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Greyhound Pk Expansion Loan Inc D~ ~ck~ MEMORANDUM December 28, 2004 TO: The Honorable Mayor and City Council Members FROM: Michael C. Van Milligen, City Manager SUBJECT: Dubuque Greyhound Park & Casino Expansion - Loan Increase Dubuque Racing Association General Manager Bruce Wentworth has submitted a request for approval for an expanded loan amount, from $22,000,000 to $25,000,000, to meet the currently projected needs of the casino expansion and related equipment purchases. I respectfully request Mayor and City Council approval of the expanded loan amount. !l (I' if .. . i(/ /.' i IlL v i III / ¿II '\ Michael C. Van Milligen . MCVM/jh Attachment cc: Bruce Wentworth, General Manager, Dubuque Racing Association Barry Lindahl, Corporation Counsel Cindy Steinhauser, Assistant City Manager (, DR4 DUBUQUE RACING A550ClAnON December 24, 2004 Honorable Mayor and City Council Dubuque City Hall 50 West 13th Street Dubuque, IA 52001-4864 RE: Dubuque Greyhound Park & Casino Expansion-Loan Increase Dear Honorable Mayor and City Council: Please accept this letter and packet of supporting information as a request by the Dubuque Racing Association to increase the DGP&C expansion loan amount from $22,000,000 to $25,000,000 in order to meet the currently projected needs of the casino expansion and related equipment purchases with the loan repayment to be structured on a 7-yearand IS-year basis. Provisions within the DRAICity Lease require approval for alterations in excess of $10,000 (DRA/City Lease, para. 17) and for debt incurred with the consent of the City (DRA/City Lease, para. 45. (e)). At a meeting of the Dubuque Racing Association Board of Directors held on Tuesday, November 23, 2004, the Board passed a motion instructing staff to proceed with securing the increased loan commitment from AmTrust and DB&T. AmTrust's credit facility letter of approval is included in this packet. If the City approves this request, the DRA will present the increased loan proposal to the Iowa Racing & Gaming Commission on January 13, 2005. The Dubuque Racing Association respectfully requests that the City approve this request. Sincerely, ~~ Bruce Wentworth General Manager Dubuque Racing Association P.O. Box 3190 . DUBUOUE. IA 52004-3190 . PHONE 563.582.3647 . FAX 563.582.9074 DR4 DUBUQUE RACING ASSOCIATION Date: November 18,2004 To: DRA Board of Directors Roger Hoeger b1Jv From: Issue: Request to Increase Loan from $22M to $25M Recommendation: DRA Executive Committee recommends Board approval authorizing staff to contact American Trust (the lead bank), to request an increase of the DGP&C expansion loan amount from $22,000,000 to $25,000,000, in order to meet the currently projected needs of the casino expansion and related equipment purchases with the loan repayment to be structured on a 7 year and 15 year basis. Background: A loan of $22M is currently in place with American Trust and Dubuque Bank & Trust to fund the casino expansion, based on a DRA's request of $21.4M. The banks agreed to loan $600,000 more that what was needed at the time of the request. The two reasons for the increased borrowing relate to a construction budget overage of $1,389,114 and also for purchasing 100 poker machines and related equipment for $1,639,293. A schedule titled "DGP Casino - Project Budget" prepared by Durrant' detailing the variances from budget is included for your review. Addition.ally, a representative from Durrant will be at the Executive Committee meeting to review the schedule, discuss the variances from budget, and answer questions. The second reason for the increased loan asking relates to' the purchase of 100 poker machines and related equipment projected to cost $1,639,293. Staff's previous position was to work with 950 regular slot machines and to P.O. Box 3190 . DUBUQUE. IA 52004-3190 . PHONE 563.582.3647 . FAX 563.582.9074 purchase an additional 50 poker machines, which did fit within the $22M loan. However, in light of the Diamond Jo potentially wanting to increase their number of slot machines from 729 to around 1,100 to 1,200 machines, necessitated rethinking our position to the point of asking Will Cummings for updated projections. Based on Mr. Cummings work and in a conversation with Bruce Wentworth and me, Mr. Cummings advised us that we should plan on purchasing the additional 100 poker machines in order to minimize adverse financial impacts of the Diamond Jo adding more machines. If we are able to secure an additional $3M loan, then based on current projections, approximately $450,000 and $150,000 are in place for construction contingencies and for equipment contingencies, respectively. In addition to the above two contingencies an additional $600,000 would be available to meet unanticipated future needs - if the needs don't materialize, then the draws on the loan total $24.4M. Bank, DRA Board, City of Dubuque, and Iowa Racing & Gaming Commission approvals are necessary to increase the loan amount from $22M to $25M. Staff will review the attached schedules during the Executive Committee meeting. If you have any questions, please contact Bruce Wentworth or me. Sources and Uses of Funds Statement Sources of Funds Nov. 2004 Mav 2004 March 2004 Depreciation & Improvement Fund: D & I Fund - Funding Source for Street Lighting $200.000 0 & I Fund - Funding Source for Hotel Parking $220.000 0 & I Fund - Funding Source Greyhound Park onve Entry Sign $50.000 Sutotal 0 & I Fund $470,000 0 & I Fund (11130/04 Belance of $1.267.013 @ 50% to Fund Const) $633.507 $633.507 $633.507 Total 0 & I Fund $1,103,507 $633,507 $633,507 ORA Reserve Fund: ORA Reserve - CIP Fund (Balance 11130/04) $835.918 $835.918 $835.918 ORA Reserve - Contlngency Fund (Balance 11/30/04) $3.916,961 $3,916.961 $3.916.961 ORA Portion of 2003 ~istribution Escrowed for Gaming Tax $1.902.000 $1.902.000 $1.901.500 2% Increase in Gaming Tax (7/02 - 11/30/03) hom Escrowed Funds ($275,070 ($275.070) ($275,070 12% Increase In Gamin9 Tax (6/12/02 - 6130/02) from Escrowed Funds ($64.862 ($64.662) N/A Subtotal ORA Reserve $6,314,947 $6,314,947 $6,379,3<19 Previous Commitment to Fund Project from ORA Reserve Funds $1.285,819 $1,285.819 $1.285.819 Additional Draw Down on ORA Reserve Balance $159,55O ORA Reserve - Previously Reserved for Non Expansion Related Uses $505.289 N/A N/A Subtotal DRA Reserve $1,950,658 $1,285,819 $1,285,819 Total DRA Reserve $8,265,605 $T,600,768 $7,865,128 ORA Reserve - 5% of Operating (Balance of $905.088 11/30/04) $0 $0 $0 Available DGP&C Funds $9,369,112 $8,234,273 $6,379,309 Previously Boa'" Approved Loan Amount $21,392,616 $21.392.616 $21,363.273 Additional Loan Amount Requested (Round to $3M) $2,837,917 N/A N/A Total Loan Amount $24,230,533 $21.392.616 $21.363.273 Total Sources $33,599,645 $29,626,889 $27,742,582 Other: Contingency for CIP Additional Bankroll Requirements Total - Oth.. Total tiP & Other Nov. 20041 Ma 2004 March 2004 $17.453.399 $17.453.399 $16.464.752 $312.000 $312,000 $312.000 $520.000 $520,000 $520.000 $300,000 $300.000 $300.000 $131,880 $131.880 $131.860 20,106, $18,717,278 $17,T28,632 ($5". ($511.208) ($511.208 $19,595, $18,206,071 $17,217,424 $7.446.878 $6,069.200 $5,505.200 Incl. In Slot & Equip. $511.208 $511.208 $200.000 Incl. In 5101 & Equip. $250.000 $250.000 Incl. in Slot & Equip. $190.490 $190,490 $220,000 $50.000 $7,916,878 $7,020,888 $6,456,898 $505.289 N/A N/A $8,422,167 $7,020,888 $6,456,898 $150.000 $606.920 $275.260 $293.000 $293.000 $293.000 $443,000 $899,920 $568,260 $B,B65,167 $7,920,818 $7,025,158 $3,000,000 $3,000,000 $3,000,000 $300,000 $300.000 $200,000 $200.000 $500,000 $500,000 $29,626,889 $27,742,582 11/18/2004 reconfi9uration - AAAF 2.123 Uses of Funds Construction: Construction Project Budget Union Wage Agreement Incentive Bonus Plan Emergency Power UP9rade Durrant Fees to Abandon Cunenl Planning Subtotal Non Gaming FF&E & Sign age to Signage to CIP Budget Total Construction CIP Budget: Slot Machines & Related Casino Equipment Non Gaming FF&E & Signage to Signage to CIP Budgef Street lighting Greyhound Park Drive Signage & Impro,ements Hardware & Software Purchase & Installation Increases Parking Lot for Hotel Greyhound Park on'e Entry Sign Subtotal CIP Items Previously Identified for Non expansion Related Uses Total CIP Budget Table Game License Fee tiP 2006: Table Games & Related Equipment (Fiscal 2006) Table Game Software (Fiscal 2006) - 'n. t Total CIP 2006 Related to Expansion Total Uses ):.1it¡¡:lOOÞj¡JJj!j¡lffi:'Ië...a~'jf.(ñ¡"òIIi!~ê_aTl~ 20041 20051 20061 20071 20081 200911 I Description D & I Fund Balance Calculation D & I Fund Balance (Includes Re,trlcted Fund,) $1.119,037 $592.3"" $257.134 $383.583 $513.152 $645.980 Resources - Annual Payments $80,000 $120.000 $120.000 $120.000 $120.000 $120.000 Roconfiguration Project Use ($633.507) $0 N/A N/A N/A NIA Uses-Current Year $0 ($470,000) $-<> $-0 $-<> $-0 Inte..st lnoome $26.796 $14,808 $6,428 $9.589 $12,829 $16,150 Fund Balance (Includes Res"'cled Funds) $592.328 $257.134 $383.583 $513,152 $645,980 $782.130 Re"rlcted Fund, ($250.000) ($250.000) ($250,000) ($250,000) ($250,000) ($250,000 Fund Balance Available $342 328 $7134 $133583 $283152 $395 980 $532130 CIP Fund of DRA Reserve Fund Fund 6alance Start Of Fiscal Year $3.274.357 $315,339 $1.171.121 $72.592 $1.210.188 $783,687 Re,ou<ces - ol,tnbution (Start of FN & Debt Servlce@ 7/15 Yea, Plan) $3.035,000 $2.819,606 $3.152.890 $3.261,035 $3.409.574 $3.628,179 Additional Loan - 100 Slot Poker Machines $1.639.293 DRA., Sha,e of Additional Debt Service ($3.0M 7.50%l10.0%@7/15Yr.j $0 $0 ($140.855) ($140.855) ($140,855) ($140,855 Uses - Prior Year (Fund' TransfeITed Current Year) ($1.604.276) NfA N/A N/A NfA N/A Uses - Current Year ($1.570.559) ($7,952.167) ($6.219.996) ($1,968.872) ($3.696.070) ($3.726.842 Expansion Project ($6.314.947) ($1.285.819) Loan - Slot Mochines & Relaled Equipment $6.069.200 Loan - Contingency $506,920 Loan - Contingency (Reserve Amount) ($150.000) Loan - Greyhound Pa" Signage & Improvements $250,000 Loan - Non Gaming FF&E & Interior Signage (Induded in Con"ruction 6udget) $511,208 Loan - Ta~e Game, & Related Equipment $300.000 Loan - Ta~e Game Softwa.. $200.000 Restrlcled Fund, (5% Of Operating Expenses) ($42.050) ($31.472) ($30.933) ($31.597) ($30.437) ($37.747 Re,tncted Funds - Contingency - From (To) $3.534.138 $0 $0 $0 $0 $0 Re"rlcted Funds - Debt Reserve $0 $0 $0 $0 $0 $0 Inte.." lnoome $4.675 $17.307 $1,073 $17.885 $11.286 $7.296 Fund Balance $316338 $1 171 121 $72 592 $1 210 188 $763 687 $493718 5% of Operating Fund of DRA Reserve Fund Fund Balance Start Of Fiscal Yea, $863,030 $905,088 $936.560 $967"93 $999.090 $1.029.527 Resources - Annual Payment (Start of Fiscal Year) $42.050 $31.472 $30,933 $31,597 $30.437 $37.747 Uses Fund Balance $905088 $938560 $967493 $999 090 $1029527 $1067274 Contingency Fund of DRA Reserve Fund Fund Balance Start Of Fiscal Year ' $3.534,130 $0 $0 $0 $0 $0 Ine..ase (Deeraase) - (Start of Fiscal Year) ($3.534,130) $0 $0 $0 $0 $0 Interast Income $0 $0 $0 $0 $0 $0 Fund Balance $0 $0 $0 $0 $0 $0 Debt Reserve Fund of DRA Reserve Fund Fund 6alance Start Of Fiscal Year $0 $0 $0 $0 $0 $0 Inc..ase - (Start of Fiscal Year) $0 $0 $0 $0 $0 $0 Prapaymenf of Oebt (Debl ratirad In Fiscal 1999) $0 $0 $0 $0 $0 $0 Fund Balance $0 $0 $0 $0 $0 $0 DRA Reserve Fund Percentage Allocations RestOcted Fund, - Operating (Balance to equal 5% of Operating Budget) Early Deb! Retirament 0.00% Capital Improvements 100.00% Conti en 0.00% epraeiation mpro'ement Fun a ance in Exee" of 250.000 342.326 7,134 133,563 263,162 395,980 532.130 CJP Fund of ORA Reserve Fund $316,338 $1,171.121 $72,592 $1.210.188 $763.687 $493,718 Contingency Fund of ORA Re,erve Fund $0 $0 $0 $0 $0 $0 ------ $658664 1 178 255 $206155 1473340 $1159 667 $1025848 11/18/2004 2005dp1.123 Description Code 2005 2006 2007 2008 2009 Total RES $4,655.624 $2,652.200 $1.405.oB6 $2.977.460 $3.155.100 $15,045,670 RES $1.639.293 $1.639,293 RES $300.000 $300.000 RES $200,000 $200,000 RES $75,500 RES $196.000 ftware RES $775.000 RES $3,000 RES $210,000 RES $202.100 $533.050 RES $367.600 $641.500 RES $156,032 RES $135.626 $76.774 $165,171 $100.029 $496.760 RES $27.399 $13.356 $26.995 $14,112 $106.252 RES $15,000 $15.000 RES $12,305 Re lacements RES $26.000 $26,500 $92.160 RES $11.320 RES $15.000 $26,912 RES $1,690 RES $50,000 $50.000 RES $25.000 $25.000 RES $10,000 $10,000 RES $50.000 $50,000 RES $4.500 $4.500 RES $5.000 $5.000 RES $31,824 $19.121 $19.695 $20.265 $20,694 $111,619 RES $68,S24 $68,624 RES $121.237 $134,416 $255.655 RES 11.672 $6.240 $6.458 $24.370 RES ,236 RES .312 RES RES $22, $11.749 $6.242 $2.875 $4,600 RES $16,964 RES $6.554 RES $1.000 RES $23,450 $27.500 RES $5,019 RES $2.190 RES $1.659 RES $4,938 RES $36.224 RES $8,646 RES $18,676 IS ,tem to, Dmft Beer Lines RES $14,322 RES $1.621 Conc.,.lon, RES $16.500 R, la"ments RES $12.000 RES $24,000 RES $105,000 RES $10,000 RES $52,100 RES $35.000 RES $25,000 $25,000 $25.000 $25.000 $25.000 RES $70,600 D&I $220.000 $220.000 RES $411,603 $411.603 D&I $200,000 $200,000 D&I $50.000 $50.000 RES NfA $421106 $311 000 $196667 $369 607 $1296602 $8.422,167 $6,219.996 $1,966,872 $3,696,070 $3,726,842 $24,033.947 RES = CIP Portion of 30% R"'Ne Fund D & I = Depr. & Impm"menl Fund OPER = Opemting Ca," Total $7,952.167 $470.000 $0 $8422167 $6.219,996 $0 $0 $6219996 3.696.070 $0 $0 $3698010 $3.726.842 23,563.947 $0 $470.000 $0 $0 $3726842 $24033947 1,966.872 $0 $0 $1 968 872 11/1812004 2005cipf.123 - Project Summary DGP Casino. Project Budget 11/112004 Confract Contingency Adjusted Invoice To Contracf Current May 2.2004 Differential Scope Change Projected Approved Current vs. Description Amount Change Contract Amount Date Balance Budoet Budoet Approved. Construction Contracts Bid Package #1 - Under Contracf $980.085 $58,017 $142,358 $1.180.460 $969.727 $210.733 $1.180,460 $808.270 $372.1 gO Bid Package #2 - Under Contract $5.322,OB5 $0 $0 $5.322.085 $0 $5,322.085 $5,322.0B5 $4.620.000 $702.085 Bid Package #3 - Under Contract $7.083,553 $0 $0 $7,083,553 $0 $7,083,553 $7.493.553 $7,432.201 $61.352 Bid Package #4 . Bids Received $2.028.222 $0 $0 $2,028.222 $0 $2,02B,222 $2.026,222 $1,2B6,099 $742.123 Consfruction Contingency Budget $573,919 $573,9'9 $573,919 $0 Consfruction Contingency Used $58.017 -$124,801 -$124.801 oGP Direct Purchase & Other DIrect Construction Expenses Direct Purchase Contracts $270.218 $465,500 -$195.282 Other Construction Expenses $231.367 $115.000 $116.367 Durrant Group AlE/CM Fees AlE Design Fees $1.122.276 $0 $1.122.276 $905,116 $217.160 $1.122.276 $1,122,276 $0 CM Fees $698,270 $0 $698,270 $225,541 $472.729 $698,270 $698.270 $0 AlE/CM Fees for Abandoned Project $131.621 $0 $131.621 $131.621 $0 $131.621 $131.621 $0 Durrant Relmb. Consultant Fees & Printing Consultant Fees $140,700 $122,268 $18,432 $140.700 $130,000 $10.700 Printing & oistnbution Fees $40,000 $41.340 -$1.340 $40.000 $20,000 $20.000 Durrant Reimbursable Construction Costs Field Office Expenses $B.OOO $2,353 $5,B47 $8.000 $8.000 $0 Construction Staking, Testing & Special Inspections $65.000 $54.628 $10.372 $65,000 $75.000 -$10,000 Construction Facilities & Temporary Confrols $60,607 $6.187 $54,420 $58.000 $60.000 -$2.000 Miscellaneous $66,380 $19.201 $47.179 . $66.380 $40,000 $26.380 Subtotal $19.305,270 $17.586,156 $1.719,114 Other Soft Costs Not Included In Detail Tabs Non Gaming FF&E & Intenor Signage - -..... $0 Incentive Bonus Plan $260.000 $520.000 -$260,000 Mlsceltaneous Contingency Not Included In Detail Tabs $100.000 $100.000 $0 For Modular Office Space -$20.000 -$20.000 For A&G Preliminary Work -$50.000 .$50.000 Total $17,366,112 $58,017 $142,358 $17,947,174 $2,477,980 $15,469,194 $20,106,478 $18,717,364 $1,389,114 8/18& 10/11 Total $19.601.662 895 MBin Street P.O. BDX 938 Dubuque, Iowa 52004-0938 563.589.0849 Fax 589.0860 tutzig@americantrustcom www.americantrust.cDm Thomas J. Utzig Executive Vice President Chief Credit Officer December 17, 2004 Mr. Bruce Wentworth, General Manager Dubuque Greyhound Park & Casino P.O. Box 3190 Dubuque, IA 52004-3190 Dear Bruce: American Trust & Savings Bank and Dubuque Bank & Trust Company ("Banks") are pleased to provide the following credit facility to the Dubuque Racing Association ("DRA") for the planned casino expansion and remodeling of the Dubuque Greyhound Park & Casino. This proposal supersedes the one submitted May, 20, 2004, as the scope and the amount of the project changed. Credit Amount: Not to exceed $25,000,000 for 1000 machine expansion, addition of gaming tables, addition of up to 100 poker machines, and expansion of the facilities. Credit Purpose: Finance purchase of gaming devices and equipment, and finance the renovation and expansion project at the Dubuque Greyhound Park & Casino. Collateral: This credit will collateralized by a general business security agreement on substantially all assets of the Dubuque Greyhound Park & Casino. Additionally, an assignment of the lease between the city of Dubuque and the DRA will be obtained. A negative pledge agreement, from the city of Dubuque, will be obtained so the assets cannot be assigned or mortgaged by the city without the express written consent of the Banks. Construction Loan: There will be one construction multiple advance loan availed for the entire amount of the proposed financing. The construction loan will have a maturity date of June 15, 2005. The rate will be 5 basis points below The Wall Street Journal Prime ('Prime"). Interest will be paid monthly and will be based upon the amount outstanding on the loan. If funding today, the initial interest rate would be 5.20 percent. The construction loan fee for the project has already been assessed and paid. Term Facility: We are offering the following financing options: American Trust & Savings Bank Mr. Bruce Wentworth December 17, 2004 Page 2 of 5 Interest Rate Scenario 1 Scenario 2 Scenario 3 Scenario 4 $25,000,000 $25,000,000 $25,000,000 $25,000,000 seven years seven years seven years seven years three-year five-year balloon seven years seven years balloon Fixed at Prime Fixed at Prime Fixed at Prime Variable at plus 0.75% plus 1.50% plus 2.50% Prime -.05% Term Loan Amount Amortization Term of loan Rate if funding today 6.0% 6.75% 7.75% 5.20% Min. payment if funding today $366,268 $375,473 $387,958 $356,601 OR Fixed principat of $297,620 plus accrued interest Scenario 5 Scenario 6 Scenario 7 Scenario 8 Loan 1 Amount $12,500,000 $12,500,000 $12,500,000 $12,500,000 Amortization seven years seven years seven years seven years Term of Loan three-year five-year balloon seven years seven years balloon Interest Rate Fixed at Prime Fixed at Prime Fixed at Prime Variable at plus 0.75% plus 1.50% plus 2.50% Prime - 0.05% Rate if funding today 6.00% 6.75% 7.75% 5.20% Min. payment if funding today $183,134 $187,736 $193,979 $178,300 Loan 2 Amount $12,500,000 $12,500,000 $12,500,000 $12,500,000 Amortization fifteen years fifteen years fifteen years fifteen years Term of Loan three-year five-year balloon seven-year fifteen years balloon balloon Interest Rate Fixed at Prime Fixed at Prime Fixed at Prime Variable at plus 1.00% plus 1.75% plus 3.00% Prime + .25% Rate if funding today 6.25 % 7.00% 8.25% 5.50% Min. payment if funding today $107,802 $113,070 $122.147 $102,670 Total monthly payment $290,936 $300,806 $316,126 $280,970 OR Fixed Principal payments of $218,254 plus accrued interest American Trust & Savings Bank Mr. Bruce Wentworth December 17, 2004 Page 3 of 5 A fifteen-year fixed rate may be offered at the time of closing. If offered today, the rate would be in the 9 percent range with a monthly payment of approximately $255,528. All fixed-rate financing proposals are subject to a prepayment fee to be negotiated at a later date. 'If you choose the variable rate option and elect to have a set monthly principal and interest payment, we will adjust the payment annually in order to maintain the intended amortization schedule. Pre-funding Conditions: 1. Renewal of the lease between the Dubuque Greyhound Park & Casino and the city of Dubuque. 2. Satisfactory consent by the city of Dubuque for the subordination of profit sharing revenues until the Banks' loans are repaid. 3. Satisfactory approval of the expansion project by the Iowa Gaming Commission. Satisfactory review of the licenses for operating the casino at the Dubuque Greyhound Park & Casino. 4. A performance bond acceptable to the lenders will be required for the construction project Other General Conditions: The proposed credit facility will be govemed by a credit agreement between the Banks and the ORA. This agreement will contain a number of conditions including, but not limited to: 1. The credit facility will be subject to documentation as may be required by the Banks and their legal counsel. 2. The Banks are to receive a perfected first lien on all collateral. 3. The ORA will provide the Banks with annual audits of its operations, as well as quarterly internal financial statements. 4. The ORA will be responsible for all expenses related to the preparation and closing of the credit facilities including, but not limited to, filing fees, and legal expenses. 5. In any of these financing proposals, there will be a significant balance owing on the credit facility at November 2010, at which time there will be a public referendum to determine whether Borrower shall continue its business. Borrower shall make no distributions pursuant to paragraph 41 of the Lease Agreement between Borrower and the City of Dubuque, Iowa, as a result of operations during Borrower's fiscal year American Trust & Savings Bank Mr. Bruce Wentworth December 17, 2004 Page 4 of 5 2010. Such funds, which otherwise would have been distributed at the end of Borrower's fiscal year 2010, shall instead be maintained in an account with Bank and pledged to Bank as additional collateral. If the referendum in 2010 approves the continuation of Borrower's gambling activities, such funds will be released by Bank to Borrower promptly after the results of the referendum are certified. 6. In the event the DRA chooses any of the 15-year amortization proposals, Borrower shall make no distributions pursuant to paragraph 41 of the Lease Agreement between Borrower and the City of Dubuque, Iowa, as a result of operations during Borrower's fiscal year 2014, unless and until Borrower has negotiated and executed a new lease with the City of Dubuque, Iowa. Such funds, which otherwise would have been distributed at the end of Borrower's fiscal year 2014, shall instead be maintained in an account with Bank, and pledged to Bank as additional collateral. Upon negotiation and execution of said lease, such funds will be released to Borrower by Bank promptly after execution of said lease. American Trust & Savings Bank shall serve as the lead bank for the credit facilities. Dubuque Bank & Trust Company will be purchasing an equal share of the credit amount. All documents will be prepared in the name of American Trust & Savings Bank. American Trust & Savings Bank and Dubuque Bank & Trust Company appreciate the opportunity to assist the Dubuque Racing Association with the expansion project. By using our collective efforts, we can expedite the approval/closing process, assure efficiencies, and maintain the majority of this credit facility within the local community. Purpose of Letter: This letter shall not be deemed as evidence of a binding agreement on the part of either the Banks or the Borrower. Important terms may remain to be negotiated, and even if an agreement in principal should be reached on the terms of the financing at a subsequent date, neither party to the financing shall be legally bound until definitive loan documents ~ been signed by the respective parties. If the foregoing terms are in accordance with what we discussed, please indicate acceptance on both.of the enclosed originals of this letter and retum one fully signed original. If.such a¿ceptance is not received by us on or before January 31, 2005, this .,pl,QpOSal shall expire. Sincerely, ~ Thomas J. Utzig Executive Vice President American Trust & Savings Bank Mr. Bruce Wentworth December 17, 2004 Page 5 of 5 Agreed and accepted this day of January 2005. Dubuque Racing Association by: