrations, permits or approvals or obtain when necessary any new ones. Any failure to do so would have a material adverse effect on us. In addition, to enforce applicable laws and regulations, regulatory authorities may levy substantial fines against or seize the assets of our company, our subsidiaries or the people involved in violating gaming laws or regulations. Any of these events could have a material adverse effect on our business, financial condition and results of operation.

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Potential Changes In Regulatory Environment.   If current laws are modified, or if additional laws or regulations are adopted, it could have a material adverse effect on us. From time to time, legislators and special interest groups have proposed legislation that would restrict or prevent gaming or racing operations in the jurisdictions in which we operate. Other laws, such as smoking bans, do not specifically restrict gaming operations but, as a practical matter, make gaming facilities less attractive to gaming patrons and can result in substantially reduced revenues. Restriction on or prohibition of our gaming or racing operations, whether through legislation or litigation, could have a material adverse effect on our operating results.

Taxation.   We pay substantial taxes and fees with respect to our operations. From time to time, federal, state and local legislators and officials have proposed changes in tax laws, or in the administration of such laws, affecting the gaming and racing industry. It is not possible to determine with certainty the likelihood of changes in tax laws or in the administration of such laws. Changes in the tax laws or administration of those laws, if adopted, could have a material adverse effect on our business, financial condition and results of operations.

We face significant competition from other gaming and racing facilities, and increased competition could have a material adverse effect on us.

Gaming Operations.   We face substantial competition in each of the markets in which our gaming facilities are located. Some of the competitors have significantly greater name recognition and financial and marketing resources than we do. All of our gaming operations primarily compete with other gaming operations in their geographic areas. New expansion and development activity is occurring in each of the relevant markets, which may be expected to intensify competitive pressures and could have a material adverse effect on us. Specifically, in West Virginia we continue to face increased competition from limited video lottery machines (“LVLs”) in local bars and certain clubs (bars and fraternal organizations that sell alcohol may apply for a license to operate up to five and ten LVL’s, respectively). In addition, Pennsylvania’s new slot machine law contemplates the installation of slot machines at up to fourteen locations: seven racetracks (including Presque Isle Downs) each with up to 3,000 slots initially and with the ability to apply to the Gaming Control Board for up to 5,000 slots; five stand-alone slot parlors with the same number of machines as the racetracks; and two resort locations with up to 500 slots each. We anticipate that the Meadows, a harness racetrack approximately 40 miles southeast of Mountaineer, will install between 1,500 and 2,000 slot machines. Additionally, the owners of the Meadows announced plans to spend $200 million improving the facility. Pennsylvania’s new law also calls for at least one of the stand-alone slot parlors to be located in downtown Pittsburgh (approximately an hour’s drive from us). Although we do not anticipate the Pittsburgh facility to open for at least 2-3 years, all of the applicants have announced plans, if awarded the license, to build first class facilities. One applicant has announced plans to spend $1 billion on the gaming and related facilities. Additionally, the Pennsylvania Harness Horse Racing Commission, which may grant one more license, recently denied, on grounds of suitability of the applicants, two applications that proposed to build a track within our target market. Both of those applicants have appealed the denials, and, with respect to one such applicant, the appellate court reversed and remanded to the Harness Commission for further proceedings. All of our gaming operations also compete to a lesser extent with operations in other locations, including Native American lands, riverboats and cruise ships, and with other forms of legalized gaming in the United States, including state-sponsored lotteries, on- and off- track wagering, high-stakes bingo, card parlors, and the emergence of Internet gaming. In addition, casinos in Canada have likewise recently begun advertising in our target markets.

Racing And Parimutuel Operations.   Mountaineer’s racing and parimutuel operations compete directly for wagering dollars with Wheeling Downs, which is located approximately 50 miles from Mountaineer; Thistledown and Northfield Park, which are located approximately 85 miles to the northwest of Mountaineer in Cleveland, Ohio; and the Meadows, located approximately 40 miles southeast of

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Mountaineer in Washington, Pennsylvania. Wheeling Downs conducts parimutuel greyhound racing and video lottery gaming. Thistledown and Northfield Park conduct parimutuel horse racing but not video lottery gaming. The Meadows conducts live harness racing and provides import simulcasting, but does not yet have video lottery gaming. Upon implementation of slot machines in Pennsylvania, The Meadows also would be permitted to operate slot machines. Since commencing export simulcasting in August 2000, Mountaineer also competes with racetracks across the country to have its signal carried by off-track wagering parlors. Mountaineer also competes for wagering dollars with off-track wagering facilities in Ohio and Pennsylvania. In general, Mountaineer also competes with other tracks for participation by quality racehorses.

Presque Isle Downs will face competition from other racetracks in Pennsylvania and off-track wagering facilities in Pennsylvania and West Virginia, as well as from any existing or future casinos in Western New York. Moreover, because Presque Isle Downs will be a new facility, all of its competitors will be more established.

Scioto Downs competes directly with other racetracks in Ohio, including Beulah Park, a thoroughbred horse racetrack which is located approximately nine miles from Scioto; River Downs Horse Racing in Cincinnati, Ohio; and to a lesser extent, casino gambling on riverboats in Indiana and Native American lands in Michigan. Further, Scioto Downs faces competition from off-track wagering facilities in Ohio, Pennsylvania and West Virginia.

Jackson Trotting competes directly with other racetracks in Michigan, including Sports Creek Raceway, Northville Downs, Hazel Park Harness Raceway and Great Lakes Downs.

Increased competition may require us to make substantial capital expenditures to maintain and enhance the competitive positions of our properties, including updating slot machines to reflect changing technology, refurbishing rooms and public service areas periodically, replacing obsolete equipment on an ongoing basis, and making other expenditures to increase the attractiveness and add to the appeal of our properties, including increased marketing and promotions.

In a broader sense, our gaming operations face competition from all manner of leisure and entertainment activities, including shopping, athletic events, television and movies, concerts and travel. Increased competition from other gaming and racing facilities and other leisure and entertainment activities could have a material adverse effect on our business financial condition and results of operations.

We depend on our key personnel.

We are highly dependent on the services of Edson R. Arneault, our Chairman and Chief Executive Officer, and other officers and key employees. We have entered into employment agreements with Mr. Arneault and certain other officers. However, the loss of the services of any of these individuals could have a material adverse effect on our business, financial condition and results of operations.

Our business may be materially and adversely affected by recession or economic downturn; the seasonal nature of our business could also materially and adversely affect our cash flow.

Our primary business involves leisure and entertainment. The economic health of the leisure and entertainment industry is affected by a number of factors that are beyond our control, including: (1) general economic conditions and economic conditions specific to our primary markets; (2) levels of disposable income of patrons; (3) increased transportation costs resulting in decreased travel by patrons; (4) local conditions in key gaming markets, including seasonal and weather-related factors; (5) increases in gaming and racing taxes or fees; (6) competitive conditions in the gaming, leisure and entertainment industry and in particular markets, including the effect of such conditions on the pricing of our products; (7) substantial price increases in the cost of energy in the United States; and (8) the relative

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popularity of entertainment alternatives to gaming and racing that compete for the leisure dollar. Any of these factors could materially adversely impact the leisure and entertainment industry generally, and as a result, our revenues and results of operations.

In addition, our operations at Mountaineer, Scioto Downs and Jackson Trotting and our planned operations at Presque Isle Downs and North Metro Harness, are typically seasonal in nature. Winter conditions may adversely affect transportation routes to our properties, as well as cause cancellations of live horse racing. As a result, unfavorable seasonal conditions could have a material adverse effect on our operations.

We are subject to environmental laws and potential exposure to environmental liabilities.

We are subject to various federal, state and local environmental laws and regulations that govern activities that may have adverse environmental effects, such as discharges to air and water, as well as the management and disposal of solid and hazardous wastes. These laws are complex, and subject to change. Under such laws and regulations, we may incur costs to obtain permits and other approvals required for our activities and operations, or to achieve or maintain compliance. For example, we may incur future costs under existing and new regulations pertaining to stormwater and wastewater management at our racetracks. In addition, we may face penalties or other liabilities in the event that we fail to comply with these laws and regulations. For instance, water discharges from our racetrack operations at our Mountaineer facility were the subject of past enforcement actions by state regulators. We satisfied the requirements of those past proceedings, and implemented measures to maintain compliance on a going forward basis. Such costs and liabilities have not in the past had a material impact on our business or financial condition. We believe, but we cannot assure you, that compliance with environmental laws and regulations will not have such an impact in the future.

We also are subject to laws and regulations that create liability and cleanup responsibility for releases of hazardous substances into the environment. Under certain of these laws and regulations, a current or previous owner or operator of property may be liable for the costs of remediating hazardous substances or petroleum products on its property, without regard to whether the owner or operator knew of, or caused, the presence of the contaminants, and regardless of whether the practices that resulted in the contamination were legal at the time they occurred. The presence of, or failure to remediate properly, such substances may materially adversely affect the ability to sell or rent such property or to borrow funds using such property as collateral. Additionally, the owner of a site may be subject to claims by third parties based on damages and costs resulting from environmental contamination emanating from a site. Based on currently available information, we believe, although we cannot assure you, that such liabilities will not have a material impact on our business (see “Business—Environmental Matters”).

The availability and cost of financing could have an adverse effect on our business.

We intend to finance our current and future expansion projects primarily with cash flow from operations, borrowings under our senior secured credit facility, and cash on hand including the remaining proceeds of the Series A Notes Offering and may in the future seek equity capital. During the third quarter of our current fiscal year, we entered into a new $105.0 million senior secured credit facility (our Fifth Amended and Restated Credit Agreement). Availability under the facility is limited to $75.0 million (including letters of credit) until (i) Presque Isle Downs is issued its gaming license in Pennsylvania, (ii) Presque Isle Downs has paid all licensing fees necessary for the issuance of such license, and (iii) the Commonwealth of Pennsylvania has terminated the applicable Letter of Credit previously delivered by Presque Isle Downs to the PGCB and returned it to its issuer. See “Description of Certain Indebtedness.” If we are unable to finance our current or future expansion projects, we will have to adopt one or more alternatives, such as reducing or delaying planned expansion, development and renovation projects as well as capital expenditures, and selling assets, restructuring debt, or obtaining additional debt or equity

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financing or joint venture partners, or further modifying our bank credit facility. These sources of funds may not be sufficient to finance our expansion, and other financing may not be available on acceptable terms, in a timely manner or at all. In addition, our existing indebtedness contains certain restrictions on our ability to incur additional indebtedness. If we are unable to secure additional financing, we could be forced to limit or suspend expansion, development and renovation projects, which may have a material adverse effect on our business, financial condition and results of operations.

The concentration and evolution of the slot machine manufacturing industry could impose additional costs on us.

A majority of our revenues are attributable to slot machines operated by us at our casinos and racinos. It is important, for competitive reasons, that we offer to our customers the most popular and up-to-date slot machine games with the latest technology. We are in the process of replacing our older slot machines with advanced interactive electronic games with TITO (ticket-in-ticket-out) technology which allows our customers to play their favorite slot machines longer with fewer interruptions and eliminates the problems associated with handling coins and tokens.

We believe that a substantial majority of the slot machines sold in the United States in 2005 were manufactured by a few companies and that one company in particular provided a majority of all slot machines sold in the United States in 2005. In recent years, prices of new slot machines have escalated faster than the rate of inflation.

Furthermore, in recent years, slot machine manufacturers have frequently refused to sell slot machines featuring the most popular games, instead requiring casinos to enter into participating lease arrangements in order to acquire the machines. Participating slot machine lease arrangements typically require the payment of a fixed daily rental and may also include payment of a percentage of coin-in or net win amounts. Generally, a participating lease is substantially more expensive over the long term than the cost to purchase a new machine.

For competitive reasons, we may be forced to purchase new slot machines or enter into participating lease arrangements that are more expensive than our current costs associated with the continued operation of our existing slot machines. If the newer slot machines do not result in sufficient incremental revenues to offset the increased investment and participating lease costs, it could hurt our profitability.

In addition, because of damage to casinos caused by Hurricane Katrina there may be a shortage of new slot machines over the next 12 to 24 months, causing a substantial increase in the cost of slot machines or making certain slot machines unavailable to us.

Risks Related to our Capital Structure

Our substantial indebtedness could adversely affect our financial health.

We continue to have a significant amount of indebtedness. Our substantial indebtedness could have important consequences to our financial health. For example, it could:

·       limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate;

·       require us to dedicate a substantial portion of our cash flow from operations to debt service, thereby reducing the availability of our cash flow to fund working capital, capital expenditures and other general corporate purposes;

·       make it more difficult for us to satisfy our obligations with respect to our debt;

·       increase our vulnerability to general adverse economic and industry conditions;

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·       place us at a competitive disadvantage compared to our competitors that are less leveraged; and

·       limit, along with the financial and other restrictive covenants in our indebtedness, among other things, our ability to borrow additional funds. A failure to comply with those covenants could result in an event of default.

Any of the above-listed factors could have a material adverse effect on our business, financial condition and results of operations. In addition, we may incur substantial additional indebtedness in the future, including, for example to fund our expansion and new acquisitions. The terms of our existing indebtedness do not fully prohibit us from doing so. If new debt is added to our current debt levels, the related risks that we now face could intensify.

To service our indebtedness, we will require a significant amount of cash, which depends on many factors beyond our control.

We cannot assure you that our business will generate sufficient cash flow from operations, or that future borrowings will be available to us in amounts sufficient to enable us to fund our liquidity needs with respect to our indebtedness. In addition, if we consummate significant acquisitions in the future, our cash requirements may increase significantly. We cannot assure you that we will be able to refinance any of our debt on attractive terms, commercially reasonable terms or at all. Our future operating performance and our ability to service or refinance our debt will be subject to future economic conditions and to financial, business and other factors, many of which are beyond our control.

Certain Risks Related To The Exchange Offer

If you do not properly tender your Series A Notes, you will continue to hold unregistered Series A Notes and your ability to transfer Series A Notes will be adversely affected.

We will only issue Series B Notes in exchange for Series A Notes that are timely received by the exchange agent together with all required documents, including a properly completed and signed letter of transmittal. Therefore, you should allow sufficient time to ensure timely delivery of the Series A Notes and you should carefully follow the instructions on how to tender your Series A Notes. Neither we nor the exchange agent are required to tell you of any defects or irregularities with respect to your tender of the Series A Notes. If you do not tender your Series A Notes or if we do not accept your Series A Notes because you did not tender your Series A Notes properly, then, after we consummate the exchange offer, you may continue to hold Series A Notes that are subject to the existing transfer restrictions. In addition, if you tender your Series A Notes for the purpose of participating in a distribution of the Series B Notes, you will be required to comply with the registration and Prospectus delivery requirements of the Securities Act in connection with any resale of the Series B Notes. If you are a broker-dealer that receives Series B Notes for your own account in exchange for Series A Notes that you acquired as a result of market-making activities or any other trading activities, you will be required to acknowledge that you will deliver a Prospectus in connection with any resale of such Series B Notes. After the exchange offer is consummated, if you continue to hold any Series A Notes, you may have difficulty selling them because there will be less Series A Notes outstanding. In addition, if a large amount of Series A Notes are not tendered or are tendered improperly, the limited amount of Series B Notes that would be issued and outstanding after we consummate the exchange offer could lower the market price of such Series B Notes.

There may not be a liquid market for resale of the Series B Notes.

The Series B Notes are new securities for which there currently is no market. Although the initial purchasers have informed us that they intend to make a market in the Series B Notes, they are not obligated to do so and any such market making may be discontinued at any time without notice. In addition, the market making activity may be limited during the pendency of the Series B offer.

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Accordingly, there can be no assurance as to the development or liquidity of any market for the Series B Notes. We do not intend to apply for listing of the Series B Notes on any securities exchange or for quotation through the Nasdaq National Market.

The liquidity of, and trading market for, the Series B Notes also may be adversely affected by general declines in the market for similar securities. Such a decline may adversely affect such liquidity and trading markets independent of our financial performance and prospects.

THE EXCHANGE OFFER

Background

We sold the Series A Notes on May 25, 2006, as part of an offering, which was exempt from the registration requirements of the Securities Act. As of the date of this Prospectus, $125,000,000 aggregate principal amount of Series A Notes are outstanding.

We entered into a Registration Rights Agreement with the initial purchasers of the Series A Notes on May 25, 2006 (the “Registration Rights Agreement”) under which we agreed that we would, at our own cost:

·  file an exchange offer registration statement under the Securities Act within 90 days after May 25, 2006, the original issue date of the Series A Notes;

·  use our reasonable best efforts to cause the exchange offer registration statement to become effective under the Securities Act as promptly as practicable after its filing, but no later than 180 days following May 25, 2006; and

·  use our reasonable best efforts to consummate the exchange offer promptly but no later than 45 days after the effectiveness of the exchange offer registration statement.

The summary in this Prospectus of provisions of the Registration Rights Agreement does not purport to be complete and is subject to, and is qualified in its entirety by, all the provisions of the Registration Rights Agreement, a copy of which is filed as an exhibit to the registration statement of which this Prospectus is a part.

Resale of the New Notes

Based on no-action letters issued by the staff of the SEC to third parties, we believe that a holder of Series A Notes, but not a holder who is an affiliate of ours within the meaning of Rule 405 of the Securities Act, who exchanges Series A Notes for Series B Notes in the exchange offer, generally may offer the Series B Notes for resale, sell the Series B Notes and otherwise transfer the Series B Notes without further registration under the Securities Act and without delivery of a Prospectus that satisfies the requirements of Section 10 of the Securities Act. This does not apply, however, to a holder who is an affiliate of ours within the meaning of Rule 405 of the Securities Act. We also believe that a holder may offer, sell or transfer the Series B Notes only if the holder acquires the Series B Notes in the ordinary course of its business and is not participating, does not intend to participate and has no arrangement or understanding with any person to participate, in a distribution of the Series B Notes.

Any holder of Series A Notes using the exchange offer to participate in a distribution of Series B Notes cannot rely on the no-action letters referred to above. This includes a broker-dealer that acquired Series A Notes directly from us, but not as a result of market-making activities or other trading activities. Consequently, the holder must comply with the registration and Prospectus delivery requirements of the Securities Act in the absence of an exemption from such requirements.

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Each broker-dealer that receives Series B Notes for its own account in exchange for Series A Notes, where such Series A Notes were acquired by the broker-dealer as a result of market-making activities or other trading activities, may be a statutory underwriter and must acknowledge that it will deliver a Prospectus meeting the requirements of the Securities Act in connection with the resale of Series B Notes received in exchange for Series A Notes. The letter of transmittal which accompanies this Prospectus states that by so acknowledging and by delivering a Prospectus, a participating broker-dealer will not be deemed to admit that it is an underwriter within the meaning of the Securities Act. A participating broker-dealer may use this Prospectus, as it may be amended from time to time, in connection with resales of Series B Notes it receives in exchange for Series A Notes in the exchange offer. We will make this Prospectus available to any participating broker-dealer in connection with any resale of this kind for a period of one year after the deadline for consummation of the exchange offer or such shorter period as will terminate when all Series A Notes have been sold pursuant to the exchange offer registration statement. See “Plan of Distribution.”

Each holder of the Series A Notes who wishes to exchange Series A Notes for Series B Notes in the exchange offer will be required to represent and acknowledge, for the holder and for each beneficial owner of such Series A Notes, whether or not the beneficial owner is the holder, in the letter of transmittal that:

·       the Series B Notes to be acquired by the holder and each beneficial owner, if any, are being acquired in the ordinary course of business;

·       neither the holder nor any beneficial owner is an affiliate, as defined in Rule 405 of the Securities Act, of ours or any of our subsidiaries;

·       any person participating in the exchange offer with the intention or purpose of distributing Series B Notes received in exchange for Series A Notes, including a broker-dealer that acquired Series A Notes directly from us, but not as a result of market-making activities or other trading activities cannot rely on the no-action letters referenced above and must comply with the registration and Prospectus delivery requirements of the Securities Act, in connection with a secondary resale of the Series B Notes acquired by such person;

·       if the holder is not a broker-dealer, the holder and each beneficial owner, if any, are not participating, do not intend to participate and have no arrangement or understanding with any person to participate in any distribution of the Series B Notes received in exchange for Series A Notes; and

·       if the holder is a broker-dealer that will receive Series B Notes for the holder’s own account in exchange for Series A Notes, the Series A Notes to be so exchanged were acquired by the holder as a result of market-making or other trading activities and the holder will deliver a Prospectus meeting the requirements of the Securities Act in connection with any resale of such Series B Notes received in the exchange offer. However, by so representing and acknowledging and by delivering a Prospectus, the holder will not be deemed to admit that it is an underwriter within the meaning of the Securities Act.

Shelf Registration Statement

If (i) prior to the time the exchange offer is completed (A) existing Commission interpretations are changed such that the Series B Notes received in the exchange offer would not in general be, upon receipt, transferable by holders thereof without restrictions under the Securities Act or (B) the interests of the holders, taken as a whole, would be materially adversely affected by the consummation of the exchange offer; (ii) the exchange offer has not been completed within 225 days following May 25, 2006; or (iii) the exchange offer is not available to any holder of the Series A Notes, the Issuer and the Guarantors shall, in lieu of (or, in the case of clause (iii), in addition to) conducting the exchange offer, file under the Securities

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Act a “shelf” registration statement providing for the registration of, and the sale on a continuous or delayed basis by the holders of, all of the Registrable Securities (the “Shelf Registration Statement”). “Registrable Securities” mean the Notes (together with the Guarantees) that may not be sold without restriction under federal or state securities law.

The Registration Rights Agreement provides that we:

(a)          will file the Shelf Registration Statement with the Commission as soon as practicable, but no later than 30 days after the time such obligation to file arises;

(b)         will use our reasonable best efforts to cause the Shelf Registration Statement to become or be declared effective under the Securities Act no later than 60 days after the date such Shelf Registration Statement is filed; and

(c)          will use our reasonable best efforts to keep such Shelf Registration Statement continuously effective for a period ending on the earlier of the second anniversary of the date such Shelf Registration Statement became or was declared effective or such time as all Registrable Securities covered by the Shelf Registration have been sold or there are no longer any Registrable Securities outstanding.

A Holder that sells notes pursuant to the Shelf Registration Statement generally would be required to be named as a selling security holder in the related Prospectus and to deliver a Prospectus to purchasers, will be subject to certain of the civil liability provisions under the Securities Act in connection with such sales and will be bound by the provisions of the Registration Rights Agreement which are applicable to such a Holder (including certain indemnification obligations). We will provide a copy of the Registration Rights Agreement to prospective investors upon request.

In the event that:

(a)          we have not filed the Shelf Registration Statement on or before the date on which such registration statement is required to be filed, or

(b)         the exchange offer registration statement or Shelf Registration Statement has not become effective or been declared effective by the Commission on or before the date on which such registration statement is required to become or be declared effective, or

(c)          the exchange offer has not been completed within 45 days after the initial effective date of the registration statement relating to the exchange offer (if the exchange offer is then required to be made), or

(d)         any registration statement relating to the exchange offer or Shelf Registration Statement is filed and declared effective but shall thereafter either be withdrawn by us or shall become subject to an effective stop order suspending the effectiveness of such registration statement without being succeeded within 30 days by an additional registration statement filed and declared effective

(each such event referred to in clauses (a) through (d), a “Registration Default” and, each period during which a Registration Default has occurred and is continuing, a “Registration Default Period”), then, in addition to the interest on the notes, liquidated damages (“Liquidated Damages”) shall accrue at an amount per week per $1,000 principal amount of Registrable Securities equal to $0.05 for the first 90 days of the Registration Default Period, increasing by an additional $0.05 per week per $1,000 principal amount of Registrable Securities with respect to each subsequent 90-day period, up to a maximum of $0.25 per week per $1,000 principal amount of Registrable Securities. Liquidated Damages shall be paid on interest payment dates to holders of record for the payment of interest.

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All accrued Liquidated Damages shall be paid by us or the Guarantors to holders entitled thereto by wire transfer to the accounts specified by them or by mailing checks to their registered address if no such accounts have been specified.

Holders of Notes will be required to make certain representations to the Company and to deliver information to be used in connection with the Shelf Registration Statement (in each case, as described in the Registration Rights Agreement) and will be required to provide comments on the Shelf Registration Statement within the time periods set forth in the Registration Rights Agreement in order to have their Notes included in the Shelf Registration Statement and benefit from the provisions regarding Liquidated Damages set forth above.

The Notes and the Exchange Notes will be considered collectively to be a single class for all purposes under the Indenture, including, without limitation, waivers, amendments, redemptions and offers to purchase, and for purposes of this Description of Notes (except in this “Registration Rights; Liquidated Damages” section), all references herein to “Notes” shall be deemed to refer collectively to Notes and any Exchange Notes, unless the context otherwise requires.

Terms of the Exchange Offer

Upon the effective date of the registration statement containing this Prospectus, we will offer the Series B Notes in exchange for surrender of the Series A Notes. We will keep the exchange offer open for at least 30 days after the date notice thereof is mailed to holders, or longer if required by applicable law.

Upon the terms and subject to the conditions contained in this Prospectus and in the letter of transmittal which accompanies this Prospectus, we will accept any and all Series A Notes validly tendered and not withdrawn before 5:00 p.m., New York City time, on the expiration date of the exchange offer. We will issue an equal principal amount of Series B Notes in exchange for the principal amount of Series A Notes accepted in the exchange offer. Holders may tender some or all of their Series A Notes under the exchange offer. Series A Notes may be tendered only in integral multiples of $1,000.

The form and terms of the Series B Notes will be the same as the form and terms of the Series A Notes except that the Series B Notes will have been registered under the Securities Act and therefore will not bear legends restricting their transfer or references to series.

The Series B Notes will evidence the same debt as the Series A Notes and will be entitled to the benefits of the Indenture governing the Series A Notes.

In connection with the exchange offer, holders of Series A Notes do not have any appraisal or dissenters’ rights under law or the Indenture governing the Series A Notes. We intend to conduct the exchange offer in accordance with the applicable requirements of the Exchange Act and the rules and regulations of the SEC related to such offers.

We shall be deemed to have accepted validly tendered Series A Notes when, as and if we have given oral or written notice of acceptance to Wells Fargo Bank, N.A., the Exchange Agent for the exchange offer. The Exchange Agent will act as agent for the tendering holders for the purpose of receiving the Series B Notes from us.

If any tendered Series A Notes are not accepted for exchange because of an invalid tender, the occurrence of certain other events specified in this Prospectus or if Series A Notes are submitted for a greater principal amount than the holder desires to exchange, the certificates for the unaccepted Series A Notes will be returned without expense to the tendering holder. If Series A Notes were tendered by book-entry transfer in the Exchange Agent account at The Depository Trust Company (“DTC”) in accordance with the book-entry transfer procedures described below, these non-exchanged Series A Notes will be credited to an account maintained with DTC promptly after the expiration date of the exchange offer.

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We will pay all charges and expenses, other than transfer taxes in certain circumstances, in connection with the exchange offer. See “Fees and Expenses.” Holders who tender Series A Notes in the exchange offer will therefore not need to pay brokerage commissions or fees or, subject to the instructions in the letter of transmittal, transfer taxes with respect to the exchange of Series A Notes in the exchange offer.

Expiration Date; Extensions; Amendments

The expiration date of the exchange offer is 5:00 p.m., New York City time, on December 27, 2006.

In order to extend the exchange offer, we will notify the Exchange Agent of any extension by oral or written notice and will make a public announcement of the extension before 9:00 a.m., New York City time, on the next business day after the previously scheduled expiration date.

We reserve the right, in our reasonable discretion:

·       to delay accepting any Series A Notes, to extend the exchange offer or to terminate the exchange offer if, in our reasonable judgment, any of the conditions described below under “Conditions” shall not have been satisfied, by giving oral or written notice of the delay, extension or termination to the Exchange Agent; or

·       to amend the terms of the exchange offer in any manner.

We will promptly announce any such event making a timely release and may or may not do so by other means as well.

Exchange Offer Procedures

The tender of Series A Notes to us by a holder pursuant to one of the procedures set forth below will constitute an agreement between the holder and us in accordance with the terms and subject to the conditions set forth in this Prospectus and in the letter of transmittal.

General Procedures

A holder of a Series A Note may tender the same by properly completing and signing the letter of transmittal or a copy of the letter of transmittal and delivering the same, together with the certificate or certificates representing the Series A Notes being tendered and any required signature guarantees or a timely confirmation of a book-entry transfer pursuant to the procedure described below, to the Exchange Agent at its address set forth below under “Exchange Agent” on or prior to the expiration date or by complying with the guaranteed delivery procedures described below.

If tendered Series A Notes are registered in the name of the signer of the letter of transmittal and the Series B Notes to be issued in exchange are to be issued (and any untendered Series A Notes are to be reissued) in the name of the registered holder, the signature of the signer need not be guaranteed. In any other case, the tendered Series A Notes must be endorsed or accompanied by written instruments of transfer in form satisfactory to us and duly executed by the registered holder and the signature on the endorsement or instrument of transfer must be guaranteed by a firm (an “Eligible Institution”) that is a member of a recognized signature guarantee medallion program within the meaning of Rule 17Ad-15 of the Exchange Act. If the Series B Notes and/or Series A Notes not exchanged are to be delivered to an address other than that of the registered holder appearing on the note register for the Series A Notes, the signature on the letter of transmittal must be guaranteed by an Eligible Institution.

Any beneficial owner whose Series A Notes are registered in the name of a broker, dealer, commercial bank, trust company or other nominee and who wishes to tender Series A Notes should contact the registered holder promptly and instruct the holder to tender Series A Notes on the beneficial owner’s behalf. If the beneficial owner wishes to tender the Series A Notes, the beneficial owner must,

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prior to completing and executing the letter of transmittal and delivering the Series A Notes, either make appropriate arrangements to register ownership of the Series A Notes in such beneficial owner’s name or follow the procedures described in the immediately preceding paragraph. The transfer of record ownership may take considerable time.

THE METHOD OF DELIVERY OF SERIES A NOTES AND ALL OTHER DOCUMENTS IS AT THE ELECTION AND RISK OF THE HOLDER. IF SENT BY MAIL, IT IS RECOMMENDED THAT REGISTERED MAIL, RETURN RECEIPT REQUESTED, BE USED, PROPER INSURANCE BE OBTAINED AND THE MAILING BE MADE SUFFICIENTLY IN ADVANCE OF THE EXPIRATION DATE TO PERMIT DELIVERY TO THE EXCHANGE AGENT ON OR BEFORE THE EXPIRATION DATE.

Book-Entry Transfer

The Series A Notes were issued as global securities in fully registered form without interest coupons. Beneficial interests in the global securities, held by direct or indirect participants in DTC, are shown on, and transfers of these interests are effected only through, records maintained in book-entry form by DTC with respect to its participants.

The Exchange Agent will establish an account with respect to the book-entry interests at DTC for purposes of the exchange offer promptly after the date of this Prospectus. You must deliver your book-entry interest by book-entry transfer to the account maintained by the Exchange Agent at DTC. Any financial institution that is a participant in DTC’s systems may make book-entry delivery of book-entry interests by causing DTC to transfer the book-entry interests into the Exchange Agent’s account at DTC in accordance with DTC’s procedures for transfer.

If you hold your Series A Notes in the form of book-entry interests and you wish to tender your Series A Notes for exchange, you must transmit to the Exchange Agent on or prior to the expiration date either: (i) a written or facsimile copy of a properly completed and duly executed letter of transmittal, including all other documents required by the letter of transmittal, to the Exchange Agent at the address set forth below under “—Exchange Agent”; or (ii) a computer- generated message transmitted by means of DTC’s Automated Tender Offer Program system and received by the Exchange Agent and forming a part of a confirmation of book-entry transfer, in which you acknowledge and agree to be bound by the terms of the letter of transmittal.

In addition, in order to deliver Series A Notes held in the form of book-entry interests, a timely confirmation of book-entry transfer of those Series A Notes into the Exchange Agent’s account at DTC must be received by the Exchange Agent prior to the expiration date or you must comply with the guaranteed delivery procedures described below.

Certificated Series A Notes

If your Series A Notes are certificated Series A Notes and you wish to tender those notes for exchange pursuant to the exchange offer, you must transmit to the Exchange Agent on or prior to the expiration date a written or facsimile copy of a properly completed and duly executed letter of transmittal, including all other required documents, to the address set forth below under “—Exchange Agent.” In addition, in order to validly tender your certificated Series A Notes, the certificates representing your Series A Notes must be received by the Exchange Agent prior to the expiration date or you must comply with the guaranteed delivery procedures described below.

Guaranteed Delivery Procedures

If a holder desires to accept the exchange offer and time will not permit a letter of transmittal or Series A Notes to reach the Exchange Agent before the expiration date, a tender may be effected if the

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Exchange Agent has received at the address specified below under “—Exchange Agent,” on or prior to the expiration date, a letter or facsimile transmission from an Eligible Institution setting forth the name and address of the tendering holder, the names in which the Series A Notes are registered and, if possible, the certificate number of the Series A Notes to be tendered, and stating that the tender is being made thereby and guaranteeing that within three New York Stock Exchange trading days after the date of execution of such letter or facsimile transmission by the Eligible Institution, the Series A Notes, in proper form for transfer, will be delivered by the Eligible Institution together with a properly completed and duly executed letter of transmittal (and any other required documents). Unless Series A Notes being tendered by the above-described method (or a timely Book-Entry Confirmation) are deposited with the Exchange Agent within the time period set forth above (accompanied or preceded by a properly completed letter of transmittal and any other required documents), we may, at our option, reject the tender. A copy of a Notice of Guaranteed Delivery, which may be used by Eligible Institutions for the purposes described in this paragraph, is being delivered with this Prospectus and the related letter of transmittal.

A tender will be deemed to have been received as of the date when the tendering holder’s properly completed and duly signed letter of transmittal accompanied by the Series A Notes or a timely book-entry confirmation is received by the Exchange Agent. Issuances of Series B Notes in exchange for Series A Notes tendered pursuant to a Notice of Guaranteed Delivery or letter or facsimile transmission to similar effect (as provided above) by an Eligible Institution will be made only against deposit of the letter of transmittal (and any other required documents) and the tendered Series A Notes or a timely book-entry confirmation.

All questions as to the validity, form, eligibility (including time of receipt) and acceptance for exchange of any tender of Series A Notes will be determined by us and shall be final and binding on all parties. We reserve the absolute right to reject any or all tenders not in proper form or the acceptance of which, or exchange for which, may, in the opinion of our counsel, be unlawful. We also reserve the absolute right, subject to applicable law, to waive any of the conditions of the exchange offer or any defects or irregularities in tenders of any particular holder whether or not similar defects or irregularities are waived in the case of other holders. Our interpretation of the terms and conditions of the exchange offer (including the letter of transmittal and the instructions thereto) will be final and binding. No tender of Series A Notes will be deemed to have been validly made until all defects and irregularities with respect to such tender have been cured or waived. Neither we, the Exchange Agent, nor any other person shall be under any duty to give notification of any defects or irregularities in tenders or incur any liability for failure to give any such notification.

Each broker-dealer that receives Series B Notes for its own account in exchange for Series A Notes, where the notes were acquired by the broker-dealer as a result of market-making activities or other trading activities, must acknowledge that it will deliver a Prospectus in connection with any resale of such Series B Notes. See “Plan of Distribution.”

Terms and Conditions of the Letter of Transmittal

The letter of transmittal contains, among other things, the following terms and conditions, which are part of the exchange offer.

The party tendering Series A Notes for Series B Notes, transfers and exchanges the Series A Notes to us and irrevocably constitutes and appoints the Exchange Agent as the transferor’s agent and attorney-in-fact to cause the Series A Notes to be assigned, transferred and exchanged.

The transferor represents and warrants that it has full power and authority to tender, exchange, sell, assign and transfer the Series A Notes, and that, when the same are accepted for exchange, we will acquire good, marketable and unencumbered title to the tendered Series A Notes, free and clear of all liens, restrictions, charges and encumbrances and not subject to any adverse claims. The transferor also warrants

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that it will, upon request, execute and deliver any additional documents deemed by us or the Exchange Agent to be necessary or desirable to complete the exchange, assignment and transfer of tendered Series A Notes. All authority conferred by the transferor will survive the death or incapacity of the transferor and every obligation of the transferor shall be binding upon the heirs, legal representatives, successors, assigns, executors and administrators of such transferor.

If the transferor is not a broker-dealer, it represents that it is not engaged in, and does not intend to engage in, a distribution of Series B Notes. If the transferor is a broker-dealer that will receive Series B Notes for its own account in exchange for Series A Notes, it represents that the Series A Notes to be exchanged for Series B Notes were acquired by it as a result of market-making activities or other trading activities, and acknowledges that it will deliver a Prospectus meeting the requirements of the Securities Act in connection with any resale of Series B Notes acquired in the exchange offer; however, by so acknowledging and by delivering a Prospectus, the transferor will not be deemed to admit that it is an “underwriter” within the meaning of the Securities Act.

Withdrawal Rights

Series A Notes tendered in the exchange offer may be withdrawn at any time prior to the expiration date.

For a withdrawal to be effective, a written or facsimile transmission of notice of withdrawal must be timely received by the Exchange Agent at its address set forth below under “—Exchange Agent” on or prior to the expiration date. Any notice of withdrawal must specify the person named in the letter of transmittal as having tendered Series A Notes to be withdrawn, the certificate numbers of Series A Notes to be withdrawn, the aggregate principal amount of Series A Notes to be withdrawn (which must be an authorized denomination), that the holder is withdrawing his election to have the Series A Notes exchanged, and the name of the registered holder of such Series A Notes, if different from that of the person who tendered the Series A Notes. Additionally, the signature on the notice of withdrawal must be guaranteed by an Eligible Institution (except in the case of Series A Notes tendered for the account of an Eligible Institution). The Exchange Agent will return the properly withdrawn Series A Notes promptly following receipt of notice of withdrawal. All questions as to the validity of notices of withdrawals, including time of receipt, will be final and binding on all parties.

If Series A Notes have been tendered pursuant to the procedures for book entry transfer, the notice of withdrawal must specify the name and number of the account at DTC to be credited with the withdrawal of Series A Notes, in which case a notice of withdrawal will be effective if delivered to the Exchange Agent by written or facsimile transmission. Withdrawals of tenders of Series A Notes may not be rescinded. Series A Notes properly withdrawn will not be deemed validly tendered for purposes of the exchange offer, but may be retendered at any subsequent time on or prior to the expiration date by following any of the procedures described herein.

Acceptance of Series A Notes for Exchange; Delivery of New Notes

Upon the terms and subject to the conditions of the exchange offer, the acceptance for exchange of Series A Notes validly tendered and not withdrawn and the issuance of the Series B Notes will be made promptly following the expiration date. For the purposes of the exchange offer, we shall be deemed to have accepted for exchange validly tendered Series A Notes when, as and if we had given notice of acceptance to the Exchange Agent.

The Exchange Agent will act as agent for the tendering holders of Series A Notes for the purposes of receiving Series B Notes from us and causing the Series A Notes to be assigned, transferred and exchanged. Upon the terms and subject to the conditions of the exchange offer, delivery of Series B Notes to be issued in exchange for accepted Series A Notes will be made by the Exchange Agent promptly after

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acceptance of the tendered Series A Notes. Series A Notes not accepted for exchange by us will be returned without expense to the tendering holders or in the case of Series A Notes tendered by book-entry transfer into the Exchange Agent’s account at DTC promptly following the expiration date or, if we terminate the exchange offer prior to the expiration date, promptly after the exchange offer is terminated.

Conditions to the Exchange Offer

Notwithstanding any other provision of the exchange offer, or any extension of an exchange offer, we will not be required to issue Series B Notes with respect to any properly tendered Series A Notes not previously accepted and may terminate the exchange offer (by oral or written notice to the Exchange Agent and by timely public announcement communicated, unless otherwise required by applicable law or regulation, by making a press release) or, at our option, modifying or otherwise amending the exchange offer, if the exchange offer, or the making of any exchange by a note holder, would violate (i) applicable law or (ii) any applicable SEC policy or interpretation of the staff of the SEC.

The foregoing conditions are for our sole benefit and may be asserted by us with respect to all or any portion of the exchange offer regardless of the circumstances (including any action or inaction by us) giving rise to such condition or may be waived by us in whole or in part at any time or from time to time in our sole discretion. Our failure at any time to exercise any of the foregoing rights will not be deemed a waiver of any right, and each right will be deemed an ongoing right which may be asserted at any time or from time to time.

In addition, we will not accept for exchange any Series A Notes tendered, and no Series B Notes will be issued in exchange for any Series A Notes, if at such time any stop order shall be threatened or in effect with respect to the registration statement of which this Prospectus constitutes a part or qualification under the Trust Indenture Act of 1939, as amended (the “TIA”) of the Indenture pursuant to which such Series A Notes were issued.

Exchange Agent

Wells Fargo Bank, National Association (“Wells Fargo Bank, N.A.”) has been appointed as the Exchange Agent of the exchange offer. All executed letters of transmittal should be directed to the Wells Fargo Bank, N.A. at the address set forth below. Questions and requests for assistance, requests for additional copies of this Prospectus or of the letter of transmittal and requests for Notices of Guaranteed Delivery should be directed to Wells Fargo Bank, N.A. addressed as follows:

 

Delivery to an address other than as set forth above, or transmission of instructions by facsimile number other than the number set forth above, will not constitute a valid delivery.

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Solicitations of Tenders; Expenses

We have not retained any dealer-manager or similar agent in connection with the exchange offer and will not make any payments to brokers, dealers or others for soliciting acceptances of the exchange offer. We will, however, pay the Exchange Agent reasonable and customary fees for its services and will reimburse it for reasonable out-of-pocket expenses. We will also pay brokerage houses and other custodians, nominees and fiduciaries the reasonable out-of- pocket expenses incurred by them in forwarding tenders for their customers. We will pay for the expenses incurred in connection with the exchange offer, including the fees and expenses of the Exchange Agent and printing, accounting and legal fees.

No person has been authorized to give any information or to make any representations in connection with the exchange offer other than those contained in this Prospectus. If given or made, information or representations should not be relied upon as having been authorized by us. Neither the delivery of this Prospectus nor any exchange made based upon this Prospectus shall, under any circumstance, create any implication that there has been no change in our affairs since the respective dates as of which information is given. The exchange offer is not being made to (nor will tenders be accepted from or on behalf of) holders of Series A Notes in any jurisdiction in which the making of the exchange offer or the acceptance of the exchange offer would not be in compliance with the laws of such jurisdiction. However, we may, at our discretion, take such action as we deem necessary to make the exchange offer in any such jurisdiction and extend the exchange offer to holders of Series A Notes in such jurisdiction. In any jurisdiction of which the securities laws or blue sky laws require the exchange offer to be made by a licensed broker or dealer, the exchange offer is being made on our behalf by one or more registered brokers or dealers that are licensed under the laws of such jurisdiction.

Accounting Treatment

The Series B Notes will be recorded at the same carrying value as the Series A Notes, which is the principal amount as reflected in our accounting records on the expiration date. Accordingly, no gain or loss for accounting purposes will be recognized. For accounting purposes, the expenses of the exchange offer will be deferred and amortized as interest expense over the life of the notes.

Appraisal Rights

Holders of Series A Notes will not have dissenters’ rights or appraisal rights in connection with the exchange offer.

Other

Participation in the exchange offer is voluntary and holders should carefully consider whether to accept. Holders of the Series A Notes are urged to consult their financial and tax advisors in making their own decisions on what action to take.

As a result of the making of, and upon acceptance for exchange of all validly tendered Series A Notes pursuant to the terms of this exchange offer, we will have fulfilled a covenant contained in the Registration Rights Agreement. Holders of the Series A Notes who do not tender their certificates in the exchange offer will continue to hold such certificates and will be entitled to all the rights and limitations under the Indenture pursuant to which the Series A Notes were issued, except for any such rights under the Registration Rights Agreement which by their terms terminate or cease to have further effect as a result of the making of this exchange offer. All untendered Series A Notes will continue to be subject to the restrictions on transfer set forth in the Series A Notes and the Indenture. To the extent that Series A Notes are tendered and accepted in the exchange offer, the trading market, if any, for any Series A Notes that remain outstanding could be adversely affected.

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We may in the future seek to acquire untendered Series A Notes in open market or privately negotiated transactions, through a subsequent exchange offer or otherwise. We have no present plan to acquire any Series A Notes which are not tendered in the exchange offer.

USE OF PROCEEDS

We will not receive any cash proceeds from the issuance of the Series B Notes in the exchange offer as described in this Prospectus. We will only receive Series A Notes in exchange for Series B Notes in like principal amounts. The Series A Notes surrendered in exchange for the Series B Notes will be retired and canceled and cannot be reissued. Accordingly, the issuance of the Series B Notes will not result in any change in our outstanding debt.

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CAPITALIZATION

The following table sets forth at September 30, 2006, our cash and cash equivalents and capitalization, on an actual basis, and reflects the offering of the 9% Senior Subordinated Notes and application of net proceeds therefrom to repay approximately $38.5 million of outstanding indebtedness under the revolving credit facility.  This table should be read in conjunction with our consolidated financial statements and the related notes incorporated by reference in this Prospectus.

(1)   Shown net of unamortized original issue discount of $776,000.

(2)        Reflects issuance of $125 million aggregate principal amount of the senior subordinated notes.

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SELECTED HISTORICAL FINANCIAL AND OPERATING DATA

The selected historical financial data presented below as of and for each of the five years ended December 31, 2005 have been derived from our audited consolidated financial statements, and as of and for the nine months ended September 30, 2006 and 2005, from our unaudited financial statements. The following information should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the consolidated financial statements and the related notes as of and for such periods. Our consolidated financial statements and the related notes as of December 31, 2005 and 2004, and for each of the three years ended December 31, 2005, and as of September 30, 2006 and 2005, and for the nine months ended September 30, 2006 and 2005, and the related "Management's Discussion and Analysis of Financial Condition and Results of Operations" are incorporated by reference into this Prospectus. In our opinion, the unaudited selected historical financial and operating data has been prepared on the same basis as the audited selected financial data and includes all adjustments, consisting of normal recurring adjustments, necessary to present fairly our results of operations and financial position as of the dates and for the periods presented. The unaudited selected historical financial and operating data for the nine months ended September 30, 2006 is not necessarily indicative of results that may be expected for any other interim period or for the full year ending December 31, 2006.

(1)   Net revenues represent total revenues less promotional allowances.

(2)    Operating income for 2001 includes a pretax asset impairment charge of $5.5 million.

(3)    Effective January 1, 2001, we adopted Financial Accounting Standards Board Statement No. 133, as amended, “Accounting for Derivative Instruments and Hedging Activities”. The cumulative effect of adopting this new accounting principle amounted to a charge of $92,000 net of tax.

(4)    Minority interest represents the third-party, 10% non-controlling interest in Jackson Trotting Association, LLC and the third-party, 50% non-controlling interest in North Metro Harness Initiative, LLC.

(5)    Effective January 1, 2002, we adopted Statement of Financial Accounting Standards No. 142 “Goodwill and Other Intangible Assets” (SFAS No. 142).  Goodwill amortization expense was approximately $250,000 for 2001.

(6)    On July 31, 2003, we acquired Scioto Downs, Inc. Scioto Downs’ operating results have been included in our consolidated results from the date of acquisition.

(7)    On March 11, 2004, we acquired Binion’s Gambling Hall and Hotel and received guaranteed payments under a joint operating agreement with Harrah’s Entertainment, Inc. until taking over operation of the property on March 10, 2005.

(8)    In October 2005 we began consolidating the financial statements of North Metro Harness in accordance with FASB Interpretation No. 46 “Consolidation of Variable Interest Entities” (FIN 46) and subsequent revision FIN 46R.

(9)    Effective January 1, 2006, we adopted Financial Accounting Standards Board Statement No. 123 (revised 2004), Share-Based Payment, which is a revision of SFAS No. 123, Accounting for Stock-Based Compensation. The effect of adopting this new accounting principle amounted to a charge of $90,000 net of tax, for the nine months ended September 30, 2006.

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BUSINESS

Overview

We own, operate, and develop a diverse collection of gaming, horseracing and entertainment facilities located in six states. Our portfolio includes: (i) the Mountaineer Racetrack & Gaming Resort, a destination racino with 3,220 slot machines in Chester, West Virginia, (ii) Presque Isle Downs, which is currently under construction in Erie, Pennsylvania, and is licensed to build a racetrack that is one of only 14 sites in the state statutorily permitted to apply for a license to operate slot machines, (iii) two casinos in Las Vegas, Nevada, (iv) Scioto Downs, a harness racetrack in Columbus, Ohio, (v) a 50% interest in North Metro Harness Initiative, LLC, which has a license to build and operate a racetrack and card room in Anoka County, Minnesota, and (vi) a 90% interest in Jackson Harness Raceway in Jackson, Michigan. For the year ended December 31, 2005, we generated net revenue of $349.9 million.

Our strategy has centered on the development of a destination gaming resort at Mountaineer and the surrounding area, which has been our primary operating asset for the past 14 years. Mountaineer is one of only four racetracks in West Virginia permitted to operate slot machines (bars and fraternal organizations that sell alcohol may apply for a license to operate up to five and ten Limited Video Lottery machines, respectively). Mountaineer is strategically located at the northern tip of West Virginia’s northwestern panhandle, primarily serving residents of the Ohio Valley (including Cleveland and Youngstown) and western Pennsylvania (including Pittsburgh). From a modest beginning in 1990 with 165 video lottery terminals, Mountaineer has grown to offer 3,220 slot machines, 359 hotel rooms and a full range of other high-quality amenities. Mountaineer is the only racetrack in the state permitted to operate slot machines apart from the racetrack. Accordingly, approximately 2,770 of Mountaineer’s 3,220 slot machines are located in a casino-like gaming area, which creates a distinct competitive advantage.

In addition to growing and developing Mountaineer, we believe we have successfully positioned ourselves for future diversification by securing a racing license at Presque Isle Downs in Erie, Pennsylvania and then, together with other members of the industry, successfully securing legislation for slot machines at the state’s racetracks, including Presque Isle Downs, subject to licensing by the Pennsylvania Gaming Control Board (“PGCB”). In October 2005, we commenced construction of the gaming and horseracing facility. We are nearing completion of the site development work and we have commenced construction on the clubhouse facility. We anticipate opening the clubhouse for slot machine gaming in February 2007. We intend to commence live racing by September 2007, and have submitted a request to the Pennsylvania Racing Commission for 25 racing dates in 2007. The PGCB issued conditional gaming licenses in September and October 2006 (we received our Conditional Category 1 License on October 25, 2006). The PGCB has scheduled the hearing on our permanent Category 1 License for December 13, 2006, and has announced that it expects to issue permanent licenses in December 2006. Licensees are permitted to operate slot machines pursuant to the conditional licenses pending issuance of the permanent licenses. Subject to compliance with applicable licensing requirements, we plan to operate 2,000 slot machines. Substantially all of the net proceeds from the offering of the Series A Notes are available to fund the development of Presque Isle Downs and to pay the $50 million slots license fee, subject to compliance with applicable licensing requirements. Following receipt of a permanent license and commencement of slot operations, we expect Presque Isle Downs to become our second largest cash flow generator and significantly diversify our operations.

We also have (through a 50-50 joint venture) a license to construct a racetrack and, after the first 50-day race meet and regulatory approval of a card room plan of operation, a 50-table card room in Anoka County, Minnesota. Additionally, in the event that favorable gaming legislation is adopted, we have a racetrack in Ohio and in Michigan that each present further development opportunities. While we consider the prospect of new gaming legislation in Ohio and Michigan speculative, we believe that our low acquisition and carrying costs for these assets make them attractive investments for the Company. Each of these assets has the potential to become a significant cash flow generator and further diversify our operations.

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Properties

Mountaineer Racetrack & Gaming Resort—Our Flagship Property

Overview.   Mountaineer is located at the northern tip of West Virginia’s northwestern panhandle, primarily serving residents of the Ohio Valley (including Cleveland and Youngstown) and western Pennsylvania (including Pittsburgh). Since acquiring Mountaineer in 1992, we have renovated and expanded its facilities in order to maximize the benefits of the West Virginia Racetrack Video Lottery Act of 1994, as amended (the “Lottery Act”), which permits us to operate slot machines at Mountaineer, and subsequent amendments that have permitted additional types of gaming machines. We continue to focus on expanding the reach of our extensive customer base at Mountaineer and improving our operating results. We have invested approximately $200 million in capital improvements, expansion projects and equipment at Mountaineer since 2000. As a result, Mountaineer has become a diverse gaming, entertainment and convention complex and destination resort with:

·       121,956 square feet of gaming space housing 3,220 slot machines, which includes approximately 450 slot machines at the racetrack and approximately 2,770 slot machines in the 97,725 square-foot “Speakeasy Gaming Saloon,” integrated with the hotel rooms and convention space, spa and retail plaza;

·       359 hotel rooms, including the recently renovated 101-room Lodge Hotel and the 258-room, 219,000 square foot Grande Hotel at Mountaineer, which opened in May 2002 and offers 22 suites, a full-service spa and salon, a gourmet coffee shop, a buffet, a 60-seat upscale steakhouse, a retail plaza and an indoor and outdoor swimming pool, and, generally, a level of luxury not previously seen within twenty-five miles of the resort;

·       52,750 square feet of convention space, which can accommodate seated meals for groups of up to 1,870 as well as smaller meetings in more intimate break-out rooms and concerts and boxing events for approximately 1,500 guests;

·       a 69,000 square foot theater and events center, known as the “Harv,” that seats approximately 5,000 patrons for concerts, boxing matches, trade shows and other entertainment offerings;

·       Woodview, an eighteen-hole par 71 golf course measuring approximately 6,550 yards on 170 acres located approximately seven miles from Mountaineer;

·       a 12,000 square foot state-of-the-art fitness center;

·       on-site parimutuel wagering and thoroughbred, harness and greyhound racing simulcast from other prominent tracks, as well as wagering on Mountaineer’s races at 900 sites to which the races are simulcast;

·       year-round live thoroughbred horseracing on a one-mile dirt surface or a 7¤8 mile grass surface with expansive clubhouse and grandstand viewing areas with enclosed seating for 770 patrons and 2,800 patrons, respectively;

·       surface parking for approximately 5,400 cars; and

·       approximately 2,350 acres of owned real property in Hancock County, West Virginia, of which approximately 215 acres comprise the resort site, 170 acres comprise the Woodview golf course, and approximately 1,885 acres are available for future development (including an approximately 250 acre parcel on the Ohio River which is adjacent to Mountaineer and which is intended to be developed as a championship golf course).

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Slot Machine Operations.   Mountaineer’s revenues and profits are driven primarily by its slot machine operations and to a lesser extent its lodging, food and beverage operations, parimutuel wagering, convention center, events center, and recreational facilities fees. Mountaineer currently operates 3,220 slot machines in various configurations of denominations and coin drop/ticket out machines. Approximately one-half of Mountaineer’s slots are TITO (ticket-in-ticket-out) machines, which allow patrons to move from machine to machine without having to visit the cashier’s window.

Mountaineer has enjoyed strong growth in its slot business as a result of positive legislation (Las Vegas style coin drop machines permitted by amendment in June 1999; relief from limitation on ratio of machines in hotel versus horse racetrack buildings from 1:1 between 1994 and June 1998 to 2:1 in June 1998, elimination of the ratio in 2000, and increase in the maximum slot wager from $2 to $5 in 2001), increases in machine count (from 400 in 1994, to 800 in 1995, to 1,000 in 1997, to 1,200 in July of 1998, to 1,345 in 1999, to 1,905 in 2000, to 2,500 in September 2001, to 3,000 in July 2002, to 3,200 in July 2003), progressive advertising and marketing, and increased patronage resulting from Mountaineer’s development into a destination resort. Mountaineer is currently authorized to operate 3,500 slot machines.

Mountaineer derives revenues from the operation of gaming in the form of net win on the gross terminal income, or the total cash deposited into a machine less the value of credits cleared for winning redemption tickets, tokens or coins. Pursuant to the Lottery Act, Mountaineer’s commission is fixed at 47% of the annual net win after deducting an administrative fee of 4% of gross terminal revenues first paid to the State of West Virginia. Additionally, net win in excess of Mountaineer’s net win for the year ended June 30, 2001, or “Excess Net Terminal Income” as it is referred to in a 2001 amendment of the Lottery Act, is subject to a 10% surcharge. Mountaineer’s threshold for Excess Net Terminal Income is fixed at approximately $160.0 million. However, the State must contribute 42% of the surcharge to a capital reinvestment fund from which the racetracks receive reimbursement, on a dollar-for-dollar basis, for qualifying capital improvements to the racetrack and adjacent property. Further, after deducting the administrative fee and the surcharge from the Excess Net Terminal Income, the racetracks receive 42% (as opposed to 47%) of the remaining net win. In April 2005, West Virginia passed legislation that increased the portion of the racetracks’ net win that is contributed to the employee pension funds from 1¤2% to 1%. This 1¤2% increase, which was effective July 8, 2005, is applied to the racetracks’ net win up to the Excess Net Terminal Income threshold (for Mountaineer, the first $160 million). Additionally, the legislation requires that Mountaineer reallocate 11¤2% of net win previously used for the payment of regular purses into the West Virginia Thoroughbred and Greyhound Breeder Development Funds. This change was effective July 8, 2005 and applies until Mountaineer reaches its Excess Net Terminal Income threshold.

Racing and Parimutuel Wagering Operations.   Mountaineer offers live thoroughbred horse racing on dirt and grass surfaces before expansive clubhouse and grandstand viewing areas with enclosed seating (770 seats and 2,800 seats respectively) for year-round racing. In August 2000, Mountaineer also began exporting its signal to other outlets in the United States, Canada and the Caribbean. Those outlets (over 900 off-track wagering facilities thus far) simulcast Mountaineer’s races and conduct parimutuel wagering. Mountaineer also conducts parimutuel wagering on horse and greyhound racing simulcast via closed circuit television from other prominent racetracks around the country. Mountaineer’s revenues from racing operations are derived mainly from three sources: commissions earned on parimutuel wagering on live races held at Mountaineer; commissions earned on races conducted at other “host” racetracks and broadcast live (i.e., import simulcast) at Mountaineer; and, since August 11, 2000, fees paid to Mountaineer by other racetracks and off track wagering facilities that broadcast Mountaineer’s races live (i.e., export simulcast). In parimutuel wagering, patrons bet against each other rather than against the operator of the facility or with pre-set odds. The dollars wagered form a pool of funds from which winnings are paid based on odds determined solely by the wagering activity. The racetrack acts as a stakeholder for the wagering patrons and deducts from the amounts wagered a “take-out” or gross commission, from which the horse racetrack pays state and county taxes and racing purses.

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Lodging, Food and Beverage Operations.   With the May 2002 opening of the 258-room Grande Hotel at Mountaineer, the resort now has 359 hotel rooms. We recently renovated and upgraded the 101 rooms in the Lodge Hotel. Because the hotel provides direct access to the Speakeasy Gaming Saloon, the spa and retail plaza, the gourmet steakhouse, the buffet, the 125-seat Gatsby restaurant for casual dining, and the convention center, we view the hotel as a focal point in marketing our gaming and racing products as well as the remainder of the resort’s entertainment offerings. We also offer various dining and lounge facilities in the horse racetrack buildings, including the horse racetrack’s Clubhouse Restaurant, which is open a minimum of 210 days annually on live race days and offers seating for 770 customers with full lunch and dinner menus and a private buffet.

Amenities and Recreational Activities.   Mountaineer offers a number of amenities and recreational activities intended to enhance the entertainment experience of its slot and racing patrons.

In January 1999, Mountaineer purchased the Woodview Golf Course. Woodview is an eighteen-hole par 71 course measuring approximately 6,550 yards on a 170-acre tract, which is located approximately seven miles from Mountaineer in New Cumberland, West Virginia.

In August 2000, Mountaineer opened the Harvey E. Arneault Memorial Arena and Events Centre. Known as the “Harv,” this 69,000 square foot facility is a tent-like fabric structure that seats approximately 5,000 patrons for concerts, boxing matches and other entertainment offerings. The Harv is just a short walk from the hotel and Speakeasy Gaming Saloon and has a state-of-the-art stage, permanent bleachers and food and beverage concessions and has hosted such entertainers as Bill Cosby, Wayne Newton, Paul Anka, Tom Jones and the late Lou Rawls.

In February 2001, Mountaineer opened its Fitness Centre. Also a fabric structure, this 12,000 square foot facility has a full complement of weight training and cardiovascular equipment as well as a health bar and locker rooms with steam and sauna rooms.

Mountaineer also offers tennis, outdoor swimming and indoor swimming, which is located at the Grande Hotel.

Presque Isle Downs

Our wholly owned subsidiary, Presque Isle Downs, Inc., holds a license to build a thoroughbred racetrack with parimutuel wagering on a 272-acre site (approximately 58.4 acres of which will be dedicated to the public as open space) we own at the intersection of I-90 and State Route 97 in Summit Township, Erie County, Pennsylvania. Presque Isle Downs owns or has option rights to two additional tracts of land, which are located in Erie, Pennsylvania (15 developable acres) and in McKean Township (213 developable acres). We began construction (earth work and roads) in October 2005. We are nearing completion of the site development work and construction on the clubhouse facility. We anticipate opening the clubhouse for slot machine gaming in February 2007. The PGCB issued conditional gaming licenses in September and October 2006 (we received our Conditional Category 1 License on October 25, 2006). The PGCB has scheduled the hearing on our Permanent Category 1 License for December 13, 2006, and has announced that it expects to issue permanent licenses in December 2006. Licensees are permitted to operate slot machines pursuant to the conditional licenses pending issuance of the permanent licenses. We intend to commence live racing at Presque Isle Downs by September 2007, and have submitted a request to the Pennsylvania Racing Commission for 25 racing dates in 2007

In July 2004, the Pennsylvania Legislature passed, and Governor Rendell signed into law, a bill permitting slot machines at the Commonwealth’s licensed racetracks (including Presque Isle Downs) and certain other locations, subject to licensing by the newly formed Gaming Control Board.

With respect to racing, our plans call for a state-of-the-art horse racing facility featuring racing as well as other entertainment and fine and casual dining. The completed facility will contain a thoroughbred

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racetrack, a grandstand and clubhouse consisting of 140,000 square feet, barns that will accommodate 1,000 horses, a paddock, and related facilities for the horses, jockeys, and trainers, and approximately 3,400 parking spaces. Presque Isle Downs is expected to hold live racing 150 days per year, primarily between June and September. Racing fans will have approximately 1,000 seats, located both indoors and out.

Scioto Downs

In July 2003, we acquired 100% of the stock of Scioto Downs, Inc., which owns and operates a harness horse racetrack in Columbus, Ohio. The 173-acre site includes the racetrack, a grandstand with a capacity of 10,000 patrons, an enclosed clubhouse with a capacity of 1,500 patrons, approximately 6,000 parking spaces, barns, a paddock, and related facilities for the horses, drivers, and trainers. Scioto Downs was built in the 1960s. The Company has an option to acquire approximately 35 adjacent acres of primarily unimproved land for the fair market value of such property, which is estimated to be approximately $1 million.

In connection with the acquisition of Scioto Downs in 2003, the Company allocated $13.2 million to intangible assets. The intangible assets consist principally of the fair value assigned to the racing licenses held by Scioto Downs based upon an independent third party valuation. The value assigned to the licenses considers that the racing licenses permit Scioto Downs to conduct live racing and simulcasting racing as established by the Ohio State Racing Commission and in addition, would permit Scioto Downs to operate electronic gaming devices in the event such enabling legislation is passed in Ohio. On November 7, 2006, voters in Ohio voted on a slot referendum to permit the operation of slot machines at the state’s racetracks. The referendum was not successful; therefore, management is considering the potential for successful future legislation and the impact on the carrying value and recoverability of the $13.2 million intangible asset associated with the fair value of the racing licenses held by Scioto Downs. See “Description of Certain Indebtedness.”

North Metro Harness

Our wholly owned subsidiary, MTR-Harness, Inc., owns a 50% interest in the North Metro Harness Initiative, LLC, which was awarded a license by the Minnesota Racing Commission on January 19, 2005 (formal findings issued February 16, 2005) to own and operate a harness racetrack in Columbus Township, Anoka County, Minnesota, approximately 30 miles northeast of downtown Minneapolis. Under Minnesota law, licensed racetracks may operate card rooms with up to 50 tables, each with approximately 5 to 10 gambling positions, subject to completion of the first 50-day live race meet and regulatory approval of a card room plan of operation. North Metro anticipates that it will, subject to the terms of its card room plan of operations, derive revenues from card room operations, depending on the particular type of game, as a percentage of accumulated wagers, a “rake” from certain wagers, and other charges for hosting the activity, but will not have an interest in the outcome of any card game. The harness racetrack and entertainment facility will be constructed on a 178.4-acre tract of land located near the interchange of I-35 and Lake Drive. The facility would include the construction of a harness racing track and approximately 110,750 square feet of associated grandstand, card club, horse barns and maintenance buildings. It would also include the construction of internal roadways, a main driveway, and surface parking (approximately 1,850 spaces); and the construction of necessary wetland mitigation and storm water treatment for the site. The project will be separately financed on a non-recourse basis to the Company, although the Company may elect to provide a credit enhancement.

Jackson Harness Raceway

In December 2005 we acquired, through a wholly owned subsidiary (Jackson Racing, Inc.), a 90% interest in Jackson Trotting Association, LLC, which operates Jackson Harness Raceway in Jackson, Michigan. Jackson Harness offers harness racing (from April to July), parimutuel wagering, and casual

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dining. Jackson Trotting presently leases a portion of the Jackson County Fairgrounds from Jackson County. Its lease with Jackson County expires on December 31, 2012. We have an option through December 3, 2007 to acquire for $1.8 million a 173-acre parcel in Jackson upon which we plan to relocate the track if legislation were to pass permitting Jackson Trotting to operate slot machines or other gaming. Relocation would be subject to licensing of the new site and approval of the Michigan Racing Commission and compliance with the provisions of the current lease with Jackson County.

Nevada Properties

On March 11, 2004, through Speakeasy Gaming of Fremont, Inc., we acquired the assets of Binion’s Horseshoe Hotel & Casino on Fremont Street in downtown Las Vegas. We paid $20 million in cash (exclusive of transaction costs) and separately purchased a parcel of land for $1.8 million. We simultaneously entered a Joint Operating License Agreement with an affiliate of Harrah’s Entertainment. Pursuant to the Joint Operating License Agreement, Harrah’s operated the property for one year and made fixed payments to us of approximately $200,000 per month. The purchase price is subject to increase by $5 million if Harrah’s achieved positive EBITDA (as defined therein) during the last nine months of the Joint Operating License Agreement. See “Business—Litigation.” We took over operation of the property on March 10, 2005 and renamed the property “Binion’s Gambling Hall and Hotel.” The Binion’s property sits on approximately 5.3 acres (231,961 square feet) and consists of a 25-story hotel tower with 365 rooms, meeting space, two gift shops, a rooftop swimming pool, and approximately 87,000 square feet of casino space. Speakeasy Fremont owns 131,961 square feet of the property in fee and ground leases the remaining 100,000 square feet pursuant to various ground leases having aggregate annual rent of approximately $6.4 million, subject to certain periodic increases.

We also own and operate, through our wholly owned subsidiary Speakeasy Gaming of Las Vegas, Inc., the Ramada Inn and Speedway Casino, which is located on approximately 6.1 acres at the intersection of Cheyenne Boulevard and Interstate 15 in North Las Vegas. Approximately five miles from the Las Vegas Motor Speedway, the property includes a 95-room hotel and a casino with approximately 400 slot machines and seven table games.

Business Strategy

Our business strategy involves (i) driving revenue growth at Mountaineer now that the facility has matured as a destination resort and convention facility and using Mountaineer’s resort status to differentiate it from the Limited Video Lottery machines permitted in West Virginia’s bars and fraternal organizations as well as from anticipated new gaming competition in Pennsylvania; (ii) constructing and opening slot and racing operations at Presque Isle Downs and cross marketing it with Mountaineer and Scioto Downs; (iii) improving operating results at Binion’s Gambling Hall and Hotel by increasing patronage through modest capital improvements and pursuing third-party tenants who will provide additional amenities at the property; (iv) promoting the passage of table game legislation for Mountaineer and slot machine gaming at Scioto Downs; and (v) building and opening North Metro Harness as soon as practicable.

Market Mountaineer As A Destination Resort, Convention Center And Diversified Entertainment Facility

Our strategy is to focus our marketing on the fact that Mountaineer is now a mature destination resort, convention facility and entertainment complex and further distinguish Mountaineer from Limited Video Lottery rooms in nearby bars and fraternal organizations and other competitors whose facilities may have some but not all of the entertainment venues available at Mountaineer. The development of a destination resort is likewise aimed at distinguishing Mountaineer from any new competition that could result from the enactment of gaming legislation in neighboring states and the implementation of additional gaming in Pennsylvania as a result of the 2004 law permitting slot machines.

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Constructing and Opening Slot and Racing Operations

When we open Presque Isle Downs for racing in 2007, assuming receipt of a permanent slots license, we will own four racetracks, two of which will have slot machines, in contiguous states. And upon opening North Metro, we will own 50% of a fifth racetrack with a 50-table card room. At that point, we expect to have a larger and more diverse operation, thus reducing our dependence on a single property for the vast majority of our revenues. Moreover, the properties will be sufficiently proximate to allow for cross marketing, yet sufficiently distant that cannibalization should not be a concern. Through promotions such as a unified players’ club and advertising during our export simulcast broadcasts, we intend to cross market among our racetrack properties. We likewise intend to promote Binion’s Gambling Hall and Hotel at all of our racetrack properties.

Improving Operating Results at Binion’s

Our strategy for improving operating results at Binion’s involves modest capital improvements (approximately $7 million, exclusive of gaming equipment) and the addition of amenities through leases with third parties—all in an effort to increase walk-in traffic from Fremont Street. Contemplated capital improvements include new carpeting, wall treatments and chairs in the casino, lighting, and conversion of Binion’s unique rooftop pool deck to a night club. We believe these improvements will make the property more attractive to passersby. We intend to drive rental income as well as foot traffic for the casino by entering leases with third parties who will provide shopping and other outlets at the property.

Pursuing Legislation for Additional Forms of Gaming at our Properties

We have been pursuing and intend to continue to pursue legislation for video lottery or slot machine gaming at racetracks in Ohio and Michigan and, subject to county referendum, table gaming at racetracks in West Virginia. We believe that such legislation, depending upon the fees and taxes imposed on gaming revenues or profits, can result in improvement of our business prospects and financial condition. Enhanced gaming at our properties would create new jobs and a new source of revenue, increase foot traffic at our properties, and provide a competitive advantage.

Constructing and Opening Racing and Card Room Operations in Minnesota

We view our Minnesota joint venture as another opportunity to leverage our racing and parimutuel expertise as well as to diversify our sources of revenue and profits.

Competition

Gaming Operations

We face substantial competition in each of the markets in which our gaming facilities are located. See “Risk Factors—Certain Risks Related to Our Business—We face significant competition from other gaming and racing facilities, and increased competition could have a material adverse effect on us.”

Specific competitive factors relating to our primary gaming markets include the following:

Mountaineer’s Slot Operations.   In recent years, the number of gaming options available to consumers in our West Virginia area market has increased considerably. While there are three other tracks in West Virginia that offer slot machine gaming, only one, Wheeling Downs, lies within Mountaineer’s primary market (a 150-mile radius), located approximately 50 miles to the south in Wheeling, West Virginia. That competitor currently operates approximately 2,320 slot machines. In 2001, West Virginia enacted legislation permitting Limited Video Lottery in bars and fraternal organizations. The law authorized up to 9,000 slot machines in adults-only facilities throughout West Virginia commencing on January 1, 2002. No more than five slot machines are allowed in each establishment licensed to sell alcoholic beverages; and no

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more than ten slot machines are allowed in each licensed fraternal or veterans’ organization. As of June 2006, approximately 8,100 new slot machines have been installed in the State’s bars and fraternal organizations, approximately 520 of which are in Hancock County (where Mountaineer is located) and another approximately 930 in total are located in nearby Brook and Ohio Counties. Although the bars and fraternal organizations housing these machines lack the amenities and ambiance of our resort, they do compete with us, particularly for local business.

Beginning in late 2006 or early 2007, we expect new competition from slot operations in Pennsylvania. In July 2004, Pennsylvania enacted a law that contemplates the installation of slot machines at up to fourteen locations: seven racetracks (including Presque Isle Downs) each with up to 3,000 slots initially, and after six months of operations, with the ability to apply to the gaming board for up to 5,000 slots; five stand-alone slot parlors with the same number of machines as the racetracks; and two resort locations with up to 500 slots each. We anticipate that the Meadows, a harness racetrack approximately 40 miles southeast of Mountaineer, will install between 1,500 and 2,000 slot machines. Additionally, the owners of the Meadows announced plans to spend $200 million improving the facility. Pennsylvania’s new law also calls for at least one of the stand-alone slot parlors to be located in downtown Pittsburgh (approximately an hour’s drive from us). Although we do not anticipate the Pittsburgh facility to open for at least 2-3 years, all of the applicants have announced plans, if awarded the license, to build first class facilities. One applicant has announced plans to spend $1 billion on the gaming and related facilities. In 2005, the Pennsylvania Harness Horse Racing Commission, which at the time was permitted to grant one additional license for a track that would be eligible for slot machines, denied two applications that proposed to build a track within our target market. Both unsuccessful applicants appealed the denials. The appellate court affirmed the denial of one of the applications and reversed and remanded the other to the Harness Racing Commission for further proceedings. We do not know if that applicant will succeed. Ultimately, the location of the new facilities, the number and types of games, and the types of facilities built will determine the degree to which Pennsylvania’s planned entry into the slot machine business will have on us. Moreover, we believe that the addition of table games at Mountaineer, if permitted by the West Virginia Legislature, would significantly mitigate the impact of this new competition.

In July, the West Virginia Lottery began participating in the new multi-state progressive “Ca$hola” game. Currently, Mountaineer has 25 slots dedicated to this new game. We believe growth of this game, which has already yielded an annuity jackpot in excess of $700,000 for a player in Rhode Island, will further differentiate Mountaineer’s slot offering from its competition.

Presque Isle Downs’ Planned Slot Operations.   Upon commencement of its slot operations, Presque Isle Downs will compete with other Pennsylvania racetracks as well as Indian casinos in western New York and casinos in Canada.

The Speedway Property’s Casino Operations.   The Speedway Property competes primarily within the “locals” market in North Las Vegas. Within four miles of the Speedway property, there are at least seven casinos with non-restricted gaming licenses, including Jerry’s Nugget, the Cannery, the Silver Nugget, and Poker Palace. The Speedway Property also competes with numerous additional restricted gaming locations, which each offer up to 15 slot machines. The Speedway Property competes, to a lesser extent with several of the larger “locals” casinos operated by Station Casinos, Inc. At least two new North Las Vegas hotel/casino projects have been announced by our competitors and an existing competitor recently announced a plan to expand. While the nearest of these projects is approximately seven miles from the Speedway Property, the successful completion and operation of these projects could have an impact on the Speedway Property.

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Binion’s Gambling Hall and Hotel.   The downtown Las Vegas gaming market is highly competitive. During the term of the Joint Operating License Agreement, however, the competition did not affect us, as our minimum payments from Harrah’s were guaranteed and not dependent upon the financial results of the property. Having taken over operations on March 10, 2005, we now compete with other downtown casinos (there are 16) as well as casinos on the Strip and other parts of Las Vegas.

Racing and Parimutuel Operations

Mountaineer’s racing and parimutuel operations compete directly for wagering dollars with Wheeling Downs, which is located approximately 50 miles from Mountaineer; Thistledown and Northfield Park, which are located approximately 85 miles to the northwest in Cleveland, Ohio; and the Meadows, located approximately 40 miles southeast of Mountaineer in Washington, Pennsylvania. Wheeling Downs conducts parimutuel greyhound racing and video lottery gaming. Thistledown and Northfield Park conduct thoroughbred and harness parimutuel horse racing, respectively, but not video lottery gaming. The Meadows conducts live harness racing and provides import simulcasting and plans to add slot machine gaming. Since commencing export simulcasting in August 2000, Mountaineer also competes with racetracks across the country to have its signal carried by off-track wagering parlors. In general, Mountaineer also competes with other tracks for participation by quality racehorses.

In 2005, the Pennsylvania Harness Horse Racing Commission denied two applications, both for sites within Mountaineer’s target market, for the one remaining license to operate a harness racetrack. Both applicants appealed the denial. The appellate court affirmed the denial of one of the applications and reversed and remanded the other to the Harness Racing Commission for further proceedings. If the remaining applicant succeeds on remand and ultimately builds a racetrack in Mountaineer’s target market, that facility may compete with our thoroughbred horse racing at Mountaineer and planned thoroughbred horse racing at Presque Isle Downs, as well as our harness racing at Scioto Downs.

Presque Isle Downs will face competition from other racetracks in Pennsylvania and off-track wagering facilities in Pennsylvania and West Virginia, as well as from casinos in Western New York and racetracks in northern Ohio. Moreover, because Presque Isle Downs will be a new facility, all of its competitors will be more established.

Scioto Downs competes directly with other racetracks in Ohio, including Beulah Park, a thoroughbred horse racetrack which is located approximately nine miles from Scioto; River Downs Horse Racing in Cincinnati, Ohio; and to a lesser extent, casino gambling on riverboats in Indiana and Native American lands in Michigan. Further, Scioto Downs faces competition from off-track wagering facilities in Ohio, Pennsylvania and West Virginia.

North Metro Harness will face competition from Canterbury Park, an established thoroughbred racetrack and card room approximately 55 miles away. It will also compete with Minnesota’s Indian casinos (several of which are approximately 50 miles away), and, to a lesser extent, those in Wisconsin. We believe North Metro’s most likely direct competitor will be the Grand Casino Hinckley, which is approximately 50 miles to the north (farther from the Twin Cities), but on the same highway as North Metro.

Jackson Trotting competes directly with other racetracks in Michigan, including Sports Creek Raceway, Northville Downs, Hazel Park Harness Raceway and Great Lakes Downs.

Employees

As of December 31, 2005, we and our subsidiaries had approximately 2,850 employees (approximately 1,466 in connection with operations at Mountaineer; 70 full time (which increases by 250 during race meets conducted from May through September) at Scioto Downs; 183 at the Speedway property; 31 (which increases by 120 during race meets conducted from April to July) at Jackson Harness Raceway; and 1,100

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at Binion’s of whom approximately 372 were represented by labor unions under collective bargaining agreements. The union representing parimutuel clerks at Mountaineer has been expanded in recent years to cover certain employees providing off-track betting services at the Speakeasy Gaming Saloon. We have an agreement in place with the parimutuel clerks at Mountaineer until November 30, 2008. In July 2003, Mountaineer’s video lottery clerks (a bargaining unit of approximately 350 employees) voted to be represented by a labor union with which Mountaineer has entered a contract through March 1, 2008. In December 2003, Mountaineer’s housekeeping employees (a bargaining unit of approximately 174 employees) participated in a union election. The union filed objections to the election, and in December 2004 a final determination was made that the union lost the election. We believe that our employee relations are good. Certain employees in the maintenance, slot, food and beverage and hotel departments of Binion’s are represented by labor unions. The applicable labor agreements expire on May 31, 2010 and May 31, 2007 respectively.

Litigation

On May 5, 2006, HHLV Management Company, LLC, an affiliate of Harrah’s Entertainment, Inc., served a complaint for breach of contract against Speakeasy Gaming of Fremont, Inc. (and MTR Gaming Group, Inc. as guarantor of the obligations of Speakeasy Gaming of Fremont, Inc.). The complaint alleges that HHLV is entitled to an additional $5 million of purchase price pursuant to the Purchase Agreement by which Speakeasy Gaming of Fremont acquired Binion’s Gambling Hall and Hotel. The Company and Speakeasy Gaming of Fremont, Inc. answered the complaint, generally denying liability and filed counterclaims for breach of contract, breach of duty of good faith and fair dealing, and fraudulent or intentional misrepresentations. By order filed on October 2, 2006, the court dismissed those of the Company’s counterclaims that were based on fraud and bad faith, but preserved the counterclaim based on breach of contract.

Gary Birzer and Amy Birzer v. MTR Gaming Group, Inc. and Mountaineer Park, Inc, et. al, Civil Action No. 06-C-2-W, Circuit Court of Hancock County, West Virginia (First Amended Complaint filed January 17, 2006.   On January 17, 2006, Gary Birzer, a jockey who was injured during a race at Mountaineer in July 2004, filed a first amended complaint in which he alleges that Mountaineer was negligent in its design, construction and maintenance of the racetrack as well as in its administration of races. Mr. Birzer seeks medical expenses to date of $550,000, future medical expenses, unspecified lost wages and other damages resulting from his injuries. Mr. Birzer seeks in excess of $10 million in damages. Mr. Birzer’s wife seeks $2 million for loss of consortium. Mountaineer has answered the complaint, denying any negligence or wrongdoing and further alleging that Mr. Birzer’s injuries, to the extent the result of negligence, resulted from Mr. Birzer’s own negligence or the negligence of others. Though the complaint is unclear as to the basis for liability against the Company, it appears that the Company was named a defendant because it is Mountaineer’s parent company and allegedly conspired with the other defendants to cause Mr. Birzer’s inquiries. We believe, but cannot assure, that the Company has sufficient liability insurance coverage for these claims.

Sherwin Seiden, Individually and On Behalf of All Others Similarly Situated v. MTR Gaming Group, Inc., Edson R. Arneault, Robert A. Blatt, Donald J. Duffy, James V. Stanton, LC Greenwood and Richard Delatore, Civil Action No. 05-C-266M, Circuit Court of Hancock County, West Virginia, filed December 14, 2005.   On December 14, 2005, Sherwin Seiden, an MTR Stockholder filed suit as an individual and as a class action against us and the members of our Board of Directors alleging that the defendants were unlawfully attempting to complete the sale of MTR to TBR Acquisition Group, LLC (“TBR”) at a grossly inadequate and unfair price in breach of the director defendants’ fiduciary duties to MTR’s shareholders. TBR is controlled by Edson R. Arneault (our President, Chief Executive Officer and Chairman) and Robert A. Blatt (our Executive Vice President and a member of our Board of Directors). The action seeks to enjoin the defendants from proceeding with or completing the proposal sale, and if the sale is completed, the

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action seeks its rescission and the award of recessionary damages to the class. We believe these claims are moot because the Special Committee of our Board of Directors rejected the TBR proposal and no other purchase proposal has been made.

Patricia L. Williams, Individually and On Behalf of All Others Similarly Situated v. MTR Gaming Group, Inc., Edson R. Arneault, Robert A. Blatt, Donald J. Duffy, James V. Stanton, LC Greenwood and Richard Delatore, Civil Action No. 05-C-267 G, Circuit Court of Hancock County, West Virginia filed December 15, 2005.   On December 15, 2005, Patricia L. Williams, an MTR Stockholder filed suit as an individual and as a class action against us and the members our Board of Directors, alleging substantially the same facts and seeking substantially the same relief as described with respect to the Seiden action described above. We believe these claims are moot because the Special Committee of our Board of Directors rejected the TBR proposal and no other purchase proposal has been made.

Matthew John Smyth v. Edson R. Arneault, Robert A. Blatt, James V. Stanton, Donald J. Duffy, LC Greenwood, Richard Delatore, TBR Acquisition Group, LLC (Defendants), and MTR Gaming Group, Inc. (Nominal Defendant) Civil Action No. 06-C-28 W, Circuit Court of Hancock County, West Virginia, filed February 13, 2006.   On February 13, 2006 Matthew John Smyth, an MTR Stockholder, filed suit as a derivative action on our behalf, and as a class action on behalf of our stockholders, alleging that the defendants were unlawfully attempting to complete a going-private transaction with TBR upon unfair terms in breach of the director defendants’ fiduciary duties to our stockholders and resulting in a waste of our corporate assets. The action seeks a judgment ordering the director defendants to fulfill their fiduciary duties to us and our shareholders, to provide accountings of certain damages and pay certain reimbursement to us of amounts paid or to be paid by us to TBR under an Expense Reimbursement Agreement between TBR and us. See “Certain Transactions.”

The Company is also party to various lawsuits, which have arisen in the normal course of its business. The liability arising from unfavorable outcomes of those lawsuits is not expected to have a material impact on the Company’s financial condition or financial results.

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REGULATION AND LICENSING

General

All of our gaming operations are subject to extensive regulations and could be subjected at any time to additional or more restrictive regulations. We are also subject to the provisions of West Virginia law that govern the conduct of horse racing in West Virginia (the “West Virginia Racing Act”) and the operation of slots in West Virginia (the “Lottery Act”). In addition, our horse racing operations at Presque Isle Downs will be subject to extensive regulation under the Pennsylvania Racing Act and slot operations will be subject to the laws, regulations, and supervisory procedures of the recently formed PGCB. Our harness racing operations at Scioto Downs are subject to the applicable Ohio statutes and the rules and regulations of the Ohio Racing Commission. Our live racing, parimutuel wagering and slot operations are contingent upon the continued governmental approval of such operations as forms of legalized gaming. Our casino gaming operations in Nevada are subject to the laws, regulations, and supervisory procedures of the Nevada Gaming Control Board, the Nevada Gaming Commission, the City of Las Vegas, and the City of North Las Vegas.

The regulations and oversight applicable to our operations are intended primarily to safeguard the legitimacy of gaming activity and its freedom from inappropriate or criminal influences. Many of our material licenses are subject to annual or other periodic renewal and governmental authorities may refuse to grant permission to continue to operate existing facilities. The failure to obtain or maintain in effect required regulatory approvals is expected to constitute an event of default under our various financing agreements and would have a material adverse effect upon our business, financial condition and results of operations.

West Virginia Racing and Gaming Regulation

The powers and responsibilities of the Racing Commission include, among other things, (i) granting permission annually to maintain racing licenses and schedule race meets, (ii) approving simulcasting activities, (iii) licensing all officers, directors, racing officials and certain other employees of the licensee, and (iv) approving all contracts entered into by the licensee affecting racing and parimutuel wagering operations. Such powers and responsibilities extend to the approval and/or oversight of all aspects of racing and parimutuel wagering operations. In order to conduct simulcast racing, Mountaineer is required under West Virginia law to apply for a minimum of 210 live race days each year and to obtain Racing Commission approval for any reduction in race days actually held during that year. West Virginia law requires that at least 80% of Mountaineer’s employees be citizens and residents of West Virginia and must have been such for at least one year. In addition, certain activities, such as simulcasting races, require the consent of the representatives of a majority of the horse owners and trainers at Mountaineer.

Mountaineer’s export simulcast activities to sites outside of West Virginia are subject to regulation by other state racing commissions, as well as the provisions of the Federal Interstate Horse Racing Act of 1978, which prohibit Mountaineer from accepting off-track wagering on simulcast racing without the approval of the Racing Commission and, subject to certain exceptions, of any other currently operating horse racetrack within 60 miles, or if none, of the closest horse racetrack in any adjoining state. We believe we have received all necessary approvals to conduct our current operations at Mountaineer; however, such approvals are subject to renewal and approval annually. The failure to receive or retain approvals or renewals of approvals, or a delay in receiving such approvals and renewals, could cause the reduction or suspension of racing and parimutuel wagering as well as of gaming operations at Mountaineer and have a material adverse effect on our business, financial condition and results of operations.

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Pursuant to the Lottery Act, each of the two West Virginia horse racetracks and two West Virginia dog racetracks licensed prior to January 1, 1994 and which conduct a minimum number of days of live racing, may apply for an annual license to operate gaming at its racetrack. The Lottery Act likewise requires that the operator of Mountaineer be subject to a written agreement with the horse owners, breeders and trainers who race horses at Mountaineer (the “Mountaineer Horsemen”) concerning the proceeds of video lottery (a “Proceeds Agreement”) in order to conduct gaming operations. Mountaineer is party to the requisite agreement with the Mountaineer Horsemen which expires on December 31, 2006. The Lottery Act also requires Mountaineer to have a Proceeds Agreement with the parimutuel clerks in order to operate gaming. Mountaineer is party to a labor agreement with its parimutuel clerks, which expires on November 30, 2008, however, our Proceeds Agreement with the Mountaineer parimutuel clerks expires on April 14, 2007. The absence of such an agreement with the Mountaineer Horsemen or the parimutuel clerks at Mountaineer, or the termination or non-renewal of such agreements, would have a material adverse effect on our business, financial condition and results of operations. The Lottery Commission has broad powers to approve and monitor all operations of the gaming machines, the specification of the machines and the interface between the terminals and the West Virginia Central Lottery System. The Lottery Commission also acts upon requests for increases in the number of gaming machines. The Lottery Commission’s denial of a request to increase the number of machines at Mountaineer could limit Mountaineer’s growth and thus adversely affect our business, financial condition and results of operations. In addition, the Lottery Commission licenses all persons who control the licensed entity or are key personnel of the gaming operation to ensure their integrity and absence of any criminal involvement.

The conduct of gaming by a racing facility is subject to the approval of the voters of the county in which the facility is located. If such approval is obtained, the facilities may continue to conduct video lottery activities unless the matter is resubmitted to the voters pursuant to a petition signed by at least 5% of the registered voters, who must wait at least five years to bring such a petition. If approval is denied, another vote on the issue may not be held for a period of two years. Gaming was approved in Hancock County, the location of Mountaineer, on May 10, 1994. If such approval were ever revoked pursuant to the Lottery Act, it would have a material adverse effect on us.

The Lottery Act imposes extensive operational controls relating to, among other matters, security and supervision, access to the machines, hours of operation, general liability insurance coverage and machine location. In addition, the Lottery Act prohibits the extension of credit for video lottery play and requires Lottery Commission approval before any video lottery advertising and promotional activities are conducted. The Lottery Act provides for criminal and civil liability in the event of specified violations.

Pursuant to both the Racing Commission’s and Lottery Commission’s regulatory authority, we may be investigated by either body at virtually any time. Accordingly, we must comply with all gaming laws at all times. Should either body consider us to be in violation of any of the applicable laws or regulations, each has the plenary authority to suspend or rescind our licenses. While we have no knowledge of any non-compliance, and believe that are in full compliance with all relevant regulations, should we fail to comply with such regulations, our business would be materially adversely affected.

Nevada Gaming Regulation

The laws, regulations, and supervisory procedures of the Nevada Gaming Control Board (the “Board”), the Nevada Gaming Commission (the “Commission”), the City of Las Vegas (the “City”) and the City of North Las Vegas (“North Las Vegas”) (the Board, the Commission, the City and North Las Vegas are hereinafter collectively referred to herein as the “Nevada Gaming Authorities”) are based upon declarations of public policy which are concerned with, among other things: (i) the prevention of unsavory or unsuitable persons from having a direct or indirect involvement with gaming at any time or in any capacity; (ii) the establishment and maintenance of responsible accounting practices and procedures;

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(iii) the maintenance of effective controls over the financial practices of licensees, including the establishment of minimum procedures for internal fiscal affairs and the safeguarding of assets and revenues, providing reliable record keeping and requiring the filing of periodic reports with the Nevada Gaming Authorities; (iv) the prevention of cheating and fraudulent practices; and (v) the provision of a source of state and local revenues through taxation and licensing fees. Any changes in such laws, regulations, and procedures could have a material adverse effect on the operations of the Company, Binion’s and Speakeasy Las Vegas.

In order to operate non-restricted gaming at Binion’s and at the Speedway Property, Speakeasy Fremont, Speakeasy Las Vegas and certain officers and directors are required to be licensed or found suitable as operators and owners of a casino by the Nevada Gaming Authorities. A gaming license requires the periodic payment of fees and taxes and is not transferable. We are also required to be registered by the Nevada Commission as a publicly traded corporation (“Registered Corporation”) and as such, we are required periodically to submit detailed financial and operating reports to the Nevada Commission and furnish any other information that the Nevada Commission may require. No person may become a stockholder of, or receive any percentage of profits from, Speakeasy Fremont or Speakeasy Las Vegas without first obtaining licenses and approvals from the Nevada Gaming Authorities. We and all relevant affiliates have obtained from the Nevada Gaming Authorities the necessary licenses or approvals to engage in gaming activities at our Nevada properties.

The Nevada Gaming Authorities may investigate any individual who has a material relationship to, or material involvement with, us or Speakeasy Fremont or Speakeasy Las Vegas in order to determine whether such individual is suitable or should be licensed as a business associate of a gaming licensee. Officers, directors, and certain key employees must file applications with the Nevada Gaming Authorities and may be required to be licensed or found suitable by the Nevada Gaming Authorities. Officers, directors, and our key employees who are actively and directly involved in gaming activities of our Nevada properties may be required to be licensed or found suitable by the Nevada Gaming Authorities. The Nevada Gaming Authorities may deny an application for licensing for any cause they deem reasonable. A finding of suitability is comparable to licensing, and both require submission of detailed personal and financial information followed by a thorough investigation. The applicant for licensing or a finding of suitability must pay all the costs of the investigation. Changes in licensed positions must be reported to the Nevada Gaming Authorities and in addition to their authority to deny an application for a finding of suitability or licensing, the Nevada Gaming Authorities have jurisdiction to disapprove a change in a corporate position.

If the Nevada Gaming Authorities were to find an officer, director, or key employee unsuitable for licensing or unsuitable to continue having a relationship with us, Speakeasy Fremont or Speakeasy Las Vegas, the companies involved would have to sever all relationships with such person. In addition, the Nevada Commission may require us, Speakeasy Fremont, or Speakeasy Las Vegas to terminate the employment of any person who refuses to file appropriate applications. Determinations of suitability or of questions pertaining to licensing are not subject to appeal in Nevada.

We must submit detailed financial and operating reports to the Nevada Commission. Substantially all material loans, leases, sales of securities, and similar financial transactions by us and the Nevada subsidiaries will have to be reported to, or approved by, the Nevada Commission.

If it were determined that we, Speakeasy Fremont, or Speakeasy Las Vegas had violated the Nevada Gaming Control Act or the regulations promulgated thereunder (collectively, the “Nevada Act”), the gaming licenses could be limited, conditioned, suspended, or revoked, subject to compliance with certain statutory and regulatory procedures. In addition, we, Speakeasy Fremont, Speakeasy Las Vegas and the persons involved could be subject to substantial fines for each separate violation of the Nevada Act at the discretion of the Nevada Commission. Any beneficial holder of our voting securities, regardless of the

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number of shares owned, may be required to file an application, be investigated, and have his suitability as a beneficial holder of our voting securities determined if the Nevada Commission has reason to believe that such ownership would otherwise be inconsistent with the declared policies of the State of Nevada. The applicant must pay all costs of investigation incurred by the Nevada Gaming Authorities in conducting any such investigation.

The Nevada Act requires any person who acquires more than five percent of our voting securities to report the acquisition to the Nevada Commission. The Nevada Act requires that beneficial owners of more than 10 percent of our voting securities apply to the Nevada Commission for a finding of suitability within 30 days after the Chairman of the Nevada Board mails the written notice requiring such filing. Under certain circumstances, an “institutional investor,” as defined in the Nevada Act, which acquires more then 10 percent, but not more than 15 percent, of our voting securities may apply to the Nevada Commission for a waiver of such finding of suitability if such institutional investor holds the voting securities for investment purposes only. An institutional investor shall not be deemed to hold voting securities for investment purposes unless the voting securities were acquired and are held in the ordinary course of business as an institutional investor and not for the purpose of causing, directly or indirectly, the election of a majority of the members of our board of directors, any change in our corporate charter, bylaws, management, policies, or operations, or any of its gaming affiliates, or any other action which the Nevada Commission finds to be inconsistent with holding our voting securities for investment purposes only. Activities which are not deemed to be inconsistent with holding voting securities for investment purposes only include: (i) voting on all matters voted on by stockholders; (ii) making financial and other inquiries of management of the type normally made by securities analysts for informational purposes and not to cause a change in its management, policies, or operations; and (iii) such other activities as the Nevada Commission may determine to be consistent with such investment intent. If the beneficial holder of voting securities who must be found suitable is a corporation, partnership, or trust, it must submit detailed business and financial information including a list of beneficial owners. The applicant is required to pay all costs of the investigation.

Any person who fails or refuses to apply for a finding of suitability or a license within 30 days after being ordered to do so by the Nevada Commission or the Chairman of the Nevada Board may be found unsuitable. The same restrictions apply to a record owner of securities if the record owner, after request, fails to identify the beneficial owner. Any stockholder found unsuitable and who holds, directly or indirectly, any beneficial ownership of the common stock of a Registered Corporation beyond such period of time as may be prescribed by the Nevada Commission may be guilty of a criminal offense. We are subject to disciplinary action if, after we receive notice that a person is unsuitable to be a stockholder or to have any other relationship with us, Speakeasy Fremont or Speakeasy Las Vegas, we (i) pay that person any dividend or interest upon our voting securities, (ii) allow that person to exercise, directly or indirectly, any voting right conferred through securities held by that person, (iii) pay remuneration in any form to that person for services rendered or otherwise, or (iv) fail to pursue all lawful efforts to require such unsuitable person to relinquish his voting securities for cash at fair market value.

The Nevada Commission may, in its discretion, require the holder of any debt security of a Registered Corporation to file applications, be investigated, and be found suitable to own the debt security of a Registered Corporation. If the Nevada Commission determines that a person is unsuitable to own such security, then pursuant to the Nevada Act, the Registered Corporation can be sanctioned, including the loss of its approvals, if without the prior approval of the Nevada Commission, it: (i) pays to the unsuitable person any dividend, interest, or any distribution whatsoever; (ii) recognizes any voting right by such unsuitable person in connection with such securities; (iii) pays the unsuitable person remuneration in any form; or (iv) makes any payment to the unsuitable person by way of principal, redemption, conversion, exchange, liquidation, or similar transaction. We must maintain a current stock ledger in Nevada, which may be examined by the Nevada Gaming Authorities at any time. If any securities are held in trust by an

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agent or by a nominee, the record holder may be required to disclose the identity of the beneficial owner to the Nevada Gaming Authorities. A failure to make such disclosure may be grounds for finding the record holder unsuitable. We also must render maximum assistance in determining the identity of the beneficial owner. The Nevada Commission has the power to require our stock certificates to bear a legend indicating that the securities are subject to the Nevada Act. Likewise, we may not make a public offering of our securities without the prior approval of the Nevada Commission if the securities or proceeds therefrom are intended to be used to construct, acquire, or finance gaming facilities in Nevada, or to retire or extend obligations incurred for such purposes.

Changes in control of us through merger, consolidation, stock or asset acquisitions, management or consulting agreements, or any act or conduct by a person whereby he obtains control, may not occur without the prior approval of the Nevada Commission. Entities seeking to acquire control of a Registered Corporation must satisfy the Nevada Board and Nevada Commission in a variety of stringent standards prior to assuming control of such Registered Corporation. The Nevada Commission may also require controlling stockholders, officers, directors, and other persons having a material relationship or involvement with the entity proposing to acquire control, to be investigated and licensed as part of the approval process relating to the transaction.

The Nevada legislature has declared that some corporate acquisitions opposed by management, repurchases of voting securities and corporate defense tactics affecting Nevada gaming licensees, and Registered Corporations that are affiliated with those operations, may be injurious to stable and productive corporate gaming. The Nevada Commission has established a regulatory scheme to ameliorate the potentially adverse effects of these business practices upon Nevada’s gaming industry and to further Nevada’s policy to: (i) assure the financial stability of corporate gaming operators and their affiliates; (ii) preserve the beneficial aspects of conducting business in the corporate form; and (iii) promote a neutral environment for the orderly governance of corporate affairs. Approvals are, in certain circumstances, required from the Nevada Commission before we can make exceptional repurchases of voting securities above the current market price thereof and before a corporate acquisition opposed by management can be consummated. The Nevada Act also requires prior approval of a plan of recapitalization proposed by our Board of Directors in response to a tender offer made directly to the Registered Corporation’s stockholders for the purposes of acquiring control of the Registered Corporation.

Any person who is licensed, required to be licensed, registered, required to be registered, or is under common control with such persons (collectively, “Licensees”), and who is or proposes to become involved in a gaming venture outside of Nevada is required to deposit with the Nevada Board, and thereafter maintain, a revolving fund in the amount of $25,000 to pay the expenses of investigation of the Nevada Board of their participation in such foreign gaming. The revolving fund is subject to increase or decrease in the discretion of the Nevada Commission. Thereafter, Licensees are required to comply with certain reporting requirements imposed by the Nevada Act. A Licensee is also subject to disciplinary action by the Nevada Commission if it knowingly violates any laws of the foreign jurisdiction pertaining to the foreign gaming operation, fails to conduct the foreign gaming operation in accordance with the standards of honesty and integrity required of Nevada gaming operations, engages in activities that are harmful to the State of Nevada or its ability to collect gaming taxes and fees, or employs a person in the foreign operation who has been denied a license or finding of suitability in Nevada on the grounds of personal unsuitability.

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Impact of Resort Hotel Legislation

The Speedway Property is subject to legislation passed in 1991 by the Nevada Legislature, which is commonly referred to as the Resort Hotel Legislation. The key portions of this legislation are found in Section 463.1605 of the Nevada Revised Statutes (“NRS”) and essentially provide that the Nevada Commission shall not approve a non-restricted gaming license for an establishment located in either Clark County or Washoe County, Nevada, unless the establishment is a resort hotel. A resort hotel is defined to include an establishment held out to the public as a hotel with more than 200 rooms available for sleeping accommodations, at least one bar with capacity for more than 30 patrons, and at least one restaurant with capacity for more than 60 patrons. A county, city or town may require resort hotels to meet standards in addition to those required by NRS 463.1605 as a condition to issuance of a gaming license by the particular county, city or town. The Speedway Property, which does not have more than 200 rooms, is exempt from NRS 463.1605 because it held a non-restricted gaming license prior to the enactment of NRS 463.1605. The grandfathered exemption, however, would be lost in the event gaming is abandoned within the meaning of the statute and local regulations. The March 1999 commencement of gaming operations at the Speedway Property preserved the grandfathered status of the Speedway Property. The failure to keep the grandfathered exemption to NRS 463.1605 and the local regulations governing resort hotels (by abandonment of gaming operations) would have a material adverse effect on us.

Pennsylvania Racing and Gaming Regulation

Presque Isle Downs’ horse racing operations will be subject to extensive regulation under the Pennsylvania Race Horse Industry Reform Act (the “Pennsylvania Racing Act”). The Pennsylvania State Horse Racing Commission (the “Pennsylvania Racing Commission”) has the power to supervise all thoroughbred horse race meetings at which parimutuel wagering is conducted and, in connection therewith, is responsible for, among other things:

·       granting permission annually to maintain racing licenses and schedule races;

·       approving, after a public hearing, the opening of off-track wagering facilities (“OTWs”);

·       approving simulcasting activities; and

·       approving all contracts entered into by a company affecting racing, parimutuel wagering and OTWs.

As in most states, the regulations and oversight applicable to our planned Pennsylvania operations are intended primarily to safeguard the legitimacy of the sport and its freedom from inappropriate or criminal influences. The Pennsylvania Racing Commission has broad authority to regulate in the best interests of racing and may disapprove the involvement of certain personnel in our operations, deny approval of certain acquisitions following their consummation or withhold permission for a proposed OTW site for a variety of reasons, including community opposition. The Pennsylvania legislature also could, at any time, terminate parimutuel wagering as a form of legalized gaming in Pennsylvania or subject such wagering to additional restrictive regulation.

The Pennsylvania Racing Act requires that any shareholder of a licensed corporation proposing to transfer beneficial ownership of 5% or more of our shares file an affidavit with us setting forth certain information about the proposed transfer and transferee, a copy of which we are required to furnish to the Pennsylvania Racing Commission. The certificates representing our shares owned by 5% beneficial shareholders are required to bear certain legends prescribed by the Pennsylvania Racing Act. In addition, under the Pennsylvania Racing Act, the Pennsylvania Racing Commission has the authority to order any beneficial shareholder of a licensed corporation to dispose of his common stock of such licensed corporation if it determines that continued ownership would be inconsistent with the public interest, convenience or necessity or the best interest of racing generally.

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Presque Isle Downs’ planned slot machine operations will be subject to the Pennsylvania Race Horse Development and Gaming Act (the “Pennsylvania Gaming Act”) passed and signed into law in July 2004. The Pennsylvania Gaming Act authorizes the granting of slot machine licenses to up to seven Category 1 licensed facilities (i.e. racetracks) and up to five Category 2 licensed facilities (i.e. non-tracks), along with limited licenses to up to two Category 3 licensed facilities (i.e. resort hotels). Those racetracks and non-track facilities which successfully apply for slot machine licenses will be permitted to operate between 1,500 and 3,000 slot machines each, subject to future expansion of up to 2,000 additional machines per facility upon the approval of the PGCB. The licensed resort facilities will be permitted to operate up to 500 machines each.

Each racetrack slot machine licensee in Pennsylvania will be required to pay 34% of its daily gross revenues from gaming less all monetary payouts (“Gross Terminal Revenues”) to the State Gaming Fund, 5% of its Gross Terminal Revenues to the Pennsylvania Gaming Economic Development and Tourism Fund and a maximum of 12% of its Gross Terminal Revenues to a pool (the “Horsemen Pool”) for distribution to each racetrack’s horsemen, in the form of purses and other awards. Non-track and resort facilities will be bound to make the same percentage distributions but, since they do not conduct horse racing, they will contribute to the Horsemen Pool that portion of their Gross Terminal Revenues which is equal, on a pro rata basis, to the amount contributed to the Horsemen Pool by Category 1 licensees. The Horsemen Pool will then be allocated among the horsemen at each of the Category 1 licensed facilities, with the intention of providing payments to the horsemen at each racetrack, which are equivalent to 18% of that track’s Gross Terminal Revenues. In July, 2006, the Pennsylvania Department of Revenue issued temporary regulations interpreting the state’s gaming act to require Category 1 licensees to pay a minimum of $10 million annually to local government. In April of 2006, a Department spokesman had indicated that the aggregate amount payable to the host county and host municipality would be capped at 4% of gross terminal revenue (net win after payouts to players). We intend to mitigate the impact of this new regulation by pursuing agreements with Erie County for the county’s investment of part of its local share into infrastructure improvements that we believe will directly or indirectly benefit both the host municipality, Summit Township, and Presque Isle Downs. We have already entered into a similar agreement with the Summit Township Industrial and Economic Development Authority pursuant to which the Authority has agreed to apply to Erie County for certain grants contemplated by the gaming act, which would be used to fund, initially, up to $14.4 million of agreed upon on- and off-site infrastructure improvements. We remain confident, notwithstanding the new regulation, that the distribution scheme as a whole (including the creation of a Horse Racing Development Fund into which all of the state’s slot machine licensees will pay a portion of gross terminal revenue, but from which only the Category 1 licensees will receive distributions—80% of which will supplement racing purses), will provide an acceptable return on our investment.

All racetrack licensees offering slot machines in Pennsylvania must pay an upfront fee of $50.0 million and will be required to commit a minimum of $5.0 million over a five year period, and an amount ranging from $0.25 million to $1.0 million annually for five years thereafter, for improvements and maintenance of its backstretch (we expect, pursuant to a provision of the Pennsylvania Gaming Act applicable to new facilities, to defer these requirements for a period of ten to twelve years). We filed our application for a Category 1 license for Presque Isle Downs on December 28, 2005 and received our conditional license on October 25, 2006. We are currently subject to Pennsylvania’s gaming laws and regulations of the PGCB similar to those in effect in Nevada. The PGCB has scheduled the hearing on our Permanent Category 1 License for December 13, 2006, and has announced that it expects to issue permanent licenses in December 2006.

Minnesota Racing and Card Room Regulation

In December 2003, North Metro Harness Initiative, LLC and Southwest Casino and Hotel Corp. filed applications for Class A and Class B licenses, respectively, to develop and operate a harness racing track

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and card club in Anoka County, Minnesota, after which time the Company acquired a 50% equity interest in North Metro Harness. The Class B license application was subsequently amended to reflect the Company’s participation and, on January 19, 2005, the Minnesota Racing Commission voted to grant Class A and Class B licenses to North Metro (formal findings issued February 16, 2005). The Class A License is effective until revoked or suspended by the Racing Commission, or relinquished by the licensee. The Class B License is renewable each year by the Racing Commission after a public hearing (if required by the Racing Commission).

Minnesota established the Minnesota Racing Commission to regulate horse racing and card playing in the state under its parimutuel horse racing statute. North Metro and the Company, as a 50 percent owner of North Metro, are subject to the horse racing statute and rules and regulations promulgated under it (the “Racing Act”). North Metro’s horse racing operations will also be subject to the Federal Interstate Horse Racing Act of 1978.

The Racing Commission has broad authority to enforce the Racing Act and regulate substantially all aspects of horse racing in Minnesota. The Racing Commission granted and will oversee North Metro’s operating licenses, will license all employees of North Metro’s racetrack as well as jockeys, trainers, veterinarians and other participants, regulates the transfer of ownership interests in licensees, allocates live race days and simulcast-only race days, approves race programs, regulates the conduct of races, sets specifications for the racing ovals, animal facilities, employee quarters and public areas of North Metro’s racetrack, regulates the types of wagers on horse races and approves significant contractual arrangements with North Metro, including management agreements, simulcast arrangements, totalizator contracts and concessionaire agreements. Adverse decisions by the Racing Commission in regard to any one or more of these matters could materially adversely affect the Company’s operations.

The Racing Act requires prior approval by the Racing Commission of all officers, directors, 5% shareholders, or other persons having a present or future direct or indirect financial or management interest in any person applying for a Class A and Class B, and if a change of ownership of more than 5% of the licensee’s shares is made after an application is filed or the license issued, the applicant or licensee must notify the Racing Commission of the changes within five days of this occurrence and provide the information required by the Racing Act.

North Metro has submitted a card club plan of operation for approval by the Racing Commission in connection with North Metro’s Class B license. If the card club plan of operation is approved, the Racing Commission will regulate the playing of “unbanked” or “player pool” card games at North Metro’s card club, as well as harness racing. North Metro must reimburse the Racing Commission for its actual costs, including personnel costs, of regulating the card club. North Metro must have the Class B license and card club authorization renewed annually by the Racing Commission after a public hearing (if required by the Racing Commission).

Ohio Racing Regulation

Our horse racing operations at Scioto are subject to extensive regulation under the Ohio Racing Commission statutes and rules, under the authority of the Ohio Racing Commission, which is responsible for, among other things:

·       granting permission annually to maintain racing licenses and schedule races;

·       approving, after a public hearing, the opening of off-track wagering facilities (“OTWs”);

·       approving simulcasting activities;

·       licensing all officers, directors, racing officials and certain other employees of a company; and

·       approving all contracts entered into by a company affecting racing, parimutuel wagering and OTWs.

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The Ohio Racing Commission has broad authority to regulate in the best interests of racing and may disapprove the involvement of certain personnel in our operations, deny approval of certain acquisitions following their consummation or withhold permission for a proposed OTW site for a variety of reasons, including community opposition. The Ohio legislature also has the authority to amend or revoke the power of the Ohio Racing Commission to approve additional OTWs and could, at any time, terminate parimutuel wagering as a form of legalized gaming in Ohio or subject such wagering to additional restrictive regulation, or permit additional gaming facilities to operate in Ohio.

The Ohio Racing Commission approves annual licenses for racetracks to conduct harness and thoroughbred horse racing.

Michigan Racing Regulation

Operations at Jackson Harness in Jackson, Michigan are subject to regulation under Michigan’s Horse Racing Law of 1995 and regulations promulgated under that law. The law is administered by the Office of Racing Commissioner which is part of the Michigan Department of Agriculture. The Racing Commissioner has general supervisory control over pari-mutuel betting and the conduct of horse racing. Those powers include:

·       annual licensing of tracks, individuals or entities participating in the conduct of racing and parimutuel wagering;

·       conduct of background checks on such individuals, including fingerprinting and criminal record examination;

·       establishment of race calendars;

·       inspection of facilities, books and records; and

·       regulation of simulcast races, subject to a contract with the local county.

The conduct of horse racing is pervasively regulated in the State of Michigan. By becoming licensed, the individuals consent to inspections. The Commissioner has the power to summarily suspend a license for violation of the Horse Racing Law or rules.

IRS Regulations and Currency Transaction Reporting

The Internal Revenue Service, or IRS, requires operators of casinos located in the United States to file information returns for U.S. citizens, including names and addresses of winners, for all winnings in excess of stipulated amounts. The IRS also requires operators to withhold taxes on certain winnings of nonresident aliens. Regulations adopted by the Financial Crimes Enforcement Network of the Treasury Department and the gaming regulatory authorities in certain domestic jurisdictions in which we operate casinos require the reporting of currency transactions in excess of $10,000 occurring within a gaming day, including identification of the patron by name and social security number.

Restrictions on Share Ownership and Transfer

Unless prior approval of the West Virginia Lottery Commission is obtained, the sale of five percent or more of the voting stock of the license holder or any corporation that controls the license holder or the sale of a license holder’s assets (other than in the ordinary course of business), or any interest therein, to any person not previously determined by the Lottery Commission to have satisfied the licensing qualifications, voids the license. The Company’s stock certificates state that the securities are subject to the Company’s right to repurchase shares at any time in the sole discretion of the Company from a “Disqualified Holder” as defined in the Certificate of Incorporation. The Certificate of Incorporation defines a Disqualified Holder as any Beneficial Owner of shares of common stock of the Corporation or any of its Subsidiaries, whose holding of shares of common stock may result, in the judgment of the board of directors, in (i) the denial, loss or non-reinstatement of any license or franchise from any governmental agency applied for or

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held by the Corporation or any Subsidiary to conduct any portion of the proposed or actual business of the Corporation or any Subsidiary, which license or franchise is conditioned upon some of all of its holders of common stock meeting certain criteria, or (ii) the disapproval, modification, or non-renewal of any contract under which the Corporation or any of its Subsidiaries has sole or shared authority to manage any gaming operations. Accordingly, the Company deems any holder of the Company’s common stock who has not been determined by the Lottery Commission (subject to any exceptions recognized by the Lottery Commission) to have satisfied the licensing qualifications to be a Disqualified Holder to the extent of holdings in excess of 5% of the Company’s issued and outstanding shares, which shares the Company will deem to have been purchased on the Company’s behalf (and which the Company may, in its discretion, repurchase pursuant to the terms of the Certificate of Incorporation).

Environmental Matters

We are subject to various federal, state and local environmental laws and regulations that govern activities that may have adverse environmental effects, such as discharges to air and water, as well as the management and disposal of solid and hazardous wastes. These laws are complex, and subject to change. Under such laws and regulations, we may incur costs to achieve or maintain compliance or to obtain permits and other approvals required for our activities and operations. For example, we may incur costs under existing and new regulations pertaining to stormwater and wastewater management at our racetracks. In addition, we may face penalties or other liabilities in the event that we fail to comply with these laws and regulations. For instance, water discharges from our racetrack operations at our Mountaineer facility were the subject of past enforcement actions by state regulators. We satisfied the requirements of those past proceedings, and implemented measures to maintain compliance on a going forward basis. Such costs and liabilities have not in the past had a material impact on our business or financial condition. We believe, but we cannot assure you, that compliance with environmental laws and regulations will not have such an impact in the future.

We also are subject to laws and regulations that create liability and cleanup responsibility for releases of hazardous substances into the environment. Under certain of these laws and regulations, a current or previous owner or operator of property may be liable for the costs of remediating hazardous substances or petroleum products on its property, without regard to whether the owner or operator knew of, or caused, the presence of the contaminants, and regardless of whether the practices that resulted in the contamination were legal at the time they occurred. The presence of, or failure to remediate properly, such substances may materially adversely affect the ability to sell or rent such property or to borrow funds using such property as collateral. Additionally, the owner of a site may be subject to claims by third parties based on damages and costs resulting from environmental contamination emanating from a site.

In connection with our property acquisitions, we have conducted environmental assessments of substantially all of our properties. Based on these assessments, we have identified soil and/or groundwater contamination and other issues (such as the presence of wetlands or asbestos) at certain of our properties that may require further action or involve regulatory oversight. Generally, the contamination issues relate to prior uses of our properties by prior owners or operators. For example, in connection with the acquisition of a site in Pennsylvania that was formerly operated as a paper manufacturing plant, we entered into a consent order and agreement with the Pennsylvania Department of Environmental Protection in which we agreed to clean up certain portions of the site. At the time of our purchase, cleanup costs (as a component of overall site development and earthwork costs) were estimated at $3 million. We have since sold the portion of the property that will require further work to a third party who has agreed to undertake the work required under such consent order agreement and to pay any and all such costs. However, in the event that the purchaser fails to honor its obligations, we could incur costs related to this matter in the future. In addition, we are engaged in investigation or remediation efforts at several other of our properties. Based on currently available information, we believe, although we cannot assure you, that our environmental remediation and other liabilities will not have a material impact on our business.

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Compliance with Other Laws

We are also subject to a variety of other rules and regulations, including zoning, construction and land use laws and regulations, and laws governing the serving of alcoholic beverages in all of the states in which we operate. Mountaineer, Scioto, the Speedway Property, Jackson Harness and Binion’s derive other revenues from the sale of alcoholic beverages. Any interruption or termination of the ability to serve alcoholic beverages at those properties would have a material adverse effect on our business, financial condition and results of operations.

DESCRIPTION OF CERTAIN INDEBTEDNESS

Fifth Amended and Restated Revolving Credit Facility

This summary highlights the principal terms included in our fifth amended and restated revolving credit facility. On September 22, 2006, together with Mountaineer Park, Inc., Speakeasy Gaming of Las Vegas, Inc., Speakeasy Gaming of Fremont, Inc., Presque Isle Downs, Inc. and Scioto Downs, Inc. (each a wholly-owned subsidiary of ours), and Wells Fargo Bank, National Association as Agent Bank, Lender, Swingline Lender and L/C Issuer (“Wells Fargo”) and National City Bank, CIT Lending Services Corporation, PNC Bank, National Association, Citizens Bank of Pennsylvania, and Fifth Third Bank, each as additional Lenders, we entered into the Fifth Amended and Restated Credit Agreement (the “Credit Agreement”). The Credit Agreement provides for an $105,000,000 senior secured revolving credit facility (the “Facility”). $60,000,000 of the Facility will be available as a sub-facility for stand-by letters of credit. The Facility includes a sub-limit up to $10,000,000 for same day advances. Maturity of the Facility is in September 2011. The purpose of the Facility is for working capital requirements, the purchase of a gaming license from the Pennsylvania Gaming Control Board, construction costs for the Presque Isle Downs property, and for other general corporate purposes. The Facility may be increased by up to $50,000,000 at our election, provided that (a) no Default or Event of Default (as defined in the Agreement) then exists or would result from such increase, (b) proceeds will be used for racino capital expenditure needs at Scioto Downs (subject to receipt of a future gaming license and certain other governmental approvals and a certain construction plan at Scioto Downs) and (c) there may be no more than two increases for an aggregate total of no more than $50,000,000. Security for the Facility includes, without limitation, all assets of the borrowers, including the capital stock of subsidiaries and a first priority security interest in all real and personal property of the borrowers, except that with respect to collateral located in the Commonwealth of Pennsylvania, the Lenders will not have or otherwise claim a security interest in, or lien on, monies or other funds on account for taxes owed to the Commonwealth of Pennsylvania under certain applicable Pennsylvania law. The applicable interest rates will be determined pursuant to certain criteria as set forth in the Credit Agreement.

The Credit Agreement modifies certain of our covenants to accommodate ongoing expenditures and growth in connection with the development and construction of Presque Isle Downs and also includes certain other amendments of covenants and conditions. The Credit Agreement supersedes the Fourth Amended and Restated Credit Agreement (as amended) by and among us, Wells Fargo and the other parties thereto.

Our Fifth Amended and Restated Revolving Credit Facility contains financial covenants that require us to satisfy, on a consolidated basis, specified quarterly financial tests, including:

·       a maximum leverage ratio;

·       a minimum adjusted fixed charge coverage ratio; and

·       a minimum tangible net worth.

The Fifth Amended and Restated Credit Facility also provides that in the event estimated costs to complete a development project exceed available funding sources (as defined) for two consecutive monthly

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periods, no additional borrowings, swingline advances or letters of credit would be advanced or issued until the Company demonstrated that available funding sources exceeded the estimated costs to complete the project. During this period, the interest rate would be increased by 2% per annum.

Our Fifth Amended and Restated Revolving Credit Facility also contains a number of other customary covenants that, among other things, will restrict our ability and that of our subsidiaries to:

·       incur additional debt;

·       make certain distributions;

·       make capital expenditures;

·       incur contingent liabilities;

·       make certain investments;

·       incur liens on our assets;

·       engage in mergers or consolidations;

·       transfer interests in our subsidiaries;

·       engage in affiliate transactions;

·       creation of subsidiaries;

·       incur certain tax liabilities; or

·       change accounting principles.

Events of Default.   Our Fifth Amended and Restated Revolving Credit Facility contains customary events of default, including defaults based on:

·       material inaccuracy of representations and warranties;

·       nonpayment of principal, interest or fees when due, subject to specified grace periods;

·       cross-defaults to other debt;

·       breach of specified covenants;

·       invalidity of any guaranty or security interest;

·       certain other defaults under the credit documents;

·       events of bankruptcy and insolvency;

·       failure to meet certain requirements imposed on pension plans;

·       commencement of certain litigation, subject to specified grace periods;

·       loss or suspension of our gaming permits;

·       material judgments;

·       dissolution and liquidation;

·       events constituting a change in control;

·       the sale or transfer of subsidiary stock, other than in connection with the stock pledges;

·       the occurrence of any default under any subsidiary guaranty or revocation of such guaranty; and

·       the occurrence of a material adverse change under our third amended and restated revolving credit facility.

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As of September 30, 2006, no borrowings were outstanding under our existing revolving credit facility; however, letters of credit for approximately $51.5 were outstanding including the $50 million slot license letter of credit for the benefit of the Commonwealth of Pennsylvania.

The Senior Notes

In March 2003, MTR completed a private placement, pursuant to an exemption from the registration requirements of the Securities Act, of $130.0 million aggregate principal amount of their Series A 9¾% Senior Notes due 2010 issued pursuant to an indenture dated as of March 25, 2003. On September 5, 2003, we completed an offer to exchange such originally issued 9¾% Senior Notes due 2010, and the guarantees thereof, for Series B Senior Notes (the Senior Notes) and guarantees registered under the Securities Act and having substantially identical terms.

All of the $130.0 million aggregate principal amount of the Senior Notes is currently outstanding. Interest on the Senior Notes is payable on April 1 and October 1 of each year. The Senior Notes mature on April 1, 2010.

We may redeem all or part of the Senior Notes on or after April 1, 2007 at certain specified redemption prices. We may redeem up to 35% of the Senior Notes from proceeds of certain public offerings of our stock. The Senior Notes also are subject to redemption requirements imposed by state and local gaming laws and regulations.

The Senior Notes are general unsecured obligations and are guaranteed on a senior unsecured basis by our operating subsidiaries. The Senior Notes rank equally in right of payment with all of our existing and future senior indebtedness and rank senior in right of payment to all of our existing and future subordinated indebtedness, including the Notes. However, because the Senior Notes and the guarantees thereof are unsecured, holders of any of our existing and future senior secured indebtedness, including our senior secured credit facility, have a prior claim, ahead of the Senior Notes and the guarantees thereof, on our and the guarantors’ assets securing that senior secured debt.

DESCRIPTION OF NOTES

The Seris A Notes were issued, and the Series B Notes will be issued, under an Indenture (the “Indenture”) among the Company, the Guarantors and Wells Fargo Bank, N.A., as trustee (the “Trustee”). The terms of the Notes include those stated in the Indenture and those made a part of the Indenture by reference to the Trust Indenture Act of 1939, as amended (the “Trust Indenture Act”).

The following summarizes certain provisions of the Indenture and the Registration Rights Agreement. The following summary does not purport to be complete and is subject to, and is qualified in its entirety by reference to, all of the provisions of the Indenture and the Registration Rights Agreement, and terms made a part of the Indenture by reference to the Trust Indenture Act. We urge you to read the Indenture, the Registration Rights Agreement and the Trust Indenture Act because they, and not this description, define your rights as a holder of Notes. Wherever particular provisions of the Indenture, the Registration Rights Agreement and the Trust Indenture Act are referred to in this Description of Notes, such provisions are incorporated by reference as part of the statements made, and such statements are qualified in their entirety by such reference. Copies of the Indenture and the Registration Rights Agreement are available from the Company as described below under the section of this Prospectus entitled “Available Information.”

You can find the definitions of certain terms used in this Description of Notes under “Certain Definitions” and throughout this Description of Notes. As used in this Description of Notes, all references to the “Company,” “we,” “our” or “us” mean MTR Gaming Group, Inc. and its successors in accordance with the terms of the Indenture, and not any of its subsidiaries.

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Brief Description of the Notes and the Guarantees

The Notes

The Notes are:

·       our general unsecured obligations;

·       subordinated in right of payment to payment in full of all of our existing and future Senior Debt, including outstanding borrowings under our Credit Agreement and the $130.0 million aggregate outstanding principal amount at maturity of our 9¾% Senior Notes due 2010;

·       equal in right of payment to any future senior subordinated indebtedness that we may incur;

·       senior in right of payment to any future Subordinated Indebtedness that we may incur; and

·       unconditionally guaranteed by the Guarantors on a senior subordinated unsecured basis.

The Series B Notes will be issued in fully registered form only, without coupons, in denominations of $1,000 and integral multiples thereof.

The term “Subsidiaries” as used in this Description of Notes does not include Unrestricted Subsidiaries. As of the Issue Date, our Subsidiaries include all of our subsidiaries, other than certain subsidiaries that are Immaterial Subsidiaries as of the Issue Date. See the definition of “Certain Definitions—Unrestricted Subsidiary.” However, under certain circumstances, we will be able to designate current or future Subsidiaries as Unrestricted Subsidiaries. Unrestricted Subsidiaries will not be subject to the restrictive covenants set forth in the Indenture.

The Guarantees

The Series B Notes will be jointly and severally, irrevocably and unconditionally, guaranteed (the “Guarantees”) on a senior subordinated basis by each of our present and future Subsidiaries (the “Guarantors”), other than Immaterial Subsidiaries.

Subordination

As mentioned above, the Series B Notes and the Guarantees will be subordinated to the prior payment in full of all of our and the Guarantors’ Senior Debt, respectively. This means that holders of Senior Debt must be paid in full before any amounts are paid to the Holders of the Series B Notes in the event that we or any of the Guarantors become bankrupt or are liquidated, and that holders of Designated Senior Debt can block payments to the Holders of the Series B Notes in the event of our default on such Designated Senior Debt, all as more fully described below. See “Risk Factors—Risks Related to this Offering and the Notes—Your right to receive payments on the Notes or under the guarantees thereof is subordinated to our senior debt, including our senior notes and our senior secured credit facility.”

As of September 30, 2006, after the offering of the Series A Notes and the application of the proceeds therefrom, we have outstanding (i) an aggregate of approximately $133.8 million of Senior Debt, consisting of $130.0 million aggregate principal amount of the Senior Notes and $3.8 million of equipment and mortgage financing, (ii) no Indebtedness that ranked equal in right of payment with the Notes and (iii) no Indebtedness that was subordinate in right of payment to the Notes.

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Subordination to Senior Debt

Upon any distribution of any of our or the Guarantors’ assets upon any dissolution, winding up, total or partial liquidation or reorganization of us or such Guarantor, whether voluntary or involuntary, in bankruptcy, insolvency, receivership or a similar proceeding or upon assignment for the benefit of creditors or any marshalling of assets or liabilities:

(1)         the holders of all of our or such Guarantor’s Senior Debt, as applicable, will first be entitled to receive payment in full in cash or Cash Equivalents (or have such payment duly provided for) or otherwise to the extent holders accept satisfaction of amounts due by settlement in other than cash or Cash Equivalents before the Holders of the Notes are entitled to receive any payment on account of any Obligation in respect of the Notes, including the principal of or premium, if any, or interest (or Liquidated Damages, if any) on the Notes, or on account of the redemption provisions of the Notes or any repurchases of Notes, in any such case, other than (i) payments made with Junior Securities, and (ii) payments made from any previously established trusts described below under “—Legal Defeasance and Covenant Defeasance” and “—Satisfaction and Discharge;” and

(2)         any payment or distribution of our or such Guarantor’s assets of any kind or character from any source, whether in cash, property or securities (other (i) Junior Securities and (ii) payments made from any previously established trusts described below under “—Legal Defeasance and Covenant Defeasance” and “—Satisfaction and Discharge”) to which the Holders or the Trustee on behalf of the Holders would be entitled (by set-off or otherwise), except for the subordination provisions contained in the Indenture, will be paid by the liquidating trustee or agent or other Person making such a payment or distribution directly to the holders of such Senior Debt or their representative to the extent necessary to make payment in full (or have such payment duly provided for) on all such Senior Debt remaining unpaid, after giving effect to any concurrent payment or distribution to the holders of such Senior Debt.

Payment and Other Defaults on Designated Senior Debt

We and the Guarantors may not, and will not permit any Subsidiary to, make payment (by set-off or otherwise), as applicable, on account of any Obligation in respect of the Notes, including the principal of, or premium, if any, or interest (or Liquidated Damages, if any) on the Notes, or on account of the redemption provisions of the Notes or any repurchases of Notes, for cash or property (other than (i) payments made with Junior Securities, and (ii) payments made from any previously established trusts described below under “—Legal Defeasance and Covenant Defeasance” and “—Satisfaction and Discharge”):

(1)         upon the maturity of any of our or such Guarantors’ Designated Senior Debt by lapse of time, acceleration (unless waived) or otherwise, unless and until all principal of, premium, if any, and the interest on such Designated Senior Debt are first paid in full in cash or Cash Equivalents (or such payment is duly provided for) or otherwise to the extent holders accept satisfaction of amounts due by settlement in other than cash or Cash Equivalents, or

(2)         in the event of default in the payment of any principal of, premium, if any, or interest on our or such Guarantors’ Designated Senior Debt, as applicable, when it becomes due and payable, whether at maturity or at a date fixed for prepayment or by acceleration, declaration or otherwise (a “Payment Default”), unless and until such Payment Default has been cured or waived or otherwise has ceased to exist.

Upon (1) the happening of an event of default other than a Payment Default that permits the holders of Designated Senior Debt to declare such Designated Senior Debt to be due and payable and (2) written

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notice of such event of default given to us and the Trustee by any holder of Designated Senior Debt or such holder’s representative (a “Payment Blockage Notice”), then, unless and until such event of default has been cured or waived or otherwise has ceased to exist, no payment (by set-off or otherwise) may be made by or on behalf of us or any Guarantor which is an obligor under such Designated Senior Debt on account of any Obligation in respect of the Notes, including the principal of or premium, if any, or interest (or Liquidated Damages, if any) on the Notes, or on account of the redemption provisions of the Notes or any repurchases of Notes, in any such case, other than (i) payments made with Junior Securities, and (ii) payments made from any previously established trusts described below under “—Legal Defeasance and Covenant Defeasance” and “—Satisfaction and Discharge.”

Notwithstanding the foregoing, unless the Designated Senior Debt in respect of which such event of default exists has been declared due and payable in its entirety within 179 days after the Payment Blockage Notice is delivered as set forth above (the “Payment Blockage Period”) (and such declaration has not been rescinded or waived), at the end of the Payment Blockage Period, we and the Guarantors shall be required to pay all sums not previously paid to the Holders of the Notes during the Payment Blockage Period due to the foregoing prohibitions and to resume all other payments as and when due on the Notes.

Any number of Payment Blockage Notices may be given; provided, however, that:

(1)         not more than one Payment Blockage Notice shall be given within a period of any 360 consecutive days, and

(2)         no non-payment default that existed upon the date of such Payment Blockage Notice or the commencement of such Payment Blockage Period (whether or not such event of default is on the same issue of Designated Senior Debt) shall be made the basis for the commencement of any subsequent Payment Blockage Period unless such default has been cured or waived for a period of not less than 90 consecutive days.

In the event that, notwithstanding the foregoing, any payment or distribution of any of our or any Guarantor’s assets (other than Junior Securities) shall be received by the Trustee or the Holders of Notes at a time when such payment or distribution is prohibited by the foregoing provisions, such payment or distribution shall be held in trust for the benefit of the holders of such Senior Debt, and shall be paid or delivered by the Trustee or such Holders, as the case may be, to the holders of such Senior Debt remaining unpaid or unprovided for or to their representative or representatives, or to the trustee or trustees under any indenture pursuant to which any instruments evidencing any of such Senior Debt may have been issued, ratably according to the aggregate principal amounts remaining unpaid on account of such Senior Debt held or represented by each, for application to the payment of all such Senior Debt remaining unpaid, to the extent necessary to pay or to provide for the payment of all such Senior Debt in full in cash or Cash Equivalents or otherwise to the extent holders accept satisfaction of amounts due by settlement in other than cash or Cash Equivalents after giving effect to any concurrent payment or distribution to the holders of such Senior Debt.

No provision contained in the Indenture or the Notes will affect our or the Guarantors’ obligation, which is absolute and unconditional, to pay, when due, principal of or premium, if any, and interest (and Liquidated Damages, if any) on the Notes. The subordination provisions of the Indenture and the Notes will not prevent the occurrence of any Default or Event of Default under the Indenture or limit the rights of the Trustee or any Holder to pursue any other rights or remedies with respect to the Notes.

As a result of these subordination provisions, in the event of the liquidation, bankruptcy, reorganization, insolvency, receivership or similar proceeding or an assignment for the benefit of the creditors of, or a marshalling of the assets and liabilities of, us or the Guarantors, Holders of the Notes may receive ratably less than other creditors.

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Principal, Maturity and Interest; Additional Notes

We initially issued the Series A Notes with a maximum aggregate principal amount of $125.0 million. The Indenture provides, in addition to the $125.0 million aggregate principal amount of Series A Notes, for the issuance of additional Notes having identical terms and conditions to the Notes offered hereby (the “Additional Notes”), subject to compliance with the terms of the Indenture, including the covenant “Limitation on Incurrence of Additional Indebtedness and Disqualified Capital Stock.” Interest would accrue on the Additional Notes issued pursuant to the Indenture from and including the date of issuance of such Additional Notes. Any such Additional Notes would be issued on the same terms as the Notes and would constitute part of the same series of securities as the Notes and would vote together as one series on all matters with respect to the Notes. Except where stated otherwise, all references to Notes herein include the Additional Notes. We will issue Notes in denominations of $1,000 and integral multiples of $1,000.

The Notes will mature on June 1, 2012. The Notes will bear interest at the rate per annum stated on the cover page hereof from the date of issuance or from the most recent date to which interest has been paid or provided for (the “Interest Payment Date”), payable semi-annually in arrears on June 1 and December 1 of each year, commencing December 1, 2006, to the Persons in whose names such Notes are registered at the close of business on the May 15 or November 15 immediately preceding such Interest Payment Date (each, an “Interest Record Date”). Interest will be calculated on the basis of a 360-day year consisting of twelve 30-day months.

Methods of Receiving Payments on the Notes

Principal of, premium, if any, and interest (and Liquidated Damages, if any) on the Notes will be payable, and the Notes may be presented for registration of transfer or exchange, at our office or agency maintained for such purpose. Except as set forth below, at our option, payment of interest may be made by check mailed to the holders of the Notes (the “Holders”) at the addresses set forth upon our registry books or by wire transfer to the accounts specified by them. See “Book-Entry; Delivery; Form and Transfer—Same Day Settlement and Payment.” No service charge will be made for any registration of transfer or exchange of Notes, but we may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. Until otherwise designated by us, our office or agency will be the corporate trust office of the Trustee.

Certain Bankruptcy Limitations

We conduct a substantial portion of our business through our wholly-owned operating subsidiaries, each of which will guarantee our Obligations with respect to the Notes.

Holders of the Notes will be direct creditors of each Guarantor by virtue of its Guarantee. Under federal or state fraudulent transfer laws, however, under certain circumstances a court might avoid (i.e., cancel) a Guarantee. If a court avoided a Guarantor’s Guarantee, we cannot assure you that the assets of the other Guarantors would be sufficient to pay all amounts due on the Notes. See “Risk Factors—Risks Related to this Offering and the Notes—Under certain circumstances, a court could cancel the obligations under the guarantees.”

If the obligations of a Guarantor under its Guarantee were avoided, Holders of Notes would have to look to the assets of the Company and any remaining Guarantors for payment. There can be no assurance in that event that such assets would suffice to pay the outstanding principal and interest on the Notes.

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Optional Redemption

We will not have the right to redeem any Notes prior to June 1, 2009 (other than out of the Net Cash Proceeds of a Qualified Equity Offering, as described in the next following paragraph).

At any time on or after June 1, 2009 we may redeem the Notes for cash at our option, in whole or in part, upon not less than 30 days nor more than 60 days notice to each Holder of Notes, at the following redemption prices (expressed as percentages of the principal amount) if redeemed during the 12-month period commencing June 1 of the years indicated below, in each case together with accrued and unpaid interest and Liquidated Damages, if any, thereon to the date of redemption of the Notes (the “Redemption Date”):

 

At any time prior to June 1, 2009, upon a Qualified Equity Offering for cash, up to 35% of the aggregate principal amount of the Notes issued pursuant to the Indenture may be redeemed at our option within 90 days of such Qualified Equity Offering, on not less than 30 days, but not more than 60 days, notice to each Holder of the Notes to be redeemed, with cash received by us from the Net Cash Proceeds of such Qualified Equity Offering, at a redemption price equal to 109.000% of the principal amount thereof, together with accrued and unpaid interest and Liquidated Damages, if any, thereon to the Redemption Date; provided, however, that immediately following such redemption not less than 65% of the aggregate principal amount of the Notes issued pursuant to the Indenture on the Issue Date remain outstanding.

If the Redemption Date is on or after an Interest Record Date and on or before the associated Interest Payment Date, any accrued and unpaid interest and Liquidated Damages, if any, due on such Interest Payment Date will be paid to the Person in whose name a Note is registered at the close of business on such Interest Record Date.

Regulatory Redemption

If any Gaming Authority requires that a Holder or beneficial owner of Notes must be licensed, qualified or found suitable under any applicable Gaming Law and such Holder or beneficial owner fails to apply for a license, qualification or a finding of suitability within 30 days after being requested to do so by the Gaming Authority (or such lesser period that may be required by such Gaming Authority), or if such Holder or such beneficial owner is not so licensed, qualified or found suitable, we shall have the right, at our option, (1) to require such Holder or beneficial owner to dispose of such Holder’s or beneficial owner’s Notes within 30 days of receipt of notice of such finding by the applicable Gaming Authority or such earlier date as may be ordered by such Gaming Authority or (2) to call for the redemption (a “Regulatory Redemption”) of the Notes of such Holder or beneficial owner at the principal amount thereof or, if required by such Gaming Authority, the lesser of (a) the price at which such Holder or beneficial owner acquired the Notes, and (b) the fair market value of such Notes on the date of redemption, together with, in either case, accrued and unpaid interest and, if permitted by such Gaming Authority, Liquidated Damages, to the earlier of the date of redemption or such earlier date as may be required by such Gaming Authority or the date of the finding of unsuitability by such Gaming Authority, which may be less than 30 days following the notice of redemption, if so ordered by such Gaming Authority. We shall notify the Trustee in writing of any such redemption as soon as practicable and the redemption price of each Note to be redeemed.

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The Holder or beneficial owner applying for a license, qualification or a finding of suitability must pay all costs of the licensure and investigation for such qualification or finding of suitability. Under the Indenture, we are not required to pay or reimburse any Holder of the Notes or beneficial owner who is required to apply for such license, qualification or finding of suitability for the costs of the licensure and investigation for such qualification or finding of suitability. Such expense will, therefore, be the obligation of such Holder or beneficial owner. See “Risk Factors—Risks Related to this Offering and the Notes—You may be required to sell your Notes if any gaming authority finds you unsuitable to hold them.”

Mandatory Redemption

The Notes do not have the benefit of any sinking fund and we will not be required to make any mandatory redemption payments with respect to the Notes.

Selection and Notice

In the case of a partial redemption, the Trustee shall select the Notes or portions thereof for redemption on a pro rata basis, by lot or in such other manner it deems appropriate and fair. The Notes may be redeemed in part in multiples of $1,000 only.

Notice of any redemption will be sent, by first class mail, at least 30 days and not more than 60 days prior to the date fixed for redemption to the Holder of each Note to be redeemed to such Holder’s last address as then shown upon the registry books of our registrar. Any notice which relates to a Note to be redeemed in part only must state the portion of the principal amount of such Note to be redeemed and must state that on and after the date of redemption, upon surrender of such Note, a new Note or Notes in a principal amount equal to the unredeemed portion thereof will be issued. On and after the date of redemption, interest will cease to accrue on the Notes or portions thereof called for redemption, unless we default in the payment thereof.

Offers to Repurchase the Notes

Repurchase of Notes at the Option of the Holder Upon a Change of Control

The Indenture provides that in the event that a Change of Control has occurred, each Holder of Notes will have the right, at such Holder’s option, pursuant to an offer (subject only to conditions required by applicable law, if any) by us (the “Change of Control Offer”), to require us to repurchase all or any part of such Holder’s Notes (provided, that the principal amount of such Notes must be $1,000 or an integral multiple thereof) on a date (the “Change of Control Purchase Date”) that is no later than 30 Business Days after the occurrence of such Change of Control, at a cash price equal to 101% of the principal amount thereof (the “Change of Control Purchase Price”), together with accrued and unpaid interest and Liquidated Damages, if any, to the Change of Control Purchase Date.

The Change of Control Offer shall be made within 10 Business Days following a Change of Control and shall remain open for at least 20 Business Days following its commencement (the “Change of Control Offer Period”). Upon expiration of the Change of Control Offer Period, we promptly shall purchase all Notes properly tendered in response to the Change of Control Offer.

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As used herein, a “Change of Control” means:

(1)         any Person becomes the Beneficial Owner, directly or indirectly, of more than 35% of the aggregate voting power of the Voting Equity Interests of the Company,

(2)         the Continuing Directors cease for any reason to constitute a majority of our Board of Directors then in office,

(3)         we adopt a plan of liquidation, or

(4)         any merger or consolidation of the Company with or into another Person or the merger of another Person with or into the Company, or the sale of all or substantially all of the assets of the Company to another Person, if our securities that are outstanding immediately prior to such transaction and which represent 100% of the aggregate voting power of the Voting Equity Interests of the Company are changed into or exchanged for cash, securities or property, unless pursuant to such transaction such securities are changed into or exchanged for, in addition to any other consideration, securities of the transferee(s) or surviving Person(s) that represent, immediately after such transaction, a majority of the aggregate voting power of the Voting Equity Interests of the transferee(s) or surviving Person(s).

As used in this covenant, “Person” (including any group that is deemed to be a “Person”) has the meaning given by Section 13(d) of the Exchange Act, whether or not applicable.

On or before the Change of Control Purchase Date, we will:

(1)         accept for payment Notes or portions thereof properly tendered pursuant to the Change of Control Offer,

(2)         deposit with the paying agent for us (the “Paying Agent”) cash sufficient to pay the Change of Control Purchase Price (together with accrued and unpaid interest and Liquidated Damages, if any, to the Change of Control Purchase Date) of all Notes so tendered, and

(3)         deliver to the Trustee the Notes so accepted together with an Officers’ Certificate listing the Notes or portions thereof being purchased by us.

The Paying Agent promptly will pay the Holders of Notes so accepted an amount equal to the Change of Control Purchase Price (together with accrued and unpaid interest and Liquidated Damages, if any, to the Change of Control Purchase Date) and the Trustee promptly will authenticate and deliver to such Holders a new Note equal in principal amount to any unpurchased portion of the Note surrendered. Any Notes not so accepted will be delivered promptly by us to the Holder thereof. We publicly will announce the results of the Change of Control Offer on or as soon as practicable after the Change of Control Purchase Date.

The provisions described above that require us to make a Change of Control Offer following a Change of Control will be applicable regardless of whether or not any other provisions of the Indenture are applicable.

The occurrence of the events constituting a Change of Control under the Indenture also will result in a right of repurchase by the holders of the Senior Notes.

Prior to complying with any of the provisions of this covenant, but in any event within 90 days following a Change of Control, we will be required either to repay all outstanding Senior Debt or to obtain the requisite consents, if any, under all agreements governing outstanding Senior Debt to permit the repurchase of Notes required by this covenant.

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The provisions described above that require us to make a Change of Control Offer following a Change of Control will be applicable regardless of whether or not any other provisions of the Indenture are applicable.

The occurrence of the events constituting a Change of Control could result in an event of default under the Credit Agreement and under our and our subsidiaries’ other debt instruments. Following such an event of default, the lenders under the Credit Agreement or such other debt instruments would have the right to require the immediate repayment of the indebtedness thereunder in full, and may have the right to require such repayment prior to the Change of Control Purchase Date on which we would be required to repurchase the Notes.

The Credit Agreement also provides that the occurrence of a “change of control” (as defined in the Credit Agreement) constitutes an event of default under the Credit Agreement. The definition of “change of control” under the Credit Agreement is broader than that in the Indenture. Thus, the lenders under the Credit Agreement may be entitled to require repayment of the indebtedness thereunder due to events constituting a “change of control” (as defined therein) without such events constituting a Change of Control for purposes of the Indenture. However, such events may constitute an Event of Default under the Indenture.

No assurances can be given that we will have funds available or otherwise will be able to purchase any Notes upon the occurrence of a Change of Control. The Credit Agreement, the Senior Notes and our and our subsidiaries’ other debt instruments may prohibit or restrict the Company from repurchasing any Notes. See “Risk Factors—Risks Related to this Offering and the Notes—Our ability to repurchase the Notes upon a change of control or an asset sale may be limited.”

The provisions of the Indenture relating to a Change of Control in and of themselves may not afford Holders of the Notes protection in the event of a highly leveraged transaction, reorganization, restructuring, merger or similar transaction involving us that may adversely affect holders of the Notes if such transaction is not the type of transaction included within the definition of a Change of Control. A transaction involving our management or our affiliates likewise will result in a Change of Control only if it is the type of transaction specified by such definition. The existence of the foregoing provisions relating to a Change of Control may or may not deter a third party from seeking to acquire us in a transaction which constitutes a Change of Control and may or may not discourage or make more difficult the removal of incumbent management.

The phrase “all or substantially all” of our assets will likely be interpreted under applicable state law and will be dependent upon particular facts and circumstances. As a result, there may be a degree of uncertainty in ascertaining whether a sale or transfer of “all or substantially all” of our assets has occurred.

Any Change of Control Offer will be made in compliance with all applicable laws, rules and regulations, including, if applicable, Regulation 14E under the Exchange Act and the rules thereunder and all other applicable Federal and state securities laws. To the extent that the provisions of any securities laws or regulations conflict with the provisions of this covenant, our compliance with such laws and regulations shall not in and of itself cause a breach of our obligations under such covenant.

If the Change of Control Purchase Date is on or after an Interest Record Date and on or before the associated Interest Payment Date, any accrued and unpaid interest (and Liquidated Damages, if any) due on such Interest Payment Date will be paid to the Person in whose name a Note is registered at the close of business on such Interest Record Date.

Limitation on Sale of Assets and Subsidiary Stock

The Indenture provides that we will not and the Guarantors will not, and neither we nor the Guarantors will permit any of our Subsidiaries to, in one or a series of related transactions, convey, sell,

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transfer, assign or otherwise dispose of, directly or indirectly, any of our or their property, business or assets, including by merger or consolidation (in the case of a Guarantor or one of our Subsidiaries or Unrestricted Subsidiaries), and including any sale or other transfer or issuance of any Equity Interests of any of our Subsidiaries or Unrestricted Subsidiaries, whether by us or any of our Subsidiaries or Unrestricted Subsidiaries or through the issuance, sale or transfer of Equity Interests by any of our Subsidiaries or Unrestricted Subsidiaries and including any sale-leaseback transaction (any of the foregoing, an “Asset Sale”), unless, with respect to any Asset Sale or related series of Asset Sales involving securities, property or assets with an aggregate fair market value in excess of $2.0 million:

(1)         at least 75% of the total consideration for such Asset Sale or series of related Asset Sales consists of cash or Cash Equivalents,

(2)         no Default or Event of Default shall have occurred and be continuing at the time of, or would occur after giving effect, on a pro forma basis, to, such Asset Sale, and

(3)         our Board of Directors determines in reasonable good faith that we will receive or such Subsidiary will receive, as applicable, fair market value for such Asset Sale.

For purposes of clause (1) of the preceding sentence, total consideration received means the total consideration received for such Asset Sales minus the amount of (a) Purchase Money Indebtedness secured solely by the assets sold and assumed by a transferee; provided, that we are and our Subsidiaries are fully released from obligations in connection therewith and (b) property that within 30 days of such Asset Sale is converted into cash or Cash Equivalents; provided, that such cash and Cash Equivalents shall be treated as Net Cash Proceeds attributable to the original Asset Sale for which such property was received.

Within 360 days following such Asset Sale, Net Cash Proceeds therefrom shall be:

(a)          (i) used to retire Purchase Money Indebtedness secured by the asset which was the subject of the Asset Sale, or (ii) used to retire and permanently reduce Indebtedness incurred under the Credit Agreement and other Senior Debt; provided, that in the case of a revolver or similar arrangement that makes credit available, such commitment is permanently reduced by such amount; or

(b)         invested in assets and property (other than notes, bonds, obligations and securities, except in connection with the acquisition of a Subsidiary which is a Guarantor in a Related Business) which in the reasonable good faith judgment of our Board of Directors will immediately constitute or be a part of a Related Business of the Company or such Subsidiary (if it continues to be a Subsidiary) immediately following such transaction.

All Net Cash Proceeds from an Event of Loss shall be used as follows: (1) first, the Company shall use such Net Cash Proceeds to the extent deemed necessary or appropriate to rebuild, repair, replace or restore the assets subject to such Event of Loss with comparable assets and (2) then, to the extent any Net Cash Proceeds from an Event of Loss are not used as described in the preceding clause (1), all such remaining Net Cash Proceeds shall be reinvested or used as provided in the immediately preceding clause (a) or (b).

The accumulated Net Cash Proceeds from Asset Sales not applied as set forth in clauses (a) and (b) of the immediately preceding paragraph and the accumulated Net Cash Proceeds from any Event of Loss not applied as set forth in clauses (1) and (2) of the immediately preceding paragraph shall constitute “Excess Proceeds.” Pending the final application of any Net Cash Proceeds, the Company may temporarily reduce revolving credit borrowings or otherwise invest or use for general corporate purposes (other than Restricted Payments that are not solely Restricted Investments) the Net Cash Proceeds in any manner that is not prohibited by the Indenture.

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When the Excess Proceeds equal or exceed $5.0 million, the Company shall offer to repurchase the Notes, together with any other Indebtedness ranking on a parity with the Notes and with similar provisions requiring us to make an offer to purchase such Indebtedness with the proceeds from such Asset Sale pursuant to a cash offer (subject only to conditions required by applicable law, if any), pro rata in proportion to the respective principal amounts of such Indebtedness (or accreted values in the case of Indebtedness issued with an original issue discount) and the Notes (the “Asset Sale Offer”) at a purchase price of 100% of the principal amount (or accreted value in the case of Indebtedness issued with an original issue discount) (the “Asset Sale Offer Price”) together with accrued and unpaid interest and Liquidated Damages, if any, to the date of payment. The Asset Sale Offer shall remain open for at least 20 Business Days following its commencement (the “Asset Sale Offer Period”).

Upon expiration of the Asset Sale Offer Period, we shall apply an amount equal to the Excess Proceeds (the “Asset Sale Offer Amount”) plus an amount equal to accrued and unpaid interest and Liquidated Damages, if any, to the purchase of all Indebtedness properly tendered in accordance with the provisions of this covenant (on a pro rata basis if the Asset Sale Offer Amount is insufficient to purchase all Indebtedness so tendered) at the Asset Sale Offer Price (together with accrued and unpaid interest and Liquidated Damages, if any, to the date of payment). To the extent that the aggregate amount of Notes and such other pari passu Indebtedness tendered pursuant to an Asset Sale Offer is less than the Asset Sale Offer Amount, we may use any remaining Net Cash Proceeds as otherwise permitted by the Indenture. Following the consummation of each Asset Sale Offer in accordance with the provisions of this covenant, the Excess Proceeds amount shall be reset to zero.

Notwithstanding, and without complying with, the provisions of this covenant:

(1)         we and our Subsidiaries may, in the ordinary course of business, (a) convey, sell, transfer, assign or otherwise dispose of inventory and other assets acquired and held for resale in the ordinary course of business and (b) liquidate Cash Equivalents;

(2)         we and our Subsidiaries may convey, sell, transfer, assign or otherwise dispose of assets pursuant to and in accordance with the covenant “Limitation on Merger, Sale or Consolidation;”

(3)         we and our Subsidiaries may sell or dispose of damaged, worn out or other obsolete personal property in the ordinary course of business so long as such property is no longer necessary for the proper conduct of our business or the business of such Subsidiary, as applicable;

(4)         we and the Guarantors may convey, sell, transfer, assign or otherwise dispose of assets to us or any of our Subsidiaries that are Guarantors;

(5)         we may and our Subsidiaries may settle, release or surrender tort or other litigation claims in the ordinary course of business or grant Liens not prohibited by the Indenture;

(6)         we may and our Subsidiaries may exchange any property or assets for property or assets of the type set forth in clause (b) of the third paragraph above; and

(7)         we and our Subsidiaries may make Permitted Investments pursuant to clause (e), (h) or (i) of the definition thereof and Restricted Investments that are not prohibited by the covenant described under “Limitation on Restricted Payments.”

The occurrence of an Asset Sale also will result in a right of repurchase by the holders of the Senior Notes.

Prior to making an Asset Sale Offer, we will be required either to repay all outstanding Senior Debt or to obtain the requisite consents, if any, under all agreements governing outstanding Senior Debt to permit the repurchase of Notes required by this covenant.

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No assurances can be given that we will have funds available or otherwise will be able to purchase any Notes upon the occurrence of an Asset Sale. The Credit Agreement, the Senior Indenture and our and our subsidiaries’ other debt instruments may prohibit or restrict the Company from repurchasing any Notes. See “Risk Factors—Risks Related to this Offering and the Notes—Our ability to repurchase the Notes upon a change of control or an asset sale may be limited.”

Any Asset Sale Offer shall be made in compliance with all applicable laws, rules, and regulations, including, if applicable, Regulation 14E of the Exchange Act and the rules and regulations thereunder and all other applicable Federal and state securities laws. To the extent that the provisions of any securities laws or regulations conflict with the provisions of this paragraph, our compliance or the compliance of any of our subsidiaries with such laws and regulations shall not in and of itself cause a breach of our obligations under such covenant.

If the payment date in connection with an Asset Sale Offer hereunder is on or after an Interest Record Date and on or before the associated Interest Payment Date, any accrued and unpaid interest and Liquidated Damages, if any, due on such Interest Payment Date will be paid to the Person in whose name a Note is registered at the close of business on such Interest Record Date.

Certain Covenants

The Indenture also contains certain covenants that, among other things, restrict our, the Guarantors’ and our Subsidiaries’ ability to borrow money, pay dividends on or repurchase capital stock, make investments and sell assets or enter into mergers or consolidations. The following summaries of certain covenants of the Indenture are summaries only, do not purport to be complete and are qualified in their entirety by reference to all of the provisions of the Indenture. We urge you to read the Indenture because it, and not this description, details your rights as a holder of the Notes.

Limitation on Incurrence of Additional Indebtedness and Disqualified Capital Stock

The Indenture provides that, except as set forth in this covenant, we will not and the Guarantors will not, and neither we nor the Guarantors will permit any of our Subsidiaries to, directly or indirectly, create, issue, assume, guarantee, incur, become directly or indirectly liable with respect to (including as a result of an Acquisition), or otherwise become responsible for, contingently or otherwise (individually and collectively, to “incur” or, as appropriate, an “incurrence”), any Indebtedness (including Disqualified Capital Stock and Acquired Indebtedness), other than Permitted Indebtedness.

Notwithstanding the foregoing if:

(1)         no Default or Event of Default shall have occurred and be continuing at the time of, or would occur after giving effect on a pro forma basis to, such incurrence of such Indebtedness, and

(2)         on the date of such incurrence (the “Incurrence Date”), our Consolidated Coverage Ratio for the Reference Period immediately preceding the Incurrence Date, after giving effect on a pro forma basis to such incurrence of such Indebtedness and, to the extent set forth in the definition of Consolidated Coverage Ratio, the use of proceeds thereof, would be at least 2.0 to 1.0 (the “Debt Incurrence Ratio”),

then we and the Guarantors may incur such Indebtedness (including Disqualified Capital Stock).

In addition, the foregoing limitations of the first paragraph of this covenant will not prohibit:

(a)          if no Event of Default shall have occurred and be continuing, our incurrence or the incurrence by any Guarantor of Indebtedness in an aggregate amount incurred and outstanding at any time pursuant to this paragraph (a) (plus any Refinancing Indebtedness incurred to retire, defease, refinance, replace or refund such Indebtedness) of up to $10.0 million; and

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(b)         our incurrence or the incurrence by any Guarantor of Indebtedness pursuant to the Credit Agreement in an aggregate amount incurred and outstanding at any time pursuant to this paragraph (b) (plus any Refinancing Indebtedness incurred to retire, defease, refinance, replace or refund such Indebtedness) of up to $85,000,000, minus the amount of any such Indebtedness (1) retired with the Net Cash Proceeds from any Asset Sale or Event of Loss applied to permanently reduce the outstanding amounts or the commitments with respect to such Indebtedness pursuant to the covenant “Limitation on Sale of Assets and Subsidiary Stock” or (2) assumed by a transferee in an Asset Sale.

Indebtedness (including Disqualified Capital Stock) of any Person which is outstanding at the time such Person becomes one of our Subsidiaries (including upon designation of any Person as a Subsidiary) or is merged with or into or consolidated with us or one of our Subsidiaries shall be deemed to have been incurred at the time such Person becomes or is designated one of our Subsidiaries or is merged with or into or consolidated with us or one of our Subsidiaries as applicable.

Notwithstanding any other provision of this covenant, but only to avoid duplication, a guarantee by a Guarantor of our Indebtedness or of the Indebtedness of another Guarantor incurred in accordance with the terms of the Indenture (other than Indebtedness incurred pursuant to clause (b) of the definition of Permitted Indebtedness) issued at the time such Indebtedness was incurred or if later at the time the guarantor thereof became a Guarantor will not constitute a separate incurrence, or amount outstanding, of Indebtedness. Upon each incurrence of Indebtedness, (i) we may designate pursuant to which provision of this covenant such Indebtedness is being incurred, (ii) we may subdivide an amount of Indebtedness and designate more than one provision pursuant to which such amount of Indebtedness is being incurred and (iii) such Indebtedness shall not be deemed to have been incurred or outstanding under any other provision of this covenant, except that all Indebtedness initially outstanding under the Notes, the Guarantees and the Indenture shall be deemed to have been incurred pursuant to clause (a) of the definition of Permitted Indebtedness.

The Indenture provides that we will not and the Guarantors will not, and neither we nor the Guarantors will permit any of our Subsidiaries to, directly or indirectly, incur or suffer to exist any Indebtedness that is contractually subordinated to any of our Indebtedness or the Indebtedness of any Guarantor unless such Indebtedness is as contractually subordinated to the Notes and such Guarantor’s Guarantee, as applicable, at least to the same extent as it is to such other Indebtedness.

Limitation on Restricted Payments

The Indenture provides that we will not and the Guarantors will not, and neither we nor the Guarantors will permit any of our Subsidiaries to, directly or indirectly, make any Restricted Payment if, after giving effect on a pro forma basis to such Restricted Payment:

(1)         a Default or an Event of Default shall have occurred and be continuing,

(2)         we are not permitted to incur at least $1.00 of additional Indebtedness pursuant to the Debt Incurrence Ratio in the covenant “Limitation on Incurrence of Additional Indebtedness and Disqualified Capital Stock,” or

(3)         the aggregate amount of all Restricted Payments made by us and our Subsidiaries, including after giving effect to such proposed Restricted Payment, on and after the Issue Date, would exceed, without duplication, the sum of:

(a)           50% of our aggregate Consolidated Net Income for the period (taken as one accounting period), commencing on the first day of the fiscal quarter in which the Issue Date occurs, to and including the last day of the fiscal quarter ended immediately prior to the date of each such calculation for which our consolidated financial statements are required to be delivered

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to the Trustee or, if sooner, filed with the Commission (or, in the event Consolidated Net Income for such period is a deficit, then minus 100% of such deficit), plus

(b)          the aggregate Net Cash Proceeds received by us from the sale of our Qualified Capital Stock (other than (i) to one of our Subsidiaries, (ii) to the extent applied in connection with a Qualified Exchange or, to avoid duplication, otherwise given credit for in any provision of this or the following paragraph or (iii) used as consideration to make a Permitted Investment), after the Issue Date, plus

(c)           except in each case, in order to avoid duplication, to the extent any such payment or proceeds have been included in the calculation of Consolidated Net Income, an amount equal to the net reduction in Investments (other than returns of or from Permitted Investments) in any Person (including an Unrestricted Subsidiary) resulting from cash distributions on or cash repayments of any Investments, including payments of interest on Indebtedness, dividends, repayments of loans or advances, or other distributions or other transfers of assets, in each case to the Company or any Subsidiary or from the Net Cash Proceeds from the sale of any such Investment or from redesignations of Unrestricted Subsidiaries as Subsidiaries (valued in each case as provided in the definition of “Investments”), not to exceed, in each case, the amount of Investments previously made by the Company or any Subsidiary in such Person, including, if applicable, such Unrestricted Subsidiary, less the cost of disposition, plus

(d)          $5.0 million.

The foregoing clauses (2) and (3) of the immediately preceding paragraph, however, will not prohibit:

(a)           repurchases, redemptions, or other retirements or acquisitions of Capital Stock from our employees, directors or managers (or their heirs or estates) or employees, directors or managers (or their heirs or estates) of our Subsidiaries upon the death, disability or termination of employment or pursuant to the terms of any subscription, stockholder or other agreement or plan in effect on the Issue Date in an aggregate amount pursuant to this clause (a) to all employees, directors or managers (or their heirs or estates) not to exceed (i) $250,000 per fiscal year on and after the Issue Date, or (ii) $1.0 million in the aggregate pursuant to this clause (a),

and the provisions of the immediately preceding paragraph will not prohibit

(b)          the repurchase of Equity Interests of the Company upon the exercise of stock options representing the exercise price thereof;

(c)           any dividend, distribution or other payment by any of our Subsidiaries on its Equity Interests that is paid pro rata to all holders of such Equity Interests,

(d)          a Qualified Exchange,

(e)           the payment of any dividend on Qualified Capital Stock within 60 days after the date of its declaration if such dividend could have been made on the date of such declaration in compliance with the foregoing provisions,

(f)             Track Business Contingent Earnout Payments, or

(g)           so long as clause (1) above is satisfied, Restricted Payments not otherwise permitted pursuant to this covenant in an aggregate amount pursuant to this clause (g) not to exceed $30.0 million since the Issue Date.

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The full amount of any Restricted Payment made pursuant to the foregoing clauses (a), (c), (e), (f) and (g) (but not pursuant to clause (b) or (d)) of the immediately preceding sentence, however, will be counted as Restricted Payments made for purposes of the calculation of the aggregate amount of Restricted Payments available to be made referred to in clause (3) of the first paragraph under the heading “Limitation on Restricted Payments.”

For purposes of this covenant, the amount of any Restricted Payment made or returned, if other than in cash, shall be the fair market value thereof, as determined in the reasonable good faith judgment of our Board of Directors, unless stated otherwise, at the time made or returned, as applicable. Additionally, within 5 days of each Restricted Payment, we shall deliver an Officers’ Certificate to the Trustee describing in reasonable detail the nature of such Restricted Payment, stating the amount of such Restricted Payment, stating in reasonable detail the provisions of the Indenture pursuant to which such Restricted Payment was made and certifying that such Restricted Payment was made in compliance with the terms of the Indenture.

Limitation on Dividends and Other Payment Restrictions Affecting Subsidiaries

The Indenture provides that we will not and the Guarantors will not, and neither we nor the Guarantors will permit any of our Subsidiaries to, directly or indirectly, incur or suffer to exist any consensual restriction on the ability of any of our Subsidiaries (i) to pay dividends or make other distributions to or on behalf of, (ii) to pay any obligation to or on behalf of, (iii) to otherwise transfer assets or property to or on behalf of, or (iv) to make or pay loans or advances to or on behalf of, us or any of our Subsidiaries, except:

(1)         restrictions imposed by the Notes or the Indenture or by our Senior Debt or other Indebtedness (which may also be guaranteed by the Guarantors) ranking pari passu with the Notes or the Guarantees, as applicable; provided, that such restrictions are no more restrictive in any material respect than those imposed by the Indenture and the Notes,

(2)         restrictions imposed by applicable law,

(3)         existing restrictions under Existing Indebtedness,

(4)         restrictions under any Acquired Indebtedness not incurred in violation of the Indenture or any agreement (including any Equity Interest) relating to any property, asset, or business acquired by us or any of our Subsidiaries, which restrictions in each case existed at the time of acquisition, were not put in place in connection with or in anticipation of such acquisition and are not applicable to any Person, other than the Person acquired, or to any property, asset or business, other than the property, assets and business so acquired,

(5)         any restriction imposed by Indebtedness incurred under the Credit Agreement incurred pursuant to the covenant “Limitation on Incurrence of Additional Indebtedness and Disqualified Capital Stock;” provided, that such restriction or requirement is no more restrictive in any material respect than that imposed by the Credit Agreement as of the Issue Date,

(6)         restrictions with respect solely to any of our Subsidiaries imposed pursuant to a binding agreement which has been entered into for the sale or disposition of all of the Equity Interests or assets of such Subsidiary; provided, that such restrictions apply solely to the Equity Interests or assets of such Subsidiary which are being sold,

(7)         restrictions on transfer contained in Purchase Money Indebtedness not incurred in violation of the Indenture, provided, that such restrictions relate only to the transfer of the property acquired with the proceeds of such Purchase Money Indebtedness, and

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(8)         in connection with and pursuant to permitted refinancings, the replacement of restrictions imposed pursuant to clauses (1), (3), (4) or (7) or this clause (8) of this paragraph that are not more restrictive in any material respect than those being replaced and do not apply to any other Person or assets than those that would have been covered by the restrictions in the Indebtedness so refinanced.

Notwithstanding the foregoing, (a) there may exist customary provisions restricting subletting or assignment of any lease or restricting disposition or distribution of assets or property in joint venture agreements, asset sale agreements, stock sale agreements and other similar agreements, in each case entered into in the ordinary course of business, consistent with industry practice and (b) any asset subject to a Lien which is not prohibited to exist with respect to such asset pursuant to the terms of the Indenture may be subject to customary restrictions on the transfer or disposition thereof pursuant to such Lien.

Limitation on Liens

The Indenture provides that we will not and the Guarantors will not, and neither we nor the Guarantors will permit any of our Subsidiaries to, directly or indirectly, incur or suffer to exist any Lien of any kind, other than Permitted Liens, upon any of our or their respective assets (including, without limitation, all real, tangible or intangible property) now owned or acquired on or after the date of the Indenture, or upon any income or profits therefrom, or convey any right to receive income or profits therefrom.

Sale-Leaseback Transactions

The Indenture provides that we will not and the Guarantors will not, and neither we nor the Guarantors will permit any of our Subsidiaries to, enter into any sale-leaseback transaction; provided that we and our Subsidiaries may enter into a sale-leaseback transaction if:

(1)         we or such Subsidiary could have (a) incurred Indebtedness in an amount equal to the Attributable Indebtedness relating to such sale-leaseback transaction under the Debt Incurrence Ratio in the second paragraph of the covenant described under “Limitation on Incurrence of Additional Indebtedness and Disqualified Capital Stock” and (b) incurred a Lien to secure such Indebtedness pursuant to the covenant described under “Limitation on Liens;”

(2)         the gross cash proceeds of such sale-leaseback transaction are at least equal to the fair market value, as determined in the reasonable good faith judgment of our Board of Directors and set forth in an Officers’ Certificate delivered to the Trustee, of the property that is the subject of such sale-leaseback transaction; and

(3)         the transfer of assets in such sale-leaseback transaction is permitted by, and we apply the proceeds of such transaction in compliance with, the covenant described above under the caption “Limitation on Sale of Assets and Subsidiary Stock.”

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Limitation on Transactions with Affiliates

The Indenture provides that we will not and the Guarantors will not, and neither we nor the Guarantors will permit any of our Subsidiaries to, on or after the Issue Date, directly or indirectly, sell, lease, transfer or otherwise dispose of any of our or their properties or assets to, or purchase any property or assets from, or enter into or suffer to exist any contract, agreement, understanding, loan, advance, guarantee, arrangement or transaction with, or for the benefit of, any Affiliate (each of the foregoing, an “Affiliate Transaction”), or any series of related Affiliate Transactions (other than Exempted Affiliate Transactions):

(1)         unless it is determined that the terms of such Affiliate Transaction(s) are fair and reasonable to us, and no less favorable to us than could have been obtained in an arm’s length transaction with a non-Affiliate,

(2)         if involving consideration to either party of $2.0 million or more, unless such Affiliate Transaction(s) has been approved by a majority of the members of our Board of Directors that are disinterested in such transaction (except as provided in clause (3) hereof), and

(3)         if involving consideration to either party of $5.0 million or more (or if no members of our Board of Directors are disinterested in such transaction) unless we, prior to the consummation thereof, obtain a written favorable opinion as to the fairness of such transaction(s) to us from a financial point of view from an independent investment banking firm of national reputation in the United States or, if pertaining to a matter for which such investment banking firms do not customarily render such opinions, an appraisal or valuation firm of national reputation in the United States.

Within 5 days of any Affiliate Transaction(s) involving consideration to either party of $2.0 million or more, the Company shall deliver to the Trustee an Officers’ Certificate addressed to the Trustee certifying that such Affiliate Transaction(s) complied with clause (1), (2) and (3) above, as applicable.

Limitation on Merger, Sale or Consolidation

The Indenture provides that we will not consolidate with or merge with or into another Person or, directly or indirectly, sell, lease, convey or transfer all or substantially all of our assets (such amounts to be computed on a consolidated basis), whether in a single transaction or a series of related transactions, to another Person or group of affiliated Persons, unless:

(1)         either (a) we are the surviving Person or (b) the resulting, surviving or transferee Person is a corporation organized under the laws of the United States, any state thereof or the District of Columbia and expressly assumes by supplemental indenture all of our Obligations in connection with the Notes, the Indenture and the Registration Rights Agreement;

(2)         no Default or Event of Default shall exist or shall occur immediately after giving effect on a pro forma basis to such transaction;

(3)         unless such transaction is solely the merger of us and one of our previously existing Wholly Owned Subsidiaries which is also a Guarantor for the purpose of reincorporation into another jurisdiction and which transaction is not for the purpose of evading this provision and not in connection with any other transaction, immediately after giving effect to such transaction on a pro forma basis, the Consolidated Net Worth of the resulting, surviving or transferee Person is at least equal to our Consolidated Net Worth immediately prior to such transaction;

(4)         unless such transaction is solely the merger of us and one of our previously existing Wholly Owned Subsidiaries which is also a Guarantor for the purpose of reincorporation into another jurisdiction and which transaction is not for the purpose of evading this provision and not in

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connection with any other transaction, immediately after giving effect to such transaction on a pro forma basis, the resulting, surviving or transferee Person would immediately thereafter be permitted to incur at least $1.00 of additional Indebtedness pursuant to the Debt Incurrence Ratio set forth in the covenant “Limitation on Incurrence of Additional Indebtedness and Disqualified Capital Stock;” and

(5)         each Guarantor shall have, if required by the terms of the Indenture, confirmed in writing that its Guarantee shall apply to the Obligations of the Company or the resulting, surviving or transferee Person in accordance with the Notes, the Indenture and the Registration Rights Agreement.

In the event of any transaction (other than a lease or transfer of less than all of our assets) in accordance with the foregoing in which the Company is not the surviving Person, the resulting, surviving or transferee Person shall succeed to and be substituted for, and may exercise every right and power of, the Company under the Indenture with the same effect as if such resulting, surviving or transferee Person had been named therein as the Company.

For purposes of the foregoing, the transfer (by lease, assignment, sale or otherwise) of all or substantially all of the properties and assets of one or more of our Subsidiaries, our interest in which constitutes all or substantially all of our properties and assets, shall be deemed to be the transfer of all or substantially all of our properties and assets.

Limitation on Lines of Business

The Indenture provides that we will not and the Guarantors will not, and neither we nor the Guarantors will permit any of our Subsidiaries to, directly or indirectly engage to any substantial extent in any line or lines of business activity other than that which, in the reasonable good faith judgment of our Board of Directors, is a Related Business.

Guarantors

The Indenture provides that all of our present and future Subsidiaries, other than Immaterial Subsidiaries, jointly and severally will guarantee all principal, premium, if any, interest and Liquidated Damages (if any) on the Notes on a senior subordinated unsecured basis. The term Subsidiary does not include Unrestricted Subsidiaries. If, however, a Subsidiary that was an Immaterial Subsidiary ceases to be an Immaterial Subsidiary, upon ceasing to be an Immaterial Subsidiary, it shall be required to guarantee, on a joint and several basis with the other Guarantors, all principal, premium, if any, interest and Liquidated Damages (if any) on the Notes on a senior subordinated unsecured basis.

Notwithstanding anything herein or in the Indenture to the contrary, if any of our Subsidiaries that is not a Guarantor guarantees any of our other Indebtedness or any other Indebtedness of ours or any Guarantor, or we or any of the Guarantors, individually or collectively, pledges more than 65% of the Voting Equity Interests of a Subsidiary that is not a Guarantor to a lender to secure our Indebtedness or any Indebtedness of any Guarantor, then such Subsidiary must become a Guarantor.

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