1173284--3/29/2006--JACOBS_ENTERTAINMENT

related topics

{debt, indebtedness, cash}

{investment, property, distribution}

{stock, price, operating}

{condition, economic, financial}

{regulation, change, law}

{loan, real, estate}

{competitive, industry, competition}

{cost, regulation, environmental}

{gas, price, oil}

Risks Related to Our Indebtedness Our substantial indebtedness could adversely affect our financial health and prevent us from fulfilling our obligations under our debt agreements. Our debt agreements impose many restrictive covenants on us. Despite current indebtedness levels, we may still be able to incur substantially more debt, which could exacerbate the risks described above. To service our indebtedness, we will require a significant amount of cash, the availability of which depends on many factors beyond our control. Risks Related to Our Senior Secured Notes Holders rights to receive payments on our 11 7 / 8 % Senior Secured Notes in the principal amount of $148 million as of December 31, 2005 (the notes ) are effectively subordinated to payments under our Senior Credit Facility and any equipment financing to the extent of the collateral securing this other debt. The proceeds from the collateral securing the notes may not be sufficient to pay all amounts owed under the notes if an event of default occurs, even if the fair market value of the collateral would otherwise be sufficient to pay the amounts owed under the notes. The value of the collateral securing the notes may not be sufficient to pay all amounts owed under the notes if an event of default occurs. We may have subsidiaries in the future that will not guarantee the notes. The trustee s ability to realize on the collateral securing the notes may be limited. We are a holding company and will depend on the business of our subsidiaries to satisfy our obligations under the notes. We may not have the ability to raise the funds necessary to finance the change of control offer required by the note indenture. Our original senior notes in the amount of $125 million were issued in February 2002 with original issue discount. As a result, holders of these notes will generally be required for United States federal income tax purposes to include in gross income accrued original issue discount on the notes before the receipt of a cash payment on account thereof, and in the event of a bankruptcy of the Company, a note holder s claim would not include any unamortized original discount. Federal and state statutes allow courts, under specific circumstances, to void guarantees, subordinate claims in respect of indebtedness and require debt holders to return payments received from guarantors. Risks Related to Our Business We face extensive regulation from gaming authorities. We depend on our key personnel, particularly Jeffrey P. Jacobs Members of the Jacobs family own a controlling interest in our capital stock and may significantly influence our affairs or may pursue other activities that compete with us. We need to increase capital expenditures to compete effectively. Economic conditions, seasonality and weather conditions could affect our operations We depend on agreements with Colonial s horsemen to operate our racing and wagering business. Energy price increases may adversely affect our costs and our revenues

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1173284--3/29/2006--JACOBS_ENTERTAINMENT_INC