<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 8, 1997
REGISTRATION NO. 333-33145
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1 TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
HORSESHOE GAMING, L.L.C.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 7999 88-0343515
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
------------------------
ROBINSON PROPERTY GROUP LIMITED PARTNERSHIP
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
MISSISSIPPI 7999 64-0840031
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
4024 INDUSTRIAL ROAD
LAS VEGAS, NEVADA 89103
(702) 650-0080
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANTS' PRINCIPAL EXECUTIVE OFFICES)
WALTER J. HAYBERT
HORSESHOE GAMING, L.L.C.
568 COLONIAL ROAD
MEMPHIS, TENNESSEE 38117
(901) 820-2460
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
JAMES H. SHNELL, ESQ.
RIORDAN & MCKINZIE
695 TOWN CENTER DRIVE
SUITE 1500
COSTA MESA, CALIFORNIA 92626
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the Registration Statement becomes effective.
If 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: [ ]
------------------------
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
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 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
<PAGE> 2
HORSESHOE GAMING, L.L.C.
CROSS-REFERENCE SHEET
PURSUANT TO RULE 404(A) AND ITEM 501(B) OF REGULATION S-K
<TABLE>
<CAPTION>
FORM S-4 ITEM NUMBER AND CAPTION PROSPECTUS CAPTION
- ---------------------------------------------------- ------------------------------------------
<S> <C>
1. Forepart of Registration Statement and Outside
Front Cover Page of Prospectus.................. Outside Front Cover Page; Cross-Reference
Sheet; Inside Front Cover Page
2. Inside Front and Outside Back Cover Pages of
Prospectus...................................... Inside Front Cover Page; Available
Information; Outside Back Cover Page
3. Risk Factors, Ratio of Earnings to Fixed Charges
and Other Information........................... Prospectus Summary; Risk Factors; Selected
Consolidated Financial Data; Business
4. Terms of the Transaction........................ The Exchange Offer; Description of Notes;
Certain Federal Income Tax Considerations;
Plan of Distribution
5. Pro Forma Financial Information................. *
6. Material Contacts with the Company
Being Acquired................................. *
7. Additional Information Required for Reoffering
by Persons and Parties Deemed to Be
Underwriters.................................... *
8. Interests of Named Experts and Counsel.......... Legal Matters; Experts
9. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities..................................... *
10. Information with Respect to S-3 Registrants..... *
11. Incorporation of Certain Information by
Reference....................................... *
12. Information with Respect to S-2 or S-3
Registrants..................................... *
13. Incorporation of Certain Information by
Reference....................................... *
14. Information with Respect to Registrants Other
Than S-3 or S-2 Registrants..................... Inside Front Cover Page; Prospectus
Summary; Capitalization; Selected
Consolidated Financial Data; Management's
Discussion and Analysis of Financial
Condition and Results of Operations;
Business; Consolidated Financial
Statements
15. Information with Respect to S-3 Companies....... *
16. Information with Respect to S-2 or S-3
Companies....................................... *
17. Information with Respect to Companies Other Than
S-3 or S-2 Companies............................ *
18. Information if Proxies, Consents or
Authorizations are to be Solicited.............. *
19. Information if Proxies, Consents or
Authorizations are not to be Solicited or in an
Exchange Offer.................................. Inside Front Cover Page; The Exchange
Offer; Management; Executive Compensation;
Ownership of Units; Related Party
Transactions; Description of Notes
</TABLE>
- ---------------
* Inapplicable
<PAGE> 3
PROSPECTUS
$160,000,000
HORSESHOE GAMING, L.L.C.
OFFER TO EXCHANGE ITS
9 3/8% SENIOR SUBORDINATED NOTES DUE JUNE 15, 2007, SERIES B
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT
FOR ANY AND ALL OF ITS OUTSTANDING
9 3/8% SENIOR SUBORDINATED NOTES DUE JUNE 15, 2007, SERIES A
The Exchange Offer will expire at 5:00 P.M., New York City time, on
November 7, 1997, unless extended.
Horseshoe Gaming, L.L.C. (the "Company" or "Horseshoe Gaming") hereby
offers, upon the terms and subject to the conditions set forth in this
Prospectus (the "Prospectus") and the accompanying Letter of Transmittal (the
"Letter of Transmittal" and together with this Prospectus, the "Exchange
Offer"), to exchange each $1,000 principal amount of its 9 3/8% Senior
Subordinated Notes due June 15, 2007, Series B (the "New Notes" or the "Series B
Notes") which have been registered under the Securities Act of 1933, as amended
(the "Securities Act"), pursuant to a registration statement (the "Registration
Statement") of which this Prospectus is a part, for each $1,000 principal amount
of its outstanding 9 3/8% Senior Subordinated Notes due June 15, 2007, Series A
(the "Old Notes" or the "Series A Notes" and, together with the New Notes, the
"Notes"), of which $160 million principal amount is outstanding as of the date
hereof. Robinson Property Group Limited Partnership, a Mississippi limited
partnership ("RPG" or the "Guarantor") has issued an unconditional guarantee
(the "Guarantee") as to the principal and premium, if any, of and the interest
on the New Notes.
The Notes and the Guarantee will be general unsecured obligations of the
Company and the Guarantor, respectively, and will be subordinated in right of
payment to all existing and future Senior Debt (as defined herein) of the
Company and the Guarantor, respectively, including the Senior Notes (as defined
herein) and borrowings under the Credit Facility (as defined herein). At June
30, 1997, the aggregate principal amount of Senior Debt of the Company and its
Subsidiaries on a consolidated basis was $137 million. The Indenture (as defined
herein) permits the Company and its Subsidiaries to incur additional Senior
Debt, subject to certain limitations. See "Description of Notes -- Certain
Covenants -- Limitation on Incurrence of Additional Indebtedness and
Disqualified Capital."
In addition, the Company conducts its operations through subsidiaries. THE
CREDITORS OF A SUBSIDIARY WILL HAVE A CLAIM TO PAYMENT BY SUCH SUBSIDIARY PRIOR
TO A CLAIM TO PAYMENT OF THE NOTES, EXCEPT TO THE EXTENT THAT THE SUBSIDIARY MAY
HAVE GUARANTEED THE NOTES. As of the date of this Prospectus, RPG is the only
subsidiary of the Company that is required to issue, or that has issued, a
guarantee of the Notes. The Company's subsidiaries, other than RPG, had debt,
including intercompany liabilities other than the Intercompany Senior Notes
described under "Description of Certain Other Indebtedness," equal to $27.3
million at June 30, 1997.
(Continued on following page)
THIS PROSPECTUS AND THE LETTER OF TRANSMITTAL ARE FIRST BEING MAILED TO
HOLDERS ON OCTOBER 9, 1997.
SEE "RISK FACTORS" ON PAGE 13 FOR INFORMATION THAT SHOULD BE CONSIDERED BY
HOLDERS OF THE SERIES A NOTES IN CONNECTION WITH THE EXCHANGE OFFER AND THE
SECONDARY PURCHASE OF SERIES B NOTES.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------
NO GAMING AUTHORITY IN LOUISIANA OR MISSISSIPPI NOR ANY OTHER GAMING AUTHORITY
HAS PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS OR THE INVESTMENT
MERITS OF THE NOTES OFFERED HEREBY. ANY REPRESENTATION TO THE CONTRARY IS
UNLAWFUL.
THE DATE OF THIS PROSPECTUS IS OCTOBER 9, 1997.
<PAGE> 4
(Continuation of cover page)
The Company will accept for exchange any and all Old Notes validly tendered
prior to 5:00 P.M., New York City time, on November 7, 1997, unless extended
(the "Expiration Date"). Old Notes may be tendered only in integral multiples of
$1,000. Tenders of Old Notes may be withdrawn at any time prior to 5:00 P.M.,
New York City time, on the Expiration Date. The Exchange Offer is not
conditioned upon any minimum principal amount of Old Notes being tendered for
exchange. However, the Exchange Offer is subject to certain customary
conditions. In the event the Company terminates the Exchange Offer and does not
accept for exchange any Old Notes, the Company will promptly return the Old
Notes to the holders thereof. The Company will not receive any proceeds from the
Exchange Offer. See "The Exchange Offer."
The New Notes will be obligations of the Company evidencing the same debt
as the Old Notes, and will be entitled to the benefits of the same indenture
(the "Indenture"). See "Description of New Notes." The form and terms of the New
Notes are the same as the form and terms of the Old Notes in all material
respects except that the New Notes have been registered under the Securities Act
and hence do not include certain rights to registration thereunder and do not
contain transfer restrictions or terms with respect to the special interest
payments applicable to the Old Notes. See "The Exchange Offer."
The New Notes are being offered hereunder in order to satisfy certain
obligations of the Company under the Exchange and Registration Rights Agreement,
dated as of June 25, 1997 (the "Registration Rights Agreement"), by and among
the Company and the initial purchaser of the Notes, a copy of which has been
filed as an exhibit to the Registration Statement of which this Prospectus is a
part. The Exchange Offer is intended to satisfy the Company's obligations under
the Registration Rights Agreement to register the New Notes and exchange them
for the Old Notes under the Securities Act. Once the Exchange Offer is
consummated, the Company will have no further obligations to register any of the
Old Notes not tendered by the holders of the Old Notes (the "Holders") for
exchange, except pursuant to a shelf registration statement to be filed under
certain limited circumstances specified in "The Exchange Offer -- Purposes of
the Exchange Offer." See "Risk Factors -- Consequences to Non-Tendering Holders
of Old Notes."
Based on an interpretation by the staff of the Securities and Exchange
Commission (the "Commission") set forth in several no-action letters to third
parties, the Company believes, based on the advice of its counsel, that the New
Notes issued pursuant to the Exchange Offer in exchange for Old Notes may be
offered for resale, resold and otherwise transferred by holders thereof who are
not affiliates of the Company without compliance with the registration and
prospectus delivery provisions of the Securities Act; provided that the holder
is acquiring New Notes in its ordinary course of business and has no arrangement
or understanding with any person to participate in any distribution (within the
meaning of the Securities Act) of the New Notes. Persons wishing to exchange Old
Notes in the Exchange Offer must represent to the Company that such conditions
have been met. However, any Holder who is an affiliate of the Company or who
tenders in the Exchange Offer with the intention to participate, or for the
purpose of participating, in a distribution of the New Notes cannot rely on the
interpretation by the staff of the Commission set forth in the above referenced
no-action letters and must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any resale transaction.
See "The Exchange Offer -- Purposes of the Exchange Offer." In addition, each
broker-dealer that receives New Notes for its own account pursuant to the
Exchange Offer must acknowledge that it will deliver a prospectus in connection
with any resale of such New Notes. The Letter of Transmittal states that by so
acknowledging and by delivering a prospectus, a broker-dealer will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.
This Prospectus, as it may be amended or supplemented from time to time, may be
used by a broker-dealer in connection with resales of New Notes received in
exchange for Old Notes where such Old Notes were acquired by such broker-dealer
as a result of market-making activities or other trading activities. The Company
has agreed that for a period of 120 days after the Expiration Date, it will make
this Prospectus available to any broker-dealer for use in connection with any
such resale. See "Plan of Distribution." EXCEPT AS DESCRIBED IN THIS PARAGRAPH,
THIS PROSPECTUS MAY NOT BE USED FOR AN OFFER TO RESELL, RESALE OR OTHER TRANSFER
OF NEW NOTES.
2
<PAGE> 5
(Continuation of cover page)
The Old Notes were initially sold by the Company on June 25, 1997 to
Wasserstein Perella Securities, Inc. (the "Initial Purchaser"), and the Initial
Purchaser sold the Old Notes to accredited investors and "qualified
institutional buyers" (as such term is defined in Rule 144A under the Securities
Act). The Old Notes were initially represented by two global notes in fully
registered form (collectively, the "Global Old Note"), registered in the name of
a nominee of The Depository Trust Company ("DTC"), as depositary. The New Notes
exchanged for Old Notes represented by the Global Old Note will be represented
by a single global note in fully registered form (the "Global New Note")
registered in the name of the nominee of DTC. The Global New Note will be
exchangeable for New Notes in registered form, in denominations of $1,000 and
integral multiples thereof as described herein. The New Notes in global form
will trade in DTC's Same-Day Funds Settlement System, and secondary market
trading activity in such New Notes will therefore settle in immediately
available funds. See "Description of New Notes -- Form, Denomination, Transfer,
Exchange and Book-Entry Procedures."
The New Notes will bear interest at a rate equal to 9.375% per annum from
their date of issuance. Interest on the New Notes is payable semi-annually on
June 15 and December 15 of each year, commencing December 15, 1997. Holders
whose Old Notes are accepted for exchange will receive, in cash, accrued
interest thereon to, but not including, the date of issuance of the New Notes.
Such interest will be paid with the first interest payment on the New Notes.
Interest on the Old Notes accepted for exchange will cease to accrue upon
cancellation of the Old Notes and issuance of the New Notes.
The Notes will mature on June 15, 2007. The Company will not be required to
make any mandatory redemption or sinking fund payments with respect to the Notes
prior to maturity. The Notes will be redeemable at the option of the Company, in
whole or in part, at any time on or after June 15, 2002 at the redemption prices
set forth herein plus accrued and unpaid interest and Liquidated Damages (as
defined herein), if any, to the date of redemption. Subject to certain
requirements, up to 30% in aggregate principal amount of Notes originally issued
will be redeemable, at the option of the Company, at any time or times prior to
June 15, 2000 from the net proceeds of one or more Public Equity Offerings (as
defined herein) of the Company, at a redemption price of 110% of the principal
amount thereof, plus accrued and unpaid interest and Liquidated Damages, if any,
to the date of redemption. Upon a Change of Control (as defined herein) the
Company will be required to make an offer to repurchase all or any part (equal
to $1,000 or an integral multiple thereof) of the Notes at a purchase price
equal to 101% of the principal amount thereof, plus accrued and unpaid interest
and Liquidated Damages, if any, to the date of repurchase. In addition, the
Company will be required to offer to purchase certain of the Notes at 100% of
the principal amount thereof, plus accrued and unpaid interest and Liquidated
Damages, if any, to the date of repurchase with the proceeds of certain asset
sales. See "Description of Notes."
The Notes and the Guarantee are general unsecured obligations of the
Company and the Guarantor, respectively, and are subordinated in right of
payment to all existing and future Senior Debt. In addition, assets of the
Company and its subsidiaries secure the Credit Facility and the Senior Notes,
and may in the future be subject to liens of certain equipment financing. To the
extent that any indebtedness of the Company or its subsidiaries is secured by
liens on any assets of the Company or its Subsidiaries, the holders of such
indebtedness will have a prior claim to proceeds from the liquidation of such
assets upon foreclosure or otherwise. Moreover, except to the extent that a
subsidiary of the Company has guaranteed payment of the Notes, the holders of
the indebtedness of a subsidiary will have a claim to payment by such subsidiary
prior to the claim of the Notes.
Prior to this offering, there has been no public market for the Old Notes
or New Notes. As the Old Notes were issued and the New Notes are being issued to
a limited number of institutions who typically hold similar securities for
investment, the Company does not expect that an active public market for the New
Notes will develop. In addition, resales by certain holders of the Old Notes or
the New Notes of a substantial percentage of the aggregate principal amount of
such notes could constrain the ability of any market maker to develop or
maintain a market for the New Notes. To the extent that a market for the New
Notes should develop, the market value of the New Notes will depend on
prevailing interest rates, the market for similar securities and
3
<PAGE> 6
(Continuation of cover page)
other factors, including the financial condition, performance and prospects of
the Company. Such factors might cause the New Notes to trade at a discount from
face value. See "Risk Factors -- Lack of Public Market for Notes."
THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT PRESENTED
HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS ARE AVAILABLE UPON REQUEST FROM
THE COMPANY AT 4024 INDUSTRIAL ROAD, LAS VEGAS, NEVADA 89103, ATTENTION:
SECRETARY, TELEPHONE (702) 650-0080.
4
<PAGE> 7
SUMMARY
The following summary is qualified in its entirety by the more detailed
information and Consolidated Financial Statements and notes thereto appearing
elsewhere in this Prospectus. As used herein, unless the context otherwise
requires, the terms "Company" and "Horseshoe Gaming" refer to "Horseshoe Gaming,
L.L.C." and its subsidiaries, including predecessor entities. The principal
executive offices of the Company are located at 4024 Industrial Road, Las Vegas,
Nevada 89103 and the telephone number is (702) 650-0080. An index of defined
terms is set forth at page 98 of this Prospectus.
THE COMPANY
Horseshoe Gaming owns and operates dockside casinos and related amenities
at locations in Bossier City, Louisiana ("Horseshoe Bossier City") and Tunica
County, Mississippi ("Horseshoe Casino Center" and together with Horseshoe
Bossier City, the "Horseshoe Casinos"). The Horseshoe Casinos are designed to
feature attractive gaming environments and to offer the superior odds and high
betting limits which are a Horseshoe tradition, to differentiate the Horseshoe
Casinos from their competitors. The Horseshoe Casinos also offer quality food
and beverages, together with personal service and player incentives intended to
foster customer loyalty and repeat business.
The Company has embarked on a $300 million capital expenditure program
(exclusive of capitalized interest) designed to produce a gaming experience and
amenities which are first class. The expansion will create 606 tower suites in
Bossier City and add 309 similar suites in Tunica, themed gourmet restaurants
and significant retail and entertainment amenities; all are intended to draw
customers from more distant markets and strengthen mid-week and convention
business. The expansion will also increase the number of the Company's gaming
positions by approximately 35%, which together with the hotel suites and other
amenities, is expected to lengthen the average guest stay and increase the
number of gaming customers. Management expects both expansion projects to be
completed during the fourth quarter of 1997, with earlier openings of certain
amenities.
In addition to operating the Horseshoe Casinos, the Company routinely
considers other gaming related opportunities, including new casino developments,
acquisitions and joint ventures, and may in the future pursue other gaming
related endeavors that satisfy the Company's strategic objectives. In August
1997, the Company and Lady Luck Vicksburg, Inc. ("Lady Luck") signed a
Contribution and Sale Agreement with respect to a proposed new limited liability
company, which is intended to develop a riverboat gaming facility, including a
riverboat casino, a hotel of approximately 200 rooms, an 800-car parking garage
and other amenities, in Vicksburg, Mississippi. The consummation of the
Contribution and Sale Agreement and the development of the facility is subject
to certain conditions precedent including the mutual determination by the
Company and Lady Luck of the intended scope and cost of the proposed facility,
the obtaining of requisite regulatory approvals, and the arrangement of
appropriate project financing. The total cost of the project is estimated to be
approximately $100 million.
The Horseshoe Bossier City is located on an approximately 17-acre parcel.
The site is highly visible and easily accessible from Interstate 20, the major
highway connecting the Bossier City/Shreveport area to the Dallas/Ft. Worth
market and other population centers along the Interstate 20 corridor. The
Company recently acquired approximately 15 acres of additional land contiguous
to its existing facility, giving the Company ownership of land on both sides of
Interstate 20 at the Traffic Street exit. The Company contemplates initially
using this property for overflow customer and employee parking. However, the
property also provides the Company with the opportunity to develop additional
amenities in the future.
The property is undergoing a $195 million (exclusive of capitalized
interest) expansion which will transform the existing facility into a first
class gaming destination comparable to the type of facility typically found in
more established gaming venues such as Nevada and Atlantic City. The completed
facility will feature the following: a new riverboat; a 25-story, 606 suite
hotel tower; a significantly expanded and improved pavilion containing four
restaurants; expanded retail space and a multi-level 1,000-car parking garage.
5
<PAGE> 8
The new riverboat will be larger, wider and have higher ceilings than any
other gaming vessel presently operating in the Bossier City/Shreveport market.
Patron access will be facilitated by escalators serving each gaming level and
allowing ingress through a 30-foot wide central entrance. A spacious environment
characteristic of land-based casinos will be created by dramatically treated
16-foot high ceilings and a 108-foot wide beam. This riverboat will contain all
new furnishings and equipment including, approximately 1,349 slot machines and
71 table games, one of which will be the first full-sized baccarat table in the
Bossier City/Shreveport market. The casino will have a high-limit slot area, a
stage featuring live entertainment, and a 50-seat casual dining area.
The recently topped off 25-story hotel tower will be the second tallest and
most visible building in Northern Louisiana and will serve as a beacon for
approaching customers. This new hotel will contain 606 tower suites, including
12 luxurious penthouse suites, ranging in size from 1,200 to 1,800 square feet.
Within the hotel will be 3,500 square feet of meeting facilities and a
5,500-square-foot, fully-equipped health club and spa containing
state-of-the-art exercise equipment, sauna, steam room, massage and beauty
salon. The Horseshoe will be the first casino operator in the market with
on-site hotel rooms, which management believes will provide it with a
significant competitive advantage. As of June 30, 1997, $76 million of the $195
million budget had been expended.
The Horseshoe Casino Center generates the highest gaming win among its
competitors despite being one of the smaller facilities in the Tunica,
Mississippi market. The 162,000-square-foot dockside gaming facility, which
opened on February 13, 1995, features a 30,000-square-foot casino, two
full-service restaurants and retail facilities, all located on the ground level
of a 200 by 300-foot barge structure. The casino contains 1,024 slot machines
and 40 table games and 11 poker tables. Directly above the casino are 200 hotel
rooms on two levels. The facility is located in the most desirable, center
location of the 70-acre three-property Casino Center complex, which also
includes the Circus Circus and Sheraton casinos.
The Horseshoe Casino Center is undergoing a $105 million (exclusive of
capitalized interest) expansion which is designed to greatly enhance and improve
its successful existing facility. Management is making every effort to expand
with the least possible disruption to existing operations and with minimal
modification to the present casino. A new barge-based facility is being
constructed on site which will add approximately 15,000 square feet of gaming
space seamlessly connected and integrated with the existing casino. The expanded
casino will contain approximately 1,444 slot machines and 68 table games, which
will represent an approximately 40% increase in the number of gaming positions.
The expansion involves the construction of land-based facilities immediately
adjacent to the casino barge, including a 14-story, 309-suite hotel tower, a
1,000-space, four-level parking garage and "Bluesville," a 1,000-seat
entertainment venue. As of June 30, 1997, $37 million of the $105 million budget
had been expended.
MARKETING STRATEGY
The Company has promoted awareness of the Horseshoe operating philosophy,
which is to provide a quality gaming experience and excellent quality food and
beverage at reasonable prices in a pleasant and friendly environment where every
customer is treated as an important player. The Company has implemented
comprehensive marketing programs to assure that the Horseshoe name is
well-recognized in its respective markets. Horseshoe Gaming has employed radio,
print, and television advertising in selected local and regional markets to
emphasize the Horseshoe brand name and its commitment to customer value and
satisfaction.
The Company has developed numerous marketing and promotional programs,
including special events, players clubs and direct marketing, to maintain
customer loyalty as well as attract new clientele. Management conducts special
events at both the Horseshoe Bossier City and the Horseshoe Casino Center on a
periodic basis, tailoring such events for the specific locale.
The Horseshoe Casinos utilize sophisticated direct marketing programs and
maintain a marketing staff which is particularly active in the Dallas/Fort Worth
and Memphis areas. Because of the importance the Company has placed on effective
personal customer contact, the Horseshoe Casino's marketing strategy is heavily
focused on identifying potential new and repeat customers, and ensuring that
they are treated well upon their initial and subsequent visits.
6
<PAGE> 9
TERMS OF THE EXCHANGE OFFER
The Exchange Offer......... $1,000 principal amount of New Notes in exchange
for each $1,000 principal amount of Old Notes. As
of the date hereof, $160.0 million in aggregate
principal amount of Old Notes are outstanding. The
Company will issue the New Notes to Holders on or
promptly after the Expiration Date.
Based on an interpretation by the staff of the
Commission set forth in no-action letters issued to
third parties, the Company believes, based on the
advice of its counsel, that New Notes issued
pursuant to the Exchange Offer in exchange for Old
Notes may be offered for resale, resold and
otherwise transferred by holders thereof who are
not affiliates of the Company without compliance
with the registration and prospectus delivery
provisions of the Securities Act; provided that the
holder is acquiring New Notes in its ordinary
course of business and has no arrangement or
understanding with any person to participate in any
distribution (within the meaning of the Securities
Act) of the New Notes. Persons wishing to exchange
Old Notes in the Exchange Offer must represent to
the Company that such conditions have been met.
However, any Holder who is an affiliate of the
Company or who tenders in the Exchange Offer with
the intention to participate, or for the purpose of
participating, in a distribution of the New Notes
cannot rely on the interpretation by the staff of
the Commission set forth in the above referenced
no-action letters and must comply with the
registration and prospectus delivery requirements
of the Securities Act in connection with any resale
transaction. See "The Exchange Offer -- Purposes of
the Exchange Offer."
Each broker-dealer that receives New Notes for its
own account pursuant to the Exchange Offer must
acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. The
Letter of Transmittal states that by so
acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it
is an "underwriter" within the meaning of the
Securities Act. This Prospectus, as it may be
amended or supplemented from time to time, may be
used by a broker-dealer in connection with resales
of New Notes received in exchange for Old Notes
where such Old Notes were acquired by such
broker-dealer as a result of market-making
activities or other trading activities. The Company
has agreed that for a period of 120 days after the
Expiration Date, it will make this Prospectus
available to any broker-dealer for use in
connection with any such resale. See "Plan of
Distribution."
Expiration Date............ 5:00 p.m., New York City time, on November 7, 1997,
unless the Exchange Offer is extended, in which
case the term "Expiration Date" means the latest
date and time to which the Exchange Offer is
extended.
Accrued Interest on the New
Notes and the Old
Notes.................... The New Notes will bear interest from their
issuance date. Holders whose Old Notes are accepted
for exchange will receive, in cash, accrued
interest thereon to, but excluding, the issuance
date of the New Notes. Such interest will be paid
with the first interest payment on the New Notes.
Interest on the Old Notes accepted for exchange
will cease to accrue upon cancellation of the Old
Notes and issuance of the New
7
<PAGE> 10
Notes. Holders of Old Notes whose Old Notes are not
exchanged will receive the accrued interest payable
on December 15, 1997 on such date in accordance
with the terms of the Indenture.
Conditions to the Exchange
Offer.................... The Exchange Offer is subject to certain customary
conditions. The conditions are limited and relate
in general to proceedings which have been
instituted or laws which have been adopted that
might impair the ability of the Company to proceed
with the Exchange Offer. As of the date of this
Prospectus, none of these events had occurred, and
the Company believes their occurrence to be
unlikely. If any such conditions do exist prior to
the Expiration Date, the Company may (i) refuse to
accept any Old Notes and return all previously
tendered Old Notes, (ii) extend the Exchange Offer,
or (iii) waive such conditions. See "The Exchange
Offer -- Conditions."
Procedures for Tendering
Old Notes.................. Each Holder of Old Notes wishing to accept the
Exchange Offer must complete, sign and date the
Letter of Transmittal, or a facsimile thereof, in
accordance with the instructions contained herein
and therein, and mail or otherwise deliver such
Letter of Transmittal, or such facsimile, together
with such Old Notes to be exchanged and any other
required documentation to U.S. Trust Company of
Texas, N.A., as Exchange Agent (the "Exchange
Agent"), at the address set forth herein and
therein or effect a tender of such Old Notes
pursuant to the procedures for book-entry transfer
as provided for herein. By executing the Letter of
Transmittal, each Holder will represent to the
Company that, among other things, the New Notes
acquired pursuant to the Exchange Offer are being
obtained in the ordinary course of business of the
person receiving such New Notes, whether or not
such person is the Holder, that neither the Holder
nor any such other person has an arrangement or
understanding with any person to participate in the
distribution of such New Notes and that neither the
Holder nor any such person is an "affiliate," as
defined in Rule 405 under the Securities Act, of
the Company. Each broker-dealer that receives New
Notes for its own account in exchange for Old
Notes, where such Old Notes were acquired by such
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 New Notes. See
"The Exchange Offer -- Procedures for Tendering"
and "Plan of Distribution."
Special Procedures for
Beneficial Owners.......... Any beneficial owner whose Old Notes are registered
in the name of a broker, dealer, commercial bank,
trust company or other nominee and who wishes to
tender such Old Notes in the Exchange Offer should
contact such registered Holder promptly and
instruct such registered Holder to tender on such
beneficial owner's behalf. If such beneficial owner
wishes to tender on such owner's own behalf, such
owner must, prior to completing and executing the
Letter of Transmittal and delivering its Old Notes,
either make appropriate arrangements to register
ownership of the Old Notes in such owner's name or
obtain a properly completed bond power from the
registered Holder. The transfer of registered
ownership may take considerable time and it may not
be
8
<PAGE> 11
possible to complete a transfer initiated shortly
before the Expiration Date. See "The Exchange
Offer -- Procedures for Tendering."
Guaranteed Delivery
Procedures............... Holders of Old Notes who wish to tender their Old
Notes and whose Old Notes are not immediately
available or who cannot deliver their Old Notes,
the Letter of Transmittal or any other documents
required by the Letter of Transmittal to the
Exchange Agent, or cannot complete the procedure
for book-entry transfer, prior to the Expiration
Date must tender their Old Notes according to the
guaranteed delivery procedures set forth in "The
Exchange Offer -- Guaranteed Delivery Procedures."
Withdrawal Rights.......... Tenders may be withdrawn at any time prior to 5:00
p.m., New York City time, on the Expiration Date.
Acceptance of Old Notes and
Delivery of New Notes.... The Company will accept for exchange any and all
Old Notes which are properly tendered in the
Exchange Offer prior to 5:00 p.m., New York City
time, on the Expiration Date. The New Notes issued
pursuant to the Exchange Offer will be delivered
promptly following the Expiration Date. Any Old
Notes not accepted for exchange will be returned
without expense to the tendering Holder thereof as
promptly as practicable after the expiration or
termination of the Exchange Offer. See "The
Exchange Offer -- Terms of the Exchange Offer."
Certain Tax
Considerations............. The exchange pursuant to the Exchange Offer will
not be a taxable event for Federal income tax
purposes. See "Certain Federal Income Tax
Considerations."
Exchange Agent............. U.S. Trust Company of Texas, N.A. is serving as
Exchange Agent in connection with the Exchange
Offer.
TERMS OF NEW NOTES
The Exchange Offer applies to up to $160.0 million aggregate principal
amount of the Company's Old Notes. The New Notes will be obligations of the
Company evidencing the same debt as the Old Notes and will be entitled to the
benefits of the same Indenture. See "Description of Notes." The form and terms
of the New Notes are the same as the form and terms of the Old Notes in all
material respects except that the New Notes have been registered under the
Securities Act and hence do not include certain rights to registration
thereunder and do not contain transfer restrictions or terms with respect to the
Liquidated Damages applicable to the Old Notes. See "Description of Notes."
Securities Offered......... $160 million in aggregate principal amount of
9 3/8% Senior Subordinated Notes due 2007.
Maturity................... June 15, 2007.
Interest Payment Dates..... June 15 and December 15, commencing December 15,
1997.
Guarantee.................. The Notes will be fully and unconditionally
guaranteed (the "Guarantee") by (i) RPG, (ii) any
entity that becomes a wholly-owned subsidiary of
the Company after the Issue Date and which operates
a Casino or Related Business (as defined herein)
and (iii) any Subsidiary of the Company that
executes a guarantee of indebtedness of the Company
that is unsecured and pari passu or subordinated to
the Notes, provided that the Guarantee shall have
the same relative ranking to the guarantee
initially executed by such Subsidiary as the Notes
have to the
9
<PAGE> 12
Indebtedness initially guaranteed by such
Subsidiary. See "Description of Notes -- Guarantee"
and "-- Certain Covenants -- Additional Subsidiary
Guarantors."
Optional Redemption........ The Notes will not be redeemable, in whole or in
part, prior to June 15, 2002, except as required by
a Gaming Authority or except as set forth below.
Thereafter, the Notes will be redeemable, from time
to time, at the Company's option, in whole or in
part, at the redemption prices set forth herein,
together with accrued and unpaid interest thereon
and Liquidated Damages, if any, to the date of
redemption.
At any time prior to June 15, 2000, the Company may
redeem up to 30% of the aggregate principal amount
of Notes then outstanding at a redemption price of
110% of the principal amount thereof, plus accrued
and unpaid interest thereon and Liquidated Damages,
if any, to the date of redemption, with the net
cash proceeds of one or more Public Equity
Offerings by the Company. See "Description of
Notes -- Optional Redemption."
Ranking.................... The Notes are general unsecured obligations of the
Company subordinated in right of payment to all
existing and future Senior Debt (as defined herein)
of the Company. The Guarantee will be a general
unsecured obligation of the Guarantor and any
Additional Guarantors (as hereinafter defined),
subordinated in right to all existing and future
Senior Debt of such Guarantor. As of June 30, 1997,
the Company and its Subsidiaries (as defined
herein) on a consolidated basis had approximately
$137 million in aggregate principal amount of
indebtedness outstanding that constituted Senior
Debt. See "Description of Notes -- Subordination."
Use of Proceeds............ The Company will not receive any proceeds from the
Exchange Offer.
Repurchase at the Option of
Holders.................. Upon the occurrence of a Change of Control (as
defined herein), the Company will be required to
make an offer to repurchase the Notes at a price
equal to 101% of the principal amount thereof,
together with accrued and unpaid interest and
Liquidated Damages, if any, to the date of
repurchase. In addition, the Company will be
required to offer to purchase certain of the Notes
at 100% of the principal amount thereof, plus
accrued and unpaid interest and Liquidated Damages,
if any, to the date of repurchase with the proceeds
of certain asset sales. See "Description of
Notes -- Limitation on Sale of Assets and
Subsidiary Capital; Event of Loss."
Mandatory Redemption....... The Company is not required to make any mandatory
redemption or sinking fund payments prior to
maturity of the Notes. See "Description of Notes."
Certain Covenants.......... The Indenture pursuant to which the New Notes will
be issued (the "Indenture") contains certain
covenants that, among other things, limit the
ability of the Company and its Subsidiaries to
incur additional indebtedness, pay dividends or
make other distributions, create certain liens,
enter into certain transactions with affiliates,
utilize proceeds from asset sales, issue or sell
equity interests of Subsidiaries and enter into
certain mergers and consolidations. See
"Description of Notes -- Certain Covenants."
10
<PAGE> 13
Exchange Rights............ Holders of New Notes are not entitled to any
exchange rights with respect to the New Notes.
Holders of Old Notes are entitled to certain
exchange rights pursuant to the Registration Rights
Agreement. Under the Registration Rights Agreement,
the Company is required to offer to exchange the
Old Notes for new notes having substantially
identical terms which have been registered under
the Securities Act. This Exchange Offer is intended
to satisfy such obligation. Once the Exchange Offer
is consummated, the Company will have no further
obligations to register any of the Old Notes not
tendered by the Holders for exchange, except
pursuant to a shelf registration statement to be
filed under certain limited circumstances specified
in "The Exchange Offer -- Purposes of the Exchange
Offer." See "Risk Factors -- Consequences to
Non-Tendering Holders of Old Notes."
Absence of a Public Market
for the New Notes.......... The New Notes will be a new issue of securities
with no established market. Accordingly, there can
be no assurance as to the development or liquidity
of any market for the New Notes.
11
<PAGE> 14
SUMMARY CONSOLIDATED FINANCIAL DATA
The summary consolidated financial data set forth below are qualified in
their entirety by, and should be read in conjunction with, "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the consolidated financial statements, the notes thereto and other financial
information included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
----------------------------------------- -------------------
1993(1) 1994(2) 1995(3) 1996 1996 1997
------- ------- -------- -------- -------- --------
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF
OPERATION DATA:
Net revenues....................... $ -- $63,403 $298,385 $331,731 $171,282 $163,040
Operating income (loss)............ (1,742) 4,941 74,704 70,704 38,232 34,533
Interest (expense), net............ 221 (6,259) (18,735) (21,964) (11,699) (7,197)
Net income (loss) before minority
interest and extraordinary loss
from early retirement of
long-term debt................... (1,521) 3,924 55,969 48,822 26,769 26,925
Net income (loss) (4).............. (1,391) (1,767) 39,940 46,961 25,744 21,099
Ratio of earnings to fixed
charges.......................... N/A(5) 1.0x 3.6x 2.6x 2.8x 2.5x
</TABLE>
<TABLE>
<CAPTION>
AT JUNE 30,
AT DECEMBER 31, 1997
---------------------------------------- ------------
1993 1994 1995 1996 ACTUAL
------- -------- -------- -------- ------------
<S> <C> <C> <C> <C> <C>
(UNAUDITED)
<CAPTION>
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents(6)............... $ 10 $ 18,584 $ 96,857 $121,394 $130,102
Total assets............................... 27,082 145,535 300,088 377,597 465,780
Total debt(7).............................. 25,393 124,963 197,603 232,708 297,639
Members' equity (deficit).................. (2,469) 3,633 52,747 79,782 91,312
</TABLE>
- ---------------
(1) Includes the consolidated results of the Company and its subsidiaries from
the date each entity was formed through December 31, 1993, including
subsidiaries involved in development activities only.
(2) The Horseshoe Bossier City opened on July 9, 1994.
(3) The Horseshoe Casino Center opened on February 13, 1995.
(4) As a limited-liability company, the Company is not subject to income tax
liability. Therefore, Holders of membership interests include their
respective shares of the Company's taxable income in their income tax
returns and the Company makes distributions for such tax liabilities.
(5) Earnings were inadequate to cover fixed charges for the period ended
December 31, 1993, by a deficiency of $1,921,000.
(6) Includes escrow funds, restricted for expansion of existing facilities,
development of new projects or repayment of debt, amounting to approximately
$31,316,000 and $42,235,000 as of December 31, 1996 and 1995, respectively,
and $0 as of June 30, 1997.
(7) Includes deferred interest payable on notes payable to affiliates of
$2,467,000 as of December 31, 1994.
12
<PAGE> 15
RISK FACTORS
This Prospectus includes "forward-looking statements" within the meaning of
Section 27A of the Securities Act and Section 21E of the Exchange Act. All
statements other than statements of historical facts included in this
Prospectus, including without limitation, certain statements under the sections
"Summary," "Selected Consolidated Financial Information," "Use of Proceeds,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," "Business" and the Consolidated Financial Statements and the notes
thereto located or incorporated elsewhere herein regarding the Company's
financial position, business strategy, prospects and other related matters, may
constitute such forward-looking statements. Although the Company believes that
the expectations reflected in such forward-looking statements are reasonable, it
can give no assurance that such expectations will prove to be correct. Actual
results could differ materially from the Company's expectations as a result of a
number of factors, including without limitation those set forth below and those
located elsewhere in this Prospectus. In addition to the other matters in this
Prospectus, those who are acquiring the New Notes should carefully consider,
among other things, the following factors.
INCREASED COMPETITION IN EXISTING MARKETS
The Horseshoe Casinos are highly dependent on the Louisiana and Mississippi
gaming markets and compete directly with other riverboat and dockside gaming
operators in Louisiana and Mississippi. The Mississippi gaming market is
extremely competitive. Currently, there is a total of 29 licensed and operating
dockside gaming facilities in Mississippi including 9 dockside gaming facilities
in Tunica County. Of the facilities in Tunica County, two are closer than the
Horseshoe Casino Center to the primary customer market of Memphis, and one of
those facilities is substantially larger than the Horseshoe Casino Center.
Additionally, one of the other properties located in the Casino Center complex
is currently undergoing a significant expansion and retheming including the
addition of approximately 1,200 rooms and other amenities. Aside from the Tunica
County facilities, the Horseshoe Casino Center also competes to a lesser degree
against casinos located in other areas of Mississippi including one competitor
in Coahoma County, the county located directly to the south of Tunica County,
and one land-based Indian casino located in Philadelphia, Mississippi. Under
Mississippi law, the number of authorized gaming licenses is not limited and
there can be no assurance that additional dockside gaming facilities will not be
located in Tunica County.
The current Louisiana gaming legislation permits unlimited stakes gaming
and authorizes a total of fifteen riverboat gaming licenses statewide, but
future legislation may increase the number of licenses that may be granted. The
Horseshoe Bossier City competes directly with two dockside gaming facilities in
Bossier City and one in downtown Shreveport. The Louisiana Gaming Control Board
has approved the relocation of a riverboat casino to the Bossier City/Shreveport
market on the basis of a proposal to locate a new facility adjacent to an
existing competitor's facility in Shreveport in October 1997 (although the owner
of the riverboat has recently requested permission for the riverboat to remain
in New Orleans). The Gaming Control Board is currently accepting proposals for
the remaining fifteenth license, which was recently awarded and subsequently
rescinded due to the withdrawal of the joint venture's financial partner. This
license, once granted, may be located in the Bossier City/Shreveport market.
There can be no assurance that the Bossier City/Shreveport market will be
sufficiently large to allow six riverboat casinos to operate profitably and
there can be no assurance that the Louisiana Gaming Control Board will not
authorize additional licenses to operate riverboat casinos in the Bossier
City/Shreveport market. The Company competes to some degree with gaming
operations in Lake Charles, Baton Rouge and the New Orleans area. Additionally,
the Company competes to a lesser degree with land-based Indian casinos near Lake
Charles and in Marksville, near Alexandria. Although the Company believes that
the addition of new gaming facilities to an existing market will draw additional
visitors to the market, there can be no assurance that an increase in additional
visitors to the market will occur or that the Company will be able to attract
additional visitors to its facilities. The Company's operations and ability to
grow its business will be negatively affected to the extent additional
facilities in Bossier City/Shreveport, Louisiana or Tunica, Mississippi do not
draw additional visitors to those markets or to the extent the Company is not
able to attract its fair share of the increase in gaming customers to those
markets.
13
<PAGE> 16
The Company also competes with casino operations in other jurisdictions
throughout the United States including Nevada and Atlantic City, as well as with
other forms of wagering, including parimutuels, card clubs, state-sponsored
lotteries, video lottery terminals, video poker terminals and other forms of
entertainment. In addition, the Louisiana legislature has recently passed
legislation that would authorize the operation of slot machines at several race
tracks, including Louisiana Downs, which is approximately five miles east of
Horseshoe/Bossier City, in place of video poker machines that are currently
authorized at such locations. There can be no assurance that the Company will
not face increased competition from these other forms of legalized gaming.
Certain of the Company's competitors are larger and have significantly
greater financial and other resources than the Company. Given these factors, it
is possible that substantial competition could have a material adverse effect on
the Company's operations and thus the Company's results of operations.
POTENTIAL COMPETITION FROM ADDITIONAL JURISDICTIONS
A substantial portion of the Horseshoe Bossier City's revenues are
generated by patrons from the Dallas/Fort Worth metropolitan area approximately
180 miles west of Bossier City and from other areas in Texas. Although casino
gaming is not currently permitted in Texas, and the Attorney General of Texas
has issued an opinion that gaming in Texas would require an amendment to the
State's Constitution, the Texas legislature has considered, but not enacted,
various proposals to authorize casino gaming. A constitutional amendment
requires a two-thirds vote of those present and voting in each house of the
Texas state legislature and approval by the electorate at a referendum. If
casinos commence operations in Texas, they would be expected to adversely affect
the Horseshoe Bossier City's operations.
Both of the Horseshoe Casinos draw patrons from Arkansas. In 1994 and again
in 1996 measures were placed on the ballot in Arkansas to authorize casino
gaming. While the measures were defeated in 1994 and 1996, similar measures may
be placed on the ballot in future elections. If any such measures are adopted,
it is likely that casinos would be established in Arkansas, and they would be
expected to adversely affect the operations of the Horseshoe Casino Center and
the Horseshoe Bossier City.
Other jurisdictions may legalize various forms of gaming that may compete
with the Company in the future. It should be assumed that each of the gaming
projects of a Subsidiary will be subject to intense competition from nearby
gaming establishments.
LEVERAGE AND DEBT SERVICE
As of June 30, 1997, the Company had total debt of $297.6 million. The
ability of the Company to meet debt service obligations and to reduce total debt
will depend upon its future performance which, in turn, will be subject to
general economic conditions and to financial, business and other factors,
including factors beyond its control. While the Company believes that the
Horseshoe Casinos will be able to attract a sufficient number of patrons to
achieve the level of gaming activity necessary to permit the Company to satisfy
its obligations, its expectations are based on a number of assumptions that may
vary from actual experience. For example, there has been a decline in the
Company's margins since the opening of the facilities due to promotional and
other factors and there can be no assurances that this trend will not continue.
In addition, a portion of the combined debt of the Company may bear interest at
a floating rate; therefore, to some degree the financial results of the Company
may be affected by changes in prevailing interest rates.
If the Company is unable to comply with the terms of its debt agreements
and fails to generate sufficient cash flow from operations in the future, it may
be required to refinance all or a portion of its existing debt or to obtain
additional financing. There can be no assurance that any such refinancing would
be possible or that any additional financing could be obtained, particularly in
view of the Company's anticipated high levels of debt and the debt incurrence
restrictions under its debt agreements.
The Company's leverage may have the effect generally of reducing the
Company's flexibility in responding to changing business and economic
conditions. In addition, certain provisions of the Notes, the Senior Notes and
the Credit Facility, could adversely affect the Company in certain ways,
including the
14
<PAGE> 17
following: (i) the Company's ability to obtain additional financing in the
future for working capital, capital expenditures, general corporate purposes or
other purposes may be significantly impaired; (ii) the Company's ability to
respond quickly to increased competition and other market forces may be limited;
and (iii) the Company's vulnerability to weak general economic conditions may be
greater than it would otherwise be, absent such provisions.
LIQUIDITY
The Company is currently expanding Horseshoe Bossier City and Horseshoe
Casino Center. The Company estimates that the expansion projects will cost an
aggregate of approximately $300 million (exclusive of capitalized interest). As
of June 30, 1997, approximately $113 million had been expended by the Company
and its Subsidiaries in connection with the expansion projects. The Company
anticipates that the remaining costs associated with the expansion of the
Horseshoe Casinos, which are estimated to be approximately $187 million, will be
funded with excess cash on hand, cash flow from operations, FF&E financing, and
to the extent necessary, additional borrowings under the Credit Facility or a
replacement credit facility. At June 30, 1997, the Company had $130 million of
cash and cash equivalents and had the ability to borrow an additional $172
million pursuant to the most restrictive debt incurrence tests set forth in the
Credit Facility, the Senior Notes and the Notes. The Company applied a portion
of the net proceeds from the sale of the Old Notes to repay $76 million of
outstanding indebtedness incurred under the Credit Facility (including
prepayment penalty) and purchased $13 million in aggregate principal amount of
Senior Notes for a fair market value of approximately $14.5 million together
with accrued and unpaid interest related thereto. The amount available to be
borrowed under the Credit Facility has been reduced to approximately $132
million. The Company intends to amend its Credit Facility or enter into a new
revolving credit facility to provide up to approximately $130 million of
borrowing capacity. There can be no assurance, however, that the Company will be
able to amend the Credit Facility to provide for additional borrowing capacity
or that the Company will be able to obtain additional financing on acceptable
terms, if at all. The failure of the Company to obtain additional financing
would have a material adverse effect on the Company and its ability to complete
the Horseshoe Casinos expansion projects.
SUBORDINATION
The Notes will be general unsecured obligations of the Company,
subordinated in right of payment to all existing and future Senior Debt,
including obligations under the Credit Facility and the Senior Indenture. The
Notes will be fully and unconditionally guaranteed by the Guarantor,
subordinated in right of payment to all Senior Debt of the Guarantor. Subject to
certain limitations, the Indenture will permit the Company and the Guarantor to
incur additional indebtedness, including Senior Debt. In addition, the
indebtedness under the Credit Facility and the Senior Indenture will become due
prior to the maturity of the Notes. As a result of the subordination provisions
contained in the Indenture, in the event of a liquidation or insolvency of the
Company or the Guarantor, the assets of the Company or the Guarantor,
respectively, will be available to pay obligations on the Notes only after all
Senior Debt of the Company or Guarantor, respectively, has been paid in full,
and there may not be sufficient assets remaining to pay amounts due on any or
all of the Notes then outstanding. See "Description of Certain Other
Indebtedness" and "Description of Notes." As of June 30, 1997, the aggregate
principal amount of all Senior Debt of the Company and its Subsidiaries on a
consolidated basis was $137 million.
HOLDING COMPANY DEBT AND SUBSIDIARY OPERATIONS
The Company conducts its operations through Subsidiaries. Substantially all
of the assets of the Company are owned by its Subsidiaries and the Company has
no significant assets of its own other than cash, cash equivalents and equity
interests in Subsidiaries of the Company. As a holding company, the Company is
dependent on distributions or other intercompany transfers of funds from its
Subsidiaries to meet its debt service and other obligations. RPG is the only
Subsidiary of the Company that is a Guarantor. Distributions and intercompany
transfers from the Company's Subsidiaries to the Company may be restricted by
covenants contained in debt agreements and other agreements to which such
Subsidiaries may be subject and may be
15
<PAGE> 18
restricted by other agreements entered into in the future and by applicable law.
There can be no assurance that the operating results of the Company's
Subsidiaries at any given time will be sufficient to make distributions to the
Company. The Company's rights and the rights of its creditors, including Holders
of Notes, to participate in the assets of any Subsidiary of the Company upon
such Subsidiary's liquidation or recapitalization will be subject to the prior
claims of the Subsidiary's creditors.
NON-PAYMENT OF GUARANTEE AND INTERCOMPANY NOTES DUE TO FRAUDULENT CONVEYANCE AND
EQUITABLE SUBORDINATION
In the event of a liquidation, reorganization or insolvency of the Company
and/or the Subsidiaries under the Bankruptcy Code or any similar state or
Federal law, the trustee in such a proceeding may attempt to invalidate the
Guarantee and Intercompany Notes (as defined herein) on the basis that the
Guarantee and Intercompany Notes constituted a fraudulent conveyance or that the
Company's claim on account of the Guarantee and Intercompany Notes should be
equitably subordinated to the claims of other creditors of Subsidiaries making
the Guarantee and Intercompany Notes. In the event of such invalidation, all
obligations of the Subsidiaries, including trade payables, would be structurally
senior to the Notes.
ABILITY TO MEET OBLIGATIONS; RISKS RELATING TO A CHANGE IN CONTROL OR PUT
The Credit Facility is due and payable in full on or before September 30,
1999, and the Senior Notes are due and payable in full on or before September
30, 2000. While the Company believes that cash flows from operations will be
adequate to satisfy the Company's obligations as they become due, there can be
no assurance that such cash flows will not be adversely affected in the future.
If the Company's cash flows are not adequate to repay the Credit Facility and
the Senior Notes, the Company may be compelled to seek to refinance the
indebtedness, and there can be no assurance that the Company will be successful
in doing so. Upon the occurrence of a Change in Control, the Holders of the
Notes will have the right to require the Company to offer to purchase the Notes
at 101% of their principal amount, together with all accrued and unpaid
interest, if any, and the lenders under the Credit Facility and the holders of
the Senior Notes will have the same right with respect to the Credit Facility
and the Senior Indenture, respectively. In such event, the Company may not have
sufficient resources to satisfy all of its repurchase obligations resulting from
a Change in Control. In addition, the employment agreements of certain officers
of the Company contain a put/call provision whereby, upon termination of the
employment of such officer, the Company must, at the election of such officer,
purchase such officer's ownership interest in the Company for an amount equal to
the fair market value of such interest. As of June 30, 1997, the aggregate fair
market value of all interests subject to such put/call provisions was
approximately $27 million. Certain of the employment agreements provide that the
purchase price for the employee's ownership interest shall be paid in cash upon
transfer of the interest to the Company and certain of the employment agreements
provide that the purchase price for the employee's ownership interest may be
paid in installments over a three-year period, which may be extended to a
five-year period if the Company's lenders prohibit payment of the purchase price
to be made over a three-year period. As a result, the Company's obligation to
repurchase ownership interests in the Company may mature prior to the date on
which the principal amount of the Notes becomes due and payable.
OBSTACLES TO EXPANSION
The proceeds of the Notes will be used to finance the development of hotel
facilities, additional gaming space and other amenities at the Horseshoe
Casinos. Major construction projects, such as the improvements of the Horseshoe
Casinos, entail significant risks, including potential shortages of materials or
skilled labor, engineering, environmental or regulatory problems, work
stoppages, weather interferences and unanticipated cost increases. Construction
equipment and work stoppage problems or difficulties in obtaining any of the
required permits or authorizations from regulatory authorities could increase
the completion costs or prohibit completion of any of the facilities
contemplated. While certain of the Company's construction contracts are firm
contracts and provide penalties in the event of delay in completion of the
project, no assurances can be given that any such project will commence
operations within the contemplated time frames, if at all, or that anticipated
construction costs will not be exceeded. Budget overruns and delays with respect
to the
16
<PAGE> 19
development projects could have a material adverse effect on the Company's
business, financial condition or results of operations.
REQUIREMENTS FOR GOVERNMENT APPROVALS; GAMING LICENSING AND REGULATION
The Company is subject to the laws of each state in which it conducts
business and to Federal law. In addition to being subject to laws applicable to
businesses generally, the Company is subject to regulations that apply
specifically to the gaming industry. All laws are subject to change and
different interpretations, especially laws regulating the gaming industry, where
in many cases the laws and the regulatory agencies that apply them are new.
Changes in laws or their interpretation may result in the imposition of more
stringent, burdensome or expensive requirements or the outright prohibition of
gaming.
The Company is required to pay gaming fees and taxes in jurisdictions in
which it operates and in which projects are under development. Such fees and
taxes are subject to change over which the Company has no control.
The Company must obtain a gaming license for each location at which it
operates a casino. Generally, such licenses are for a fixed term and are subject
to renewal periodically. The Company and each of its officers, directors,
managers and principal partners are subject to strict scrutiny and approval by
the gaming regulatory bodies of each jurisdiction in which the Company conducts
or seeks to conduct gaming operations. The issuance of a gaming license is
considered a privilege, not a right, and gaming licensees are subject to
suspension, limitation or revocation if detailed regulatory requirements are not
met. In addition to licenses from the state gaming regulatory agencies, casino
operations also typically require various local governmental approvals, and
riverboats require Federal and state environmental and other approvals relating
to operations in navigable waters.
The sale of alcoholic beverages at the Horseshoe Bossier City and the
Horseshoe Casino Center is subject to licensing, control and regulation by local
liquor licensing authorities. All licenses are revocable and not transferable
without consent of such licensing authorities. Such licensing authorities have
the full power to limit, condition, suspend or revoke any such license, and any
such disciplinary action could (and revocation would) have a material adverse
effect upon the operations of the Company.
HE, the Company's Subsidiary operating the Horseshoe Bossier City,
previously experienced difficulty in obtaining licensing in the State of
Louisiana, when in November of 1993 the Louisiana State Police denied its
application for a gaming license to operate the proposed Horseshoe Bossier City
casino facility. HE appealed such decision to the Louisiana Riverboat Gaming
Commission, which voted unanimously to reverse the decision of the Louisiana
State Police and grant a gaming license to HE. The Louisiana State Police
appealed such reversal by the Louisiana Riverboat Gaming Commission to the
courts in Louisiana, and the Louisiana Supreme Court ruled unanimously in favor
of the Company to the effect that the Louisiana State Police had no right to
appeal the reversal of the decision by the Louisiana Riverboat Gaming
Commission. Subsequent to such denial, RPG and Mr. Binion were granted a gaming
license by the State of Mississippi without problem or objection by any party
and a subsidiary of the Company and Mr. Binion were found suitable to be granted
a gaming license in the State of Indiana. While the Company knows of no reason
why it would not be licensed in new jurisdictions where it might seek such
licensing, no assurance can be given that the Company will not encounter
difficulties in future licensing hearings.
Consistent with state laws, the gaming license granted to RPG in the State
of Mississippi is for a two year period and must be renewed on a continuous
basis. While the license has been renewed to September 17, 1998 and the Company
knows of no reason why such license would not be renewed again at that time, no
assurances can be given that such renewals will be granted or that new or
different conditions will not be imposed on RPG's license in connection with any
future application for a renewal of its existing license.
The casinos operating in the Bossier City/Shreveport market are the only
riverboats in the State of Louisiana currently permitted to operate exclusively
at dockside pursuant to a special exemption granted by the State legislature.
The exemption was granted as a safety measure to protect against a lack of
sufficient
17
<PAGE> 20
water depth in the Red River under normal operating conditions. There can be no
assurance that future legislation will not revise or revoke the current
exemption.
Certain aspects of the Notes are subject to required disclosure to,
approval of or disapproval by the respective Gaming Authorities in the states in
which the Company conducts or proposes to conduct gaming operations. The Notes
may be reviewed as part of the Company's application for a gaming license in a
jurisdiction, or if previously licensed, as a separate review item. No assurance
can be given that the Notes will receive all required approvals, that such
approvals will be received on a timely basis or that the failure to obtain all
required approvals will not adversely affect the Notes or the Company's ability
to make borrowings thereunder.
DEPENDENCE ON KEY PERSONNEL; MANAGEMENT; CONFLICTS
The Company is substantially dependent upon the efforts and skills of a few
key members of its Management. The loss of the services of any of these
personnel or their inability to devote sufficient attention to the operations of
the Company would have a material adverse effect on the Company's operations.
There is significant competition for qualified employees who have significant
gaming operations experience. There is no assurance that the Company will be
able to hire additional experienced executives and employees, in particular
because the Company is competing for personnel with other gaming facilities both
inside and outside of Louisiana and Mississippi, and because of the recent
expansion of the gaming industry and the further expansion that the Company
anticipates. An affiliate of the Company, Mr. Jack B. Binion, is actively
involved in the gaming industry. Casinos owned or managed by such affiliated
person may directly or indirectly compete with the Company. The potential for
conflicts of interest exists among the Company and affiliated persons for future
business opportunities that may not be presented to the Company.
POTENTIAL ADVERSE EFFECTS OF PENDING LITIGATION
On January 26, 1996, a lawsuit was filed by Becky Binion Behnen, a director
and minority shareholder of the Horseshoe Club Operating Co. (the "Club"), in
the Clark County Nevada District Court against Jack B. Binion, the Club and
other unnamed entities and individuals. The plaintiff's complaint alleges that
Jack Binion, as a director, officer and majority holder of the Club, (i)
breached his fiduciary duty of care and loyalty to the Club by using for
personal gain Club assets, property and personnel, and (ii) usurped corporate
opportunities of the Club by personally pursuing casino development ventures,
including the development and operation of the Horseshoe Casino Center and the
Horseshoe Bossier City. As remedy for the allegations contained in the
complaint, the plaintiff sought to impose a constructive trust on certain
ownership interests of Mr. Binion in the Company and certain interests of the
Company itself, as well as other remedies. No specific dollar amount of damages
has been alleged in the complaint. The parties are currently conducting
discovery with respect to the lawsuit.
While the Company has not been joined as a defendant in the lawsuit, there
can be no assurance that the plaintiff will not amend the complaint to add the
Company as an additional defendant in the action, which would be costly, time
consuming and would likely divert management's attention from the Company's
principal business. However, even if the Company is not joined as a defendant in
the lawsuit, a ruling in favor of the plaintiff that declares Mr. Binion or the
Company as the involuntary trustee for the benefit of the plaintiff could result
in Mr. Binion's loss of all or a portion of his ownership share of the Company.
LACK OF PUBLIC MARKET FOR NOTES
There is no existing public market for the Notes and there can be no
assurance as to the development or liquidity of any market for the Notes, the
ability of Holders of the Notes to sell their Notes, or the price at which
Holders would be able to sell their Notes. The Company does not intend to apply
for listing of the Notes on a securities exchange.
18
<PAGE> 21
INVESTIGATION OF POLITICAL CORRUPTION IN LOUISIANA
The Company has become aware of an investigation by the Federal Bureau of
Investigation ("FBI") into possible corruption on the part of various state
legislators and other public officials within the State of Louisiana. Affidavits
filed by the FBI in various Federal courts have specifically identified and
accused certain state legislators of having accepted bribes or illegal campaign
contributions or being involved in other illegal activities, and have associated
such legislators with various gaming interests (which do not include the
Company) within the State of Louisiana. The Company and Mr. Binion have received
and complied, and intend to continue to comply, in a timely manner with
subpoenas from the U.S. Attorney for the Western District of Louisiana
requesting an appearance or certain information, including records of all
payments, fees and compensation, if any, paid by HE to a list of individuals and
entities which included three of HE's limited partners, relatives of two of
those limited partners of HE and a Louisiana State Senator representing the
Shreveport area and certain of his relatives. The Company believes that the
information provided in response to such subpoenas is complete, and that profit
distributions, fees, compensation or other payments which HE paid to any of such
persons and entities were proper and occurred in the ordinary course of
business. Some of the employees of HE have been informally interviewed by the
U.S. Attorney's Office and the FBI, and Mr. Binion appeared before the Grand
Jury on June 26, 1997. The U.S. Attorney's Office has advised counsel to HE that
HE is neither a subject nor a target of such investigation. Accordingly, at the
present time the Company has no reason to believe that such investigation will
affect it or any of its officers in any direct manner. The Company does
anticipate that such on-going investigation and the adverse publicity arising
therefrom will continue to cause the gaming industry in general within the State
of Louisiana to receive negative publicity and a certain amount of adverse
public reaction. Such negative sentiments against the gaming industry within the
State of Louisiana could ultimately lead to state legislation which could
significantly restrict, or conceivably attempt to phase out, legalized gaming
within the State of Louisiana. Any such legislation might have a material
adverse effect upon the Company and the gaming industry in general.
HOLDER OF NOTES MAY BE COMPELLED TO DISPOSE OF NOTES
The Mississippi and Louisiana gaming authorities have discretionary
authority to require a lender or Holder to file an application to be
investigated and to be found suitable as a potential owner or landlord of a
gaming establishment. While such gaming authorities generally do not require the
individual lenders or Holders to be investigated and found suitable, these
authorities retain the discretion to do so for any reason, including but not
limited to a default, or where the Holder of the debt instrument exercises a
material influence over the gaming operations of the entity in question.
Each lender or Holder shall be deemed to have agreed (to the extent
permitted by law) that if the relevant Mississippi or Louisiana gaming
authorities determine that a lender or Holder must be found suitable under
applicable law, and if such lender or Holder or beneficial owner is not found
suitable, such party shall, upon the request of the Company, dispose of such
party's interest to a suitable purchaser within 30 days after receipt of such
request or within the time prescribed by the Louisiana or Mississippi gaming
authorities, whichever is earlier. Any party required to apply for a finding of
suitability must pay all investigative fees and costs of the Mississippi and
Louisiana gaming authorities in connection with such an investigation. The
Company anticipates that similar requirements will exist in other emerging
jurisdictions in which it is seeking to expand. There can be no assurance that a
Holder so required to dispose of Notes would be able to do so at a time, for a
consideration and/or on terms that are not disadvantageous to such Holder.
CONSEQUENCES TO NON-TENDERING HOLDERS OF OLD NOTES
Upon consummation of the Exchange Offer, the Company will have no further
obligation to register the Old Notes except pursuant to a shelf registration
statement to be filed under certain limited circumstances specified in "The
Exchange Offer -- Purposes of the Exchange Offer." Thereafter, subject to such
exception, any Holder of Old Notes that does not tender its Old Notes in the
Exchange Offer will continue to hold restricted securities which may not be
offered, sold or otherwise transferred, pledged or hypothecated except pursuant
to Rule 144 and Rule 144A under the Securities Act or pursuant to any other
exemption from registration under the Securities Act relating to the disposition
of securities, provided that an opinion of counsel is furnished to the Company
that such an exemption is available.
19
<PAGE> 22
USE OF PROCEEDS
This Exchange Offer is intended to satisfy certain of the Company's
obligations under the Registration Rights Agreement. The Company will not
receive any cash proceeds from the issuance of the New Notes offered in the
Exchange Offer. In consideration for issuing the New Notes as contemplated in
this Prospectus, the Company will receive in exchange Old Notes in like
principal amount, the form and terms of which are the same in all material
respects as the form and terms of the New Notes except that the New Notes have
been registered under the Securities Act and hence do not include certain rights
to registration thereunder and do not contain transfer restrictions or terms
with respect to special interest payments applicable to the Old Notes. The Old
Notes surrendered in exchange for New Notes will be retired and canceled and
cannot be reissued. Accordingly, issuance of the New Notes will not result in
any increase in the indebtedness of the Company.
The initial proceeds from the Old Notes ($159,838,000) were used to repay
existing indebtedness or will be loaned in part to HE and in part to RPG, as
follows:
<TABLE>
<CAPTION>
BY THE COMPANY
----------------------
(DOLLARS IN THOUSANDS)
<S> <C>
Intercompany Notes(a)..................................... $ 65,604
Repay Senior Notes........................................ 14,495
Repay Credit Facility..................................... 75,839
Debt issue costs.......................................... 3,900
--------
$159,838
========
</TABLE>
- ---------------
(a) As of June 30, 1997, the Company had not loaned any amounts to HE or RPG.
Borrowings by HE will be evidenced by an Intercompany Senior Subordinated
Note of $50 million. The Note will bear interest at 9.39%, require
semiannual interest payments on June 15 and December 15 and will be due June
15, 2007. Borrowings by RPG will be evidenced by an Intercompany Senior
Subordinated Note of $25 million. The Note will bear interest at 9.39%,
require semi-annual interest payments on June 15 and December 15 and will be
due June 15, 2007.
20
<PAGE> 23
CAPITALIZATION
The following table sets forth the consolidated capitalization of the
Company at June 30, 1997. This table should be read in conjunction with "Use of
Proceeds," "Summary Consolidated Financial Information," "Selected Consolidated
Financial Information" and the consolidated financial statements of the Company,
which are included or incorporated elsewhere in this Prospectus.
<TABLE>
<CAPTION>
JUNE 30, 1997
--------------
UNAUDITED
(IN THOUSANDS)
<S> <C>
Cash and cash equivalents.............................................. $130,102
========
Long-term debt, including current portion:
Credit Facility...................................................... $ 250
12 3/4% Senior Notes Due 2000........................................ 135,201
9 3/8% Senior Subordinated Notes Due 2007............................ 159,839
Existing debt from purchase of ownership interests................... 2,349
--------
Total long-term debt......................................... $297,639
--------
Redeemable ownership interests(1).................................... 26,861
Members' equity........................................................ 91,312
--------
118,173
--------
Total capitalization......................................... $415,812
========
</TABLE>
- ---------------
(1) The employment agreements of certain officers of the Company contain a
put/call provision whereby, upon termination of the employment of such
officer, the Company must, at the election of such officer, purchase such
officer's ownership interest in the Company for an amount equal to the fair
market value of such interest. As of June 30, 1997, the aggregate fair
market value of all interests subject to such put/call provision was
$26,861,000.
21
<PAGE> 24
THE EXCHANGE OFFER
PURPOSES OF THE EXCHANGE OFFER
The Old Notes were sold on June 25, 1997 to "qualified institutional
buyers" (as defined in Rule 144A under the Securities Act) and accredited
investors. In connection with the sale of the Old Notes, the Company and the
Initial Purchaser entered into the Registration Rights Agreement pursuant to
which the Company agreed to cause to become effective within 165 days of June
25, 1997, a registration statement with respect to the Exchange Offer. However,
in the event that (i) any applicable law or applicable interpretations of the
staff of the Commission does not permit the Company to effect the Exchange Offer
or (ii) any Holder or Holders of Old Notes notifies the Company within 20
business days of the consummation of the Exchange Offer (A) that any such Holder
is prohibited by applicable law or Commission policy from participating in the
Exchange Offer, or (B) that any such Holder may not resell the New Notes
acquired by it in the Exchange Offer to the public without delivering a
prospectus and that this Prospectus is not appropriate or available for such
resales by such Holder, or (C) that any such Holder is a broker-dealer and holds
Old Notes acquired directly from the Company or one of its affiliates, then the
Company has agreed to use its reasonable best efforts to cause to become
effective a shelf registration statement (the "Shelf Registration Statement")
with respect to the resale of the Old Notes and to keep the Shelf Registration
Statement effective until the earlier of 36 months after the effective date
thereof, the date all Transfer Restricted Securities covered by the Shelf
Registration Statement have been sold in the manner set forth and as
contemplated in the Shelf Registration Statement and the date on which all
Transfer Restricted Securities may be sold without registration pursuant to Rule
144(k) under the Securities Act.
The Exchange Offer is being made by the Company to satisfy its obligations
pursuant to the Registration Rights Agreement. A copy of the Registration Rights
Agreement has been filed as an exhibit to the Registration Statement of which
this Prospectus is a part. Once the Exchange Offer is consummated, the Company
will have no further obligations to register any of the Old Notes not tendered
by the Holders for exchange except pursuant to a Shelf Registration Statement as
provided in the foregoing paragraph. Thereafter, any Holder of Old Notes who
does not tender its Old Notes in the Exchange Offer will continue to hold
restricted securities which may not be offered, sold or otherwise transferred,
pledged or hypothecated except pursuant to Rule 144 and Rule 144A under the
Securities Act, pursuant to a Shelf Registration Statement, if applicable, or
pursuant to any other exemption from registration under the Securities Act
relating to the disposition of securities, provided that an opinion of counsel
is furnished to the Company that such an exemption is available.
Based on an interpretation by the staff of the Commission set forth in
several no-action letters issued to third parties, the Company believes, based
on the advice of its counsel, that New Notes issued pursuant to the Exchange
Offer in exchange for Old Notes may be offered for resale, resold and otherwise
transferred by holders thereof who are not affiliates of the Company without
compliance with the registration and prospectus delivery provisions of the
Securities Act, provided that the holder is acquiring New Notes in its ordinary
course of business and has no arrangement or understanding with any person to
participate in any distribution (within the meaning of the Securities Act) of
the New Notes. Persons wishing to exchange Old Notes in the Exchange Offer must
represent to the Company that such conditions have been met. However, any Holder
who tenders in the Exchange Offer with the intention to participate, or for the
purpose of participating, in a distribution of the New Notes cannot rely on the
interpretation by the staff of the Commission set forth in the above referenced
no-action letters and must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any resale transaction. In
addition, any such resale transaction should be covered by an effective
registration statement containing the selling security holders information
required by Item 507 of Regulation S-K of the Securities Act. Further, any
Holder who may be deemed an "affiliate" (as defined under Rule 405 of the
Securities Act) of the Company cannot rely on the interpretation by the staff of
the Commission set forth in the above referenced no-action letters with respect
to resales of the New Notes without compliance with the registration and
prospectus delivery requirements of the Securities Act.
In addition, each broker-dealer that receives New Notes for its own account
in exchange for Old Notes, where such Old Notes were acquired by such
broker-dealer as a result of market-making activities or other
22
<PAGE> 25
trading activities, may be a statutory underwriter and must acknowledge that it
will deliver a prospectus in connection with any resale of such New Notes. See
"Plan of Distribution."
Except as aforesaid, this Prospectus may not be used for an offer to
resell, or for a resale or other transfer of New Notes.
TERMS OF THE EXCHANGE OFFER
General
Upon the terms and subject to the conditions of the Exchange Offer set
forth in this Prospectus and in the Letter of Transmittal, the Company will
accept any and all Old Notes validly tendered and not withdrawn prior to 5:00
p.m., New York City time, on the Expiration Date. The Company will issue $1,000
principal amount of New Notes in exchange for each $1,000 principal amount of
outstanding Old Notes accepted in the Exchange Offer. Holders may tender some or
all of their Old Notes pursuant to the Exchange Offer. However, Old Notes may be
tendered only in integral multiples of $1,000.
As of June 30, 1997, there was $160.0 million aggregate principal amount of
the Old Notes outstanding. This Prospectus, together with the Letter of
Transmittal, is being sent to such registered Holders as of October 9, 1997.
In connection with the issuance of the Old Notes, the Company arranged for
the Old Notes to be issued and transferable in book-entry form through the
facilities of DTC, acting as depositary. The corresponding New Notes will be
issued and transferable in book-entry form through DTC. See "Description of
Notes -- Form, Denomination, Transfer, Exchange and Book-Entry Procedures."
The Company shall be deemed to have accepted validly tendered Old Notes
when, as and if the Company has given oral or written notice thereof to the
Exchange Agent. The Exchange Agent will act as agent for the tendering Holders
of Old Notes for the purpose of receiving the New Notes from the Company.
If any tendered Old Notes are not accepted for exchange because of an
invalid tender, the occurrence of certain other events set forth herein or
otherwise, certificates for any such unaccepted Old Notes will be returned,
without expense, to the tendering Holder thereof as promptly as practicable
after the Expiration Date.
Holders of Old Notes who tender in the Exchange Offer will not be required
to pay brokerage commissions or fees or, subject to the instructions in the
Letter of Transmittal, transfer taxes with respect to the exchange of Old Notes
pursuant to the Exchange Offer. The Company will pay the expenses, other than
certain applicable taxes, of the Exchange Offer. See "-- Fees and Expenses."
Expiration Date; Extensions; Amendments
The term "Expiration Date" shall mean November 7, 1997, unless the Company
in its sole discretion extends the Exchange Offer, in which case the term
"Expiration Date" shall mean the latest date to which the Exchange Offer is
extended.
In order to extend the Expiration Date, the Company will notify the
Exchange Agent and the record Holders of Old Notes of any extension by oral or
written notice, each prior to 9:00 a.m., New York City time, on the next
business day after the previously scheduled expiration date. Such notice may
state that the Company is extending the Exchange Offer for a specified period of
time or on a daily basis until 5:00 p.m., New York City time, on the date on
which a specified percentage of Old Notes are tendered.
The Company reserves the right to delay accepting any Old Notes, to extend
the Exchange Offer, to amend the Exchange Offer or to terminate the Exchange
Offer and not accept Old Notes not previously accepted if any of the conditions
set forth herein under "-- Conditions" shall have occurred and shall not have
been waived by the Company by giving oral or written notice of such delay,
extension, amendment or termination to the Exchange Agent. Any such delay in
acceptance, extension, amendment or termination will be followed as promptly as
practicable by oral or written notice thereof. If the Exchange Offer is amended
in a
23
<PAGE> 26
manner determined by the Company to constitute a material change, the Company
will promptly disclose such amendment in a manner reasonably calculated to
inform the Holders of such amendment and the Company will extend the Exchange
Offer as necessary to provide to the Holders a period of five to 10 business
days, after such amendment, depending upon the significance of the amendment and
the manner of disclosure to Holders of the Old Notes, if the Exchange Offer
would otherwise expire during such five to 10 business day period.
Without limiting the manner in which the Company may choose to make public
announcement of any extension, amendment or termination of the Exchange Offer,
the Company shall have no obligation to publish, advertise, or otherwise
communicate any such public announcement, other than by making a timely release
to the Dow Jones News Service.
ACCRUED INTEREST ON THE NEW NOTES AND THE OLD NOTES
The New Notes will bear interest at a rate equal to 9.375% per annum from
their date of issuance. Interest on the New Notes is payable semi-annually on
June 15 and December 15 of each year, commencing on December 15, 1997. Holders
whose Old Notes are accepted for exchange will receive, in cash, accrued
interest thereon to, but excluding, the date of issuance of the New Notes. Such
interest will be paid with the first interest payment on the New Notes. Interest
on the Old Notes accepted for exchange will cease to accrue upon cancellation of
the Old Notes and issuance of the New Notes. Holders of Old Notes whose Old
Notes are not exchanged will receive the accrued interest payable on December
15, 1997.
PROCEDURES FOR TENDERING
To tender in the Exchange Offer, a Holder must complete, sign and date the
Letter of Transmittal, or a facsimile thereof, have the signatures thereon
guaranteed if required by Instruction 4 of the Letter of Transmittal, and mail
or otherwise deliver such Letter of Transmittal or such facsimile, together with
the Old Notes and any other required documents, to the Exchange Agent prior to
5:00 p.m., New York City time, on the Expiration Date.
Any financial institution that is a participant in DTC's Book-Entry
Transfer Facility system may make book-entry delivery of the Old Notes by
causing DTC to transfer such Old Notes into the Exchange Agent's account in
accordance with DTC's procedure for such transfer. Although delivery of Old
Notes may be effected through book-entry transfer into the Exchange Agent's
account at DTC, the Letter of Transmittal (or facsimile thereof), with any
required signature guarantees and any other required documents, must, in any
case, be transmitted to and received or confirmed by the Exchange Agent at its
address set forth in "-- Exchange Agent" below prior to 5:00 p.m., New York City
time, on the Expiration Date. DELIVERY OF DOCUMENTS TO DTC IN ACCORDANCE WITH
ITS PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.
The tender by a Holder will constitute an agreement between such Holder and
the Company in accordance with the terms and subject to the conditions set forth
herein and in the Letter of Transmittal.
Delivery of all documents must be made to the Exchange Agent at its address
set forth below. Holders may also request their respective brokers, dealers,
commercial banks, trust companies or nominees to effect the above transactions
for such Holders.
The method of delivery of Old Notes and the Letter of Transmittal and all
other required documents to the Exchange Agent is at the election and risk of
the Holders. Instead of delivery by mail, it is recommended that Holders use an
overnight or hand delivery service. In all cases, sufficient time should be
allowed to assure timely delivery. No Letter of Transmittal or Old Notes should
be sent to the Company.
Only a Holder of Old Notes may tender such Old Notes in the Exchange Offer.
The term "Holder" with respect to the Exchange Offer means any person in whose
name Old Notes are registered on the books of the Company or any other person
who has obtained a properly completed bond power from the registered Holder.
24
<PAGE> 27
ANY BENEFICIAL HOLDER WHOSE OLD NOTES ARE REGISTERED IN THE NAME OF ITS
BROKER, DEALER, COMMERCIAL BANK, TRUST COMPANY OR OTHER NOMINEE AND WHO WISHES
TO TENDER SHOULD CONTACT SUCH REGISTERED HOLDER PROMPTLY AND INSTRUCT SUCH
REGISTERED HOLDER TO CONSENT AND/OR TENDER ON ITS BEHALF. IF SUCH BENEFICIAL
HOLDER WISHES TO TENDER ON ITS OWN BEHALF, SUCH BENEFICIAL HOLDER MUST, PRIOR TO
COMPLETING AND EXECUTING THE LETTER OF TRANSMITTAL AND DELIVERING ITS OLD NOTES,
EITHER MAKE APPROPRIATE ARRANGEMENTS TO REGISTER OWNERSHIP OF THE OLD NOTES IN
SUCH HOLDER'S NAME OR OBTAIN A PROPERLY COMPLETED BOND POWER FROM THE REGISTERED
HOLDER. THE TRANSFER OF RECORD OWNERSHIP MAY TAKE CONSIDERABLE TIME.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed by an Eligible Institution (as defined below)
unless the Old Notes tendered pursuant thereto are tendered (i) by a registered
Holder who has not completed the box entitled "Special Payment Instructions" or
"Special Delivery Instructions" on the Letter of Transmittal or (ii) for the
account of an Eligible Institution. In the event that signatures on a Letter of
Transmittal or a notice of withdrawal, as the case may be, are required to be
guaranteed, such guarantee must be by a member firm of a registered national
securities exchange or of the National Association of Securities Dealers, Inc.,
or a commercial bank or trust company having an office or correspondent in the
United States or an institution which falls within the definition of "Eligible
Guarantor Institution" contained in Regulation 17Ad-15 under the Exchange Act
(an "Eligible Institution").
If the Letter of Transmittal is signed by a person other than the
registered Holder of any Old Notes listed therein, such Old Notes must be
endorsed or accompanied by appropriate bond powers signed as the name of the
registered Holder or Holders appears on the Old Notes.
If the Letter of Transmittal or any Old Notes or bond powers are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and unless waived by the Company,
evidence satisfactory to the Company of their authority so to act must be
submitted with the Letter of Transmittal.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of tendered Old Notes and withdrawal of tendered Old
Notes will be determined by the Company in its sole discretion, which
determination will be final and binding. The Company reserves the absolute right
to reject any and all Old Notes not properly tendered or any Old Notes the
Company's acceptance of which would, in the opinion of counsel for the Company,
be unlawful. The Company also reserves the right to waive any defects,
irregularities or conditions of tender as to particular Old Notes. The Company's
interpretation of the terms and conditions of the Exchange Offer (including the
instructions in the Letter of Transmittal) will be final and binding on all
parties. Unless waived, any defects or irregularities in connection with tenders
of Old Notes must be cured within such time as the Company shall determine.
Neither the Company, the Exchange Agent nor any other person shall be under any
duty to give notification of defects or irregularities with respect to tenders
of Old Notes, nor shall any of them incur any liability for failure to give such
notification. Tenders of Old Notes will not be deemed to have been made until
such irregularities have been cured or waived. Any Old Notes received by the
Exchange Agent that are not properly tendered and as to which the defects or
irregularities have not been cured or waived will be returned by the Exchange
Agent to the tendering Holders of Old Notes, unless otherwise provided in the
Letter of Transmittal, as soon as practicable following the Expiration Date.
By tendering, each Holder will represent to the Company that, among other
things, the New Notes acquired pursuant to the Exchange Offer are being obtained
in the ordinary course of such Holder's business, that such Holder has no
arrangement with any person to participate in the distribution of such New
Notes, and that such Holder is not an "affiliate" (as defined under Rule 405 of
the Securities Act) of the Company. If the Holder is a broker-dealer that will
receive New Notes for its own account in exchange for Old Notes that were
acquired as a result of market-making activities or other trading activities,
such Holder by tendering will acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. See "Plan of Distribution."
25
<PAGE> 28
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Old Notes and (i) whose Old Notes are not
immediately available, or (ii) who cannot deliver their Old Notes, the Letter of
Transmittal or any other required documents to the Exchange Agent prior to the
Expiration Date, may effect a tender if:
(a) The tender is made through an Eligible Institution;
(b) Prior to the Expiration Date, the Exchange Agent receives from
such Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by facsimile transmission, mail or hand delivery)
setting forth the name and address of the Holder of the Old Notes and the
principal amount of Old Notes tendered, stating that the tender is being
made thereby and guaranteeing that, within five New York Stock Exchange
trading days after the Expiration Date, the Letter of Transmittal (or
facsimile thereof) together with the certificate(s) representing the Old
Notes to be tendered in proper form for transfer (or a confirmation of a
book-entry transfer into the Exchange Agent's account at DTC of Old Notes
delivered electronically) and any other documents required by the Letter of
Transmittal will be deposited by the Eligible Institution with the Exchange
Agent; and
(c) Such properly completed and executed Letter of Transmittal (or
facsimile thereof), as well as the certificate(s) representing all tendered
Old Notes in proper form for transfer (or confirmation of a book-entry
transfer into the Exchange Agent's account at DTC of Old Notes delivered
electronically) and all other documents required by the Letter of
Transmittal are received by the Exchange Agent within five New York Stock
Exchange trading days after the Expiration Date.
Upon request of the Exchange Agent, a Notice of Guaranteed Delivery will be
sent to Holders who wish to tender their Old Notes according to the
guaranteed delivery procedures set forth above.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Old Notes may be withdrawn
at any time prior to 5:00 p.m., New York City time, on the Expiration Date. To
withdraw a tender of Old Notes in the Exchange Offer, a written or facsimile
transmission notice of withdrawal must be received by the Exchange Agent at its
address set forth herein prior to 5:00 p.m., New York City time, on the
Expiration Date. Any such notice of withdrawal must (i) specify the name of the
person having deposited the Old Notes to be withdrawn (the "Depositor"), (ii)
identify the Old Notes to be withdrawn (including the principal amount of such
Old Notes), (iii) be signed by the Holder in the same manner as the original
signature on the Letter of Transmittal by which such Old Notes were tendered
(including any required signature guarantees) or be accompanied by documents of
transfer sufficient to have U.S. Trust Company of Texas, N.A. (the "Trustee")
with respect to the Old Notes register the transfer of such Old Notes into the
name of the person withdrawing the tender, and (iv) specify the name in which
any such Old Notes are to be registered, if different from that of the
Depositor. All questions as to the validity, form and eligibility (including
time of receipt) of such notices will be determined by the Company, whose
determination shall be final and binding on all parties. Any Old Notes so
withdrawn will be deemed not to have been validly tendered for purposes of the
Exchange Offer and no New Notes will be issued with respect thereto unless the
Old Notes so withdrawn are validly retendered. Any Old Notes which have been
tendered but which are not accepted for payment will be returned to the Holder
thereof without cost to such Holder as soon as practicable after withdrawal,
rejection of tender or termination of the Exchange Offer. Properly withdrawn Old
Notes may be retendered by following one of the procedures described above under
"-- Procedures for Tendering" at any time prior to the Expiration Date.
26
<PAGE> 29
CONDITIONS
Notwithstanding any other term of the Exchange Offer, the Company will not
be required to accept for exchange, or exchange New Notes for, any Old Notes not
theretofore accepted for exchange, and may terminate or amend the Exchange Offer
as provided herein before the acceptance of such Old Notes, if any of the
following conditions exist:
(a) the Exchange Offer, or the making of any exchange by a Holder,
violates applicable law or any applicable interpretation of the Commission;
or
(b) any action or proceeding is instituted or threatened in any court
or by or before any governmental agency with respect to the Exchange Offer
which, in the reasonable judgment of the Company, might impair the ability
of the Company to proceed with the Exchange Offer; or
(c) there shall have been adopted or enacted any law, statute, rule or
regulation which, in the reasonable judgment of the Company, might
materially impair the ability of the Company to proceed with the Exchange
Offer.
If any such conditions exist, the Company may (i) refuse to accept any Old
Notes and return all tendered Old Notes to exchanging Holders, (ii) extend the
Exchange Offer and retain all Old Notes tendered prior to the expiration of the
Exchange Offer, subject, however, to the rights of Holders to withdraw such Old
Notes (see "-- Withdrawal of Tenders") or (iii) waive certain of such conditions
with respect to the Exchange Offer and accept all properly tendered Old Notes
which have not been withdrawn or revoked. If such waiver constitutes a material
change to the Exchange Offer, the Company will promptly disclose such waiver in
a manner reasonably calculated to inform Holders of Old Notes of such waiver.
The foregoing conditions are for the sole benefit of the Company and may be
asserted by the Company regardless of the circumstances giving rise to any such
condition or may be waived by the Company in whole or in part at any time and
from time to time in its sole discretion. The failure by the Company at any time
to exercise any of the foregoing rights shall not be deemed a waiver of any such
right and each such right shall be deemed an ongoing right which may be asserted
at any time and from time to time.
In addition to the foregoing conditions, (i) if, because of any applicable
law or applicable interpretations thereof by the Commission, the Company is not
permitted to effect the Exchange Offer or (ii) if any Holder or Holders of Old
Notes notifies the Company within 20 business days of the Consummation of the
Exchange Offer (A) that any such Holder is prohibited by applicable law or
Commission policy from participating in the Exchange Offer, or (B) that any such
Holder may not resell the New Notes acquired by it in the Exchange Offer to the
public without delivering a prospectus and that this Prospectus is not
appropriate or available for such resales by such Holder, or (C) that any such
Holder is a broker-dealer and holds Old Notes acquired directly from the Company
or one of its affiliates, then the Company shall file a Shelf Registration
Statement. Thereafter, the Company's obligation to consummate the Exchange Offer
shall be terminated.
27
<PAGE> 30
EXCHANGE AGENT
U.S. Trust Company of Texas, N.A. has been appointed as Exchange Agent for
the Exchange Offer. 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 the Exchange
Agent addressed as follows:
By Registered or Certified Mail:
U.S. Trust Company of Texas, N.A.
c/o United States Trust Company of New York
P.O. Box 841
Peter Cooper Station
New York, New York 10276-0841
By Hand:
U.S. Trust Company of Texas, N.A.
c/o United States Trust Company of New York
111 Broadway, Lower Level
New York, New York 10006-1906
Attention: Corporate Trust Operations
By Overnight Courier:
U.S. Trust Company of Texas, N.A.
c/o United States Trust Company of New York
770 Broadway, 13th Floor
New York, New York 10003
Attention: Corporate Trust Municipal Operations
By Facsimile:
(212) 420-6504
Attention: Customer Service
Confirm by telephone:
(800) 225-2398
FEES AND EXPENSES
The expenses of soliciting tenders will be borne by the Company. The
principal solicitation is being made by mail; however, additional solicitation
may be made by telegraph, telephone or in person by officers and regular
employees of the Company and its affiliates.
The Company will not make any payments to brokers, dealers or others
soliciting acceptances of the Exchange Offer. The Company, however, will pay the
Exchange Agent reasonable and customary fees for its services and will reimburse
it for its reasonable out-of-pocket expenses in connection therewith. The
Company may also pay brokerage houses and other custodians, nominees and
fiduciaries the reasonable out-of-pocket expenses incurred by them in forwarding
copies of the Prospectus and related documents to the beneficial owners of the
Old Notes, and in handling or forwarding tenders for exchange.
The cash expenses to be incurred in connection with the Exchange Offer will
be paid by the Company, are estimated in the aggregate to be approximately
$250,000, and include fees and expenses of the Exchange Agent and Trustee under
the Indenture and accounting and legal fees.
The Company will pay all transfer taxes, if any, applicable to the exchange
of Old Notes pursuant to the Exchange Offer. If, however, certificates
representing New Notes or Old Notes for principal amounts not tendered or
accepted for exchange are to be delivered to, or are to be registered or issued
in the name of, any person other than the registered Holder of the Old Notes
tendered, or if tendered Old Notes are registered in the name of any person
other than the person signing the Letter of Transmittal, or if a transfer tax is
imposed for any reason other than the exchange of Old Notes pursuant to the
Exchange Offer, then the amount of any such transfer taxes (whether imposed on
the registered holder or any other persons) will be payable by the tendering
Holder. If satisfactory evidence of payment of such taxes or exemption therefrom
is not submitted with the Letter of Transmittal, the amount of such transfer
taxes will be billed directly to such tendering Holder.
ACCOUNTING TREATMENT
The New Notes will be recorded at the same carrying value as the Old Notes,
which is face value less unamortized original issue discount as reflected in the
Company's accounting records on the date of the exchange. Accordingly, no gain
or loss for accounting purposes will be recognized upon consummation of the
Exchange Offer. The issuance costs incurred in connection with the Exchange
Offer will be capitalized and amortized over the term of the New Notes.
28
<PAGE> 31
SELECTED CONSOLIDATED FINANCIAL DATA
The following table summarizes certain selected consolidated financial
data, which should be read in connection with the Company's Consolidated
Financial Statements and Notes thereto and with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" included in this
Prospectus. The selected consolidated financial data as of and for the period
from inception through December 31, 1993 and for the years ended December 31,
1994, 1995 and 1996 have been derived from the Company's audited consolidated
financial statements included elsewhere herein. The selected consolidated
financial data as of and for the periods ended June 30, 1996 and 1997 have been
derived from the Company's unaudited consolidated financial statements included
in this Prospectus.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
----------------------------------------- -------------------
1993(1) 1994(2) 1995(3) 1996 1996 1997
-------- -------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF OPERATION DATA:
Operating revenues:
Casino................................................ $ -- $ 59,230 $283,402 $317,479 $163,893 $156,716
Food and beverage..................................... -- 5,879 24,299 26,947 13,541 13,858
Hotel................................................. -- 1,830 7,289 7,919 4,028 3,328
Other................................................. -- 881 4,092 4,419 2,383 2,064
Less promotional allowances........................... -- (4,417) (20,697) (25,033) (12,563) (12,926)
-------- -------- -------- -------- -------- --------
Net revenues........................................ -- 63,403 298,385 331,731 171,282 163,040
OPERATING EXPENSES:
Casino................................................ -- 24,339 133,299 162,408 84,071 83,452
Food and beverage..................................... -- 3,167 12,741 12,317 5,411 5,088
Hotel................................................. -- 1,144 5,662 6,798 3,692 3,669
Other................................................. 24 676 1,728 1,359 729 599
General and administrative............................ 351 17,844 46,298 55,527 27,506 26,224
Development........................................... 1,367 2,128 4,387 6,629 3,909 734
Depreciation and amortization......................... -- 2,499 12,545 15,989 7,732 8,741
Preopening............................................ -- 6,665 7,021 -- -- --
-------- -------- -------- -------- -------- --------
Total operating expenses ........................... 1,742 58,462 223,681 261,027 133,050 128,507
-------- -------- -------- -------- -------- --------
Operating income........................................ (1,742) 4,941 74,704 70,704 38,232 34,533
Interest (expense), net................................. 221 (6,259) (18,735) (21,964) (11,699) (7,197)
Gain on sale of land.................................... -- 5,242 -- -- -- --
Other, net.............................................. -- -- -- 82 236 (411)
-------- -------- -------- -------- -------- --------
Net income before minority interest and extraordinary (1,521) 3,924 55,969 48,822 26,769 26,925
loss from early retirement of long-term debt..........
Minority interest in (income), loss of subsidiary(4).... 130 (5,691) (8,850) (1,861) (1,025) (583)
Extraordinary loss from early retirement of long-term -- -- (7,179) -- -- (5,243)
debt..................................................
-------- -------- -------- -------- -------- --------
Net income(5)........................................... $ (1,391) $ (1,767) $ 39,940 $ 46,961 $ 25,744 $ 21,099
======== ======== ======== ======== ======== ========
OTHER DATA:
EBITDA(6)............................................... $ (1,742) $ 14,105 $ 94,270 $ 86,693 $ 45,964 $ 43,274
Net cash provided by (used in):
Operating activities.................................. (380) 9,935 91,117 69,396 39,490 36,097
Investing activities.................................. (19,835) (56,361) (58,318) (65,461) (66,333) (34,214)
Financing activities.................................. 20,225 65,000 14,158 9,681 25,815 49,060
Capital expenditures.................................... 19,504 65,675 18,986 58,824 16,575 84,392
Ratio of earnings to fixed charges...................... N/A(7) 1.0x 3.6x 2.6x 2.8x 2.5x
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31, AT JUNE 30,
---------------------------------------- 1997
1993 1994 1995 1996 ACTUAL
------- -------- -------- -------- -----------
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents(8).................................. $ 10 $ 18,584 $ 96,857 $121,394 $ 130,102
Total assets.................................................. 27,082 145,535 300,088 377,597 465,780
Total debt(9)................................................. 25,393 124,963 197,603 232,708 297,639
Members' equity (deficit)..................................... (2,469) 3,633 52,747 79,782 91,312
</TABLE>
See footnotes to Selected Consolidated Financial Data
29
<PAGE> 32
- ---------------
(1) Includes the consolidated results of the Company and its subsidiaries from
the date each entity was formed through December 31, 1993, including
subsidiaries involved in development activities only.
(2) The Horseshoe Bossier City opened on July 9, 1994.
(3) The Horseshoe Casino Center opened on February 13, 1995.
(4) Horseshoe Gaming owns less than 100% of certain subsidiaries. Minority
interest represents the share of each subsidiary's income attributable to
those interests not owned by Horseshoe Gaming as well as the 1994 gain on
sale of land by RPG of $5,242,000 distributed to some, but not all, of the
Company's members.
(5) As a limited-liability company, the Company is not subject to income tax
liability. Therefore, Holders of membership interests include their
respective shares of the Company's taxable income in their income tax
returns and the Company makes distributions for such tax liabilities.
(6) EBITDA is defined as operating income before depreciation and amortization
and preopening expenses. EBITDA should not be construed as an alternative to
operating income or net income (as determined in accordance with generally
accepted accounting principles) as an indicator of the Company's operating
performance, or as an alternative to cash flow from operating, investing and
financing activities (as determined in accordance with generally accepted
accounting principles) as a measure of liquidity. EBITDA is presented solely
as supplemental disclosure because management believes that it is a widely
used measure of operating performance in the gaming industry.
(7) Earnings were inadequate to cover fixed charges for the period ended
December 31, 1993, by a deficiency of $1,921,000.
(8) Includes escrow funds, restricted for expansion of existing facilities,
development of new projects or repayment of debt, amounting to approximately
$31,316,000 and $42,235,000 as of December 31, 1996 and 1995, respectively,
and $0 as of June 30, 1997.
(9) Includes deferred interest payable on notes payable to affiliates of
$2,467,000 as of December 31, 1994.
30
<PAGE> 33
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The following discussion and analysis provides information which Management
believes is relevant to an assessment and understanding of the Company's
consolidated financial condition and results of operations. The discussion
should be read in conjunction with "Selected Consolidated Financial Data" and
the Consolidated Financial Statements and notes thereto.
INTRODUCTION
The formation of the Company culminated with a transaction which resulted
in the Company (a newly-formed holding company) owning, as of October 1, 1995,
50% or more of several entities that were previously owned by Mr. Binion,
certain related parties and certain unrelated parties (the "Roll-Up
Transaction"). Mr. Binion now serves as the Chairman of the Board of Directors
and Chief Executive Officer of Horseshoe Gaming, Inc. ("HGI"), the manager of
the Company.
As a result of the Roll-Up Transaction, the Company owned 89% of HE, the
partnership that owns the Horseshoe Bossier City, 100% of RPG, the partnership
that owns the Horseshoe Casino Center, and 80% of Horseshoe Ventures, L.L.C., a
Delaware limited liability company ("Horseshoe Ventures"), which was formed to
pursue casino development opportunities in new jurisdictions. As of December 31,
1995, a wholly owned subsidiary of the Company acquired an additional 2.92%
ownership interest in HE and in 1996 entered into an option agreement to acquire
an additional 1% ownership interest in HE. The consolidated financial statements
of the Company include the assets, liabilities, revenues and expenses for all
entities included in the Roll-Up Transaction, as if such entities were
subsidiaries of the Company for all periods presented. Further, prior to the
Roll-Up Transaction, certain expenses incurred pursuing development of casinos
in new jurisdictions were incurred by Mr. Binion. Mr. Binion was reimbursed for
such expenses by Horseshoe Ventures in October 1995. These expenses are included
in the consolidated financial statements of the Company, for all periods
presented, as if they had been incurred by Horseshoe Ventures.
RESULTS OF OPERATIONS
The Horseshoe Bossier City is one of four riverboat casinos currently
operating in the Bossier City/Shreveport, Louisiana market. The Louisiana Gaming
Control Board has approved the relocation of a riverboat casino to the Bossier
City/Shreveport market on the basis of a proposal to locate a new facility
adjacent to an existing competitor's facility in Shreveport in October 1997
(although the owner of the riverboat has recently requested permission for the
riverboat to remain in New Orleans). The Gaming Control Board is currently
accepting proposals for the remaining fifteenth license, which was recently
awarded and subsequently rescinded due to the withdrawal of the joint venture's
financial partner. This license, once granted, may be located in the Bossier
City/Shreveport market. Management believes that the Bossier City/Shreveport
market is sufficiently large to allow six riverboat casinos to operate
profitably. The Horseshoe Bossier City is undergoing a major expansion project,
including a new 25-story hotel on site and a new, expanded riverboat casino
facility containing over 1700 gaming positions (see "Liquidity and Capital
Resources" and "Development" sections below for additional discussion of
expansion plans.) While Management expects that this new competition will affect
the Horseshoe Bossier City's revenues and operating income, Management also
believes the expansion of the Horseshoe Bossier City and the potential addition
of two riverboat casinos in the Bossier City/Shreveport market will increase the
size and scope of the overall gaming market, mitigating the potential adverse
impact on future operating levels at the Horseshoe Bossier City. The impact on
operating margins from the overall increase in supply to this market is
uncertain.
The Horseshoe Casino Center operates in the competitive Tunica County,
Mississippi, market, which currently consists of nine casinos. Several of the
existing Tunica casinos have recently completed or are undergoing significant
expansion projects, including the Horseshoe Casino Center (see "Liquidity and
Capital Resources" and "Development" sections below for additional discussion of
expansion plans.) While Manage-
31
<PAGE> 34
ment expects that this new competition will affect the Horseshoe Casino Center's
revenues and operating income, Management also believes the expansion will
increase the size and scope of the overall Tunica gaming market, mitigating the
potential adverse impact on future operating levels at the Horseshoe Casino
Center. The impact on operating margins from the overall increase in supply to
this market is uncertain.
The Company has not experienced any significant seasonal trends; however,
the Company has a limited operating history and the Company may determine in the
future that its revenues and income may be seasonal in nature.
SIX MONTHS ENDED JUNE 30, 1997 AND 1996
Net revenues of the Company for the six months ended June 30, 1997 were
$163.0 million as compared to $171.3 million for the comparable period in 1996.
The decrease in net revenues of $8.3 million, or 4.8%, occurred at the Horseshoe
Bossier City, which reflected a decrease in casino revenues of $10.2 million.
The Horseshoe Bossier City contributed net revenues and operating income,
respectively, of $80.2 million and $12.6 million for the six months ended June
30, 1997, and $90.4 million and $17.6 million for the six months ended June 30,
1996. Operating income decreased by 28.4%, or $5.0 million in the 1997 period as
compared to the 1996 period. The decrease in operating income is due to a
reduction in patronage as a result of increased competition and construction
interruption and a reduction in the Horseshoe Bossier City's win percentage,
mainly in table games for the months of April and May. The Horseshoe Bossier
City's net revenues include casino revenues and non-casino revenues,
respectively, of $76.5 million and $3.7 million for the six months ended June
30, 1997 and $86.2 million and $4.2 million for the six months ended June 30,
1996. Casino revenue per day decreased approximately 10.8% in 1997 to $423,000
from $474,000 in 1996.
The Horseshoe Casino Center contributed net revenues and operating income
of $82.8 million and $23.3 million, respectively for the six months ended June
30, 1997 and $80.9 million and $24.5 million, respectively for the six months
ended June 30, 1996. Operating income decreased by 4.9%, or $1.2 million in the
1997 period as compared to the 1996 period. During 1996 two additional casinos
commenced operations in the Tunica market which caused an increase in casino
service levels designed to mitigate potential erosion of revenue from increased
competition. Direct and indirect marketing costs, promotional allowances and the
maturation of the work force from the growth in service levels each reflect
increases from the 1996 period as a direct result of increased competition in
the Tunica market. The Horseshoe Casino Center's 1997 net revenues include
casino revenues and non-casino revenues, respectively, of $80.2 million and $2.6
million for the six months ended June 30, 1997 and $77.7 million and $3.2
million for the six months ended June 30, 1996. Casino revenue per day increased
approximately 3.7% in 1997 to $443,000 from $427,000 in 1996.
Development expenses, which are included in operating income, were $.7
million and $3.9 million for the six months ended June 30, 1997 and 1996,
respectively. The 1996 period includes expenses associated with the Company's
failure to obtain a license to conduct gaming in the state of Indiana.
The increase of $1.0 million in depreciation and amortization is mainly due
to Horseshoe Bossier City's addition of a parking garage and administrative
building during 1996.
OTHER FACTORS AFFECTING EARNINGS
The decrease in net interest expense of $4.5 million for the six months
ended June 30, 1997, compared with the prior year period ended June 30, 1996, is
mainly due to the capitalization of interest related to the expansion of both
the Horseshoe Bossier City and Horseshoe Casino Center. Total interest
capitalized for the six months ended June 30, 1997 was $4.7 million
YEAR ENDED DECEMBER 31, 1996 AND 1995
The significant improvement in the Company's net revenues for the year
ended December 31, 1996, compared with the prior year is related primarily to
improvements in revenue per day at the Horseshoe Bossier City and the Horseshoe
Casino Center operating for a full year in 1996 compared with a partial year in
1995.
32
<PAGE> 35
Operating results for 1995 include operations for the Horseshoe Casino Center
commencing February 13, 1995.
The Horseshoe Bossier City
The Horseshoe Bossier City contributed net revenues and operating income,
respectively, of $174.9 million and $32.2 million for the year ended December
31, 1996 and $160.8 million and $36.3 million for the year ended December 31,
1995.
The Horseshoe Bossier City's net revenues include casino revenues and
non-casino revenues, respectively, of $166.8 million and $8.1 million for the
year ended December 31, 1996 and $151.2 million and $9.6 million for the year
ended December 31, 1995. The increase in net revenues for the year ended
December 31, 1996 compared to the prior year period is due to an increase in
total casino volume of 24.4%. The increase in total volume was offset by a
reduction in overall win percentage of 1.0 percentage point. Casino revenue per
day increased approximately 10.1% in 1996 to $456,000 from $414,000 for the year
ended December 31, 1995.
The Horseshoe Bossier City's operating margin for the year ended December
31, 1996 was 18.4% compared with 22.6% for year ended December 31, 1995. The
reduction in operating margin of 4.2 percentage points was caused by an increase
in expenses associated with promotional programs and direct marketing programs
and an increase in general and administrative expenses. Depreciation and
amortization increased $2.7 million over the 1995 period due to amortization of
goodwill which began in October, 1995 and an increase in depreciation expense
due to property improvements.
The Horseshoe Casino Center
The Horseshoe Casino Center contributed net revenues and operating income,
respectively, of $156.9 million and $44.6 million for the year ended December
31, 1996 and $137.6 million and $42.8 million for the year ended December 31,
1995.
The Horseshoe Casino Center's net revenues include casino revenues and
non-casino revenues, respectively, of $150.7 million and $6.2 million for the
year ended December 31, 1996 and $132.2 million and $5.4 million for the year
ended December 31, 1995. The increase in net revenues for the year ended
December 31, 1996 compared to the prior year period is primarily due to the
increase in the number of days of operation. The year ended December 31, 1995
only includes 322 days of operations, whereas the 1996 period includes a full
twelve months. Casino revenue per day increased in 1996 to $412,000 from
$411,000 for the year ended December 31, 1995.
The Horseshoe Casino Center's operating margin for the year ended December
31, 1996 was 28.4% compared with 36.2%, before the write-off of pre-opening
expenses, for the year ended December 31, 1995. The reduction in operating
margin of 7.8 percentage points was caused by an increase in expenses associated
with promotional programs and direct marketing programs, including one-time
promotional charges which were incurred by the Company prior to the opening and
during the first month of operations of two new competing casino facilities in
the Tunica market. An increase in general and administrative and bad debt
expenses also contributed to the lower operating margins in 1996.
Other Factors Affecting Earnings
The increase in net interest expense of $3.2 million for the year ended
December 31, 1996, compared with the year ended December 31, 1995, is due to an
increase of $35.1 million in the amount of debt outstanding. This was partially
offset by a reduction in the overall interest rate on the Company's long-term
debt, which resulted from the Company's refinancing of substantially all of its
existing indebtedness in October 1995. This refinancing resulted in an
extraordinary loss on early retirement of debt of $7.2 million in 1995.
Development expenses, which are included in operating income, were $6.6
million and $4.4 million for the years ended December 31, 1996 and 1995,
respectively. The increase in development expenses in 1996 over 1995 reflects
the Company's expenses incurred in its unsuccessful attempt to obtain a license
to conduct
33
<PAGE> 36
gaming in the state of Indiana. Total expenses incurred by the Company pursuing
its Indiana license was $3.9 million and $1.7 million for the years ended
December 31, 1996 and 1995, respectively.
YEAR ENDED DECEMBER 31, 1995 AND 1994
The significant improvement in the Company's operating results for the year
ended December 31, 1995, compared with the year ended December 31, 1994 is
directly related to the timing of the opening of the Company's two operating
riverboat casinos. The Horseshoe Bossier City opened in Bossier City, Louisiana
on July 9, 1994, and the Horseshoe Casino Center opened in Tunica County,
Mississippi on February 13, 1995. Accordingly, 1994 operating results include
operations for the Horseshoe Bossier City only, commencing July 9, 1994.
The Horseshoe Bossier City
The Horseshoe Bossier City contributed net revenues and operating income,
respectively, of $160.8 million and $36.3 million for the year ended December
31, 1995 and $63.4 million and $8.5 million for the year ended December 31,
1994. The operating income amounts for 1994 include a $6.7 million charge for
preopening expenses.
The Horseshoe Bossier City's net revenues include casino revenues and
non-casino revenues, respectively, of $151.2 million and $9.6 million for the
year ended December 31, 1995 and $59.2 million and $4.2 million for the year
ended December 31, 1994. Its operating margin for 1995 was 22.6% compared with
23.9% for the year ended December 31, 1994. The 1994 margin excludes the effect
of the charge for preopening expenses of approximately $6.7 million in July,
1994. Casino revenue per day increased approximately 22.5% in 1995 to $414,000
from $338,000 for the year ended December 31, 1994.
The Horseshoe Casino Center
The Horseshoe Casino Center was open for ten and one-half months in 1995
and contributed net revenues and operating income of $137.6 million and $42.8
million, respectively. Included in operating income is a $7.0 million charge for
pre-opening expenses. The Horseshoe Casino Center's 1995 net revenues include
$132.2 million of casino revenues and $5.4 million of non-casino revenues. The
operating margin before the write-off of preopening expenses was 36.2% Casino
revenue per day was $411,000 for 1995.
Other Factors Affecting Earnings
The increase in net interest expense of $12.5 million for the year ended
December 31, 1995, compared with the year ended December 31, 1994, is due to the
time at which construction of the Company's two riverboat casinos was completed.
The Company borrowed the majority of the construction funds for the two casinos
in 1994. During the construction period of both casinos, most of the related
interest was capitalized into the cost of the facilities. The capitalization of
interest ceased when the construction of each riverboat casino was completed. As
discussed in the Liquidity and Capital Resources section below, in October 1995,
the Company completed a refinancing of substantially all of its existing
indebtedness. This refinancing, among other things, reduced the overall interest
rate on the Company's long-term debt, and resulted in an extraordinary loss on
early retirement of debt of $7.2 million in 1995.
The primary item included in other income in 1994 is a $5.2 million gain on
the sale of land in Tunica County, Mississippi. This land was owned by RPG;
however RPG's partnership agreement required that any gain from the sale of this
land be distributed to certain, but not all, of the Company's members. Since not
all of the Company's members received the benefit of the gain on sale, such gain
is included in minority interest in (income) loss of subsidiaries in the
Company's 1994 consolidated statement of operations.
Development expenses, which are included in operating income, were $4.4
million and $2.1 million for the years ended December 31, 1995 and 1994,
respectively.
34
<PAGE> 37
LIQUIDITY AND CAPITAL RESOURCES
In October 1995, the Company refinanced substantially all of its exiting
indebtedness with net proceeds from an initial draw of $93.2 million on a $100
million credit facility (the "Initial Credit Facility") and from the sale of
$100 million of Secured Notes. The Secured Notes were sold with warrants to
purchase an additional $50 million of Secured Notes at a price of 98.15% of par
value which, upon exercise on April 10, 1996, raised approximately $49 million
before fees and expenses. The Initial Credit Facility bears interest at
six-month LIBOR plus 3.0% and requires semi-annual principal payments of 5% of
the then outstanding balance with final maturity on September 30, 1999.
In June 1997, the Company completed its sale of $160 million principal
amount of 9 3/8% Senior Subordinated Notes. The Notes were sold at a price of
99.899% of par value, are due June 15, 2007 and require semi-annual interest
payments. The net proceeds from the Notes received by the Company were used to
repay approximately $76 million (including prepayment penalty) outstanding under
the Credit Facility, and to repurchase $13 million in aggregate principal amount
of Senior Notes which had a fair market value of approximately $14.5 million
together with accrued and unpaid interest related thereto. The remainder is to
be loaned to HE and RPG to finance a portion of the costs associated with the
expansion of Horseshoe Bossier City and Horseshoe Casino Center, respectively.
The expansion of the Horseshoe Casinos is budgeted to cost an aggregate of
approximately $300 million (exclusive of capitalized interest). As of June 30,
1997, approximately $113 million had been expended by the Company in connection
with the expansion projects. The Company anticipates that the remaining costs
associated with the expansion of the Horseshoe Casinos, which are estimated to
be approximately $187 million, will be funded with excess cash on hand
(including the remaining proceeds from the offering), cash flow from operations,
FF&E financing, and to the extent necessary, additional borrowings under the
Credit Facility or a replacement credit facility. As of June 30, 1997, the
Company had approximately $130 million of cash and cash equivalents and had the
ability to borrow an additional $172 million pursuant to the most restrictive
debt incurrence tests set forth in the Credit Facility, the Senior Notes and the
Notes. The Company intends to amend its Credit Facility or enter into a new
revolving credit facility to provide up to approximately $130 million of
borrowing capacity. There can be no assurance, however, that the Company will be
able to amend the Credit Facility to provide for additional borrowing capacity
or that the Company will be able to obtain additional financing on acceptable
terms, if at all. The failure of the Company to obtain additional financing
would have a material adverse effect on the Company and its ability to complete
the Horseshoe Casinos expansion projects.
DEVELOPMENT
Bossier City, Louisiana
Horseshoe Bossier City is currently expanding its entire casino facility at
a cost of approximately $195 million, excluding financing costs attributable to
such expenditures. The expansion plans include a 25 story hotel tower with 606
suites, meeting room facilities, a health club and spa, the renovation and
expansion of existing dockside facilities, a new expanded riverboat casino
facility (with approximately 40% more space and featuring approximately 1,349
slot machines, 61 table games and 10 poker tables), the addition of two
specialty restaurants, the enlargement of the existing buffet and the recently
completed 1,100 space parking garage, administration building and remodeled
existing steak house restaurant. Management estimates the project will be
completed during the fourth quarter of 1997.
Tunica, Mississippi
Horseshoe Casino Center is expanding its casino complex at a cost of
approximately $105 million, excluding financing costs attributable to such
expenditures. Development plans include an additional 15,000 square feet of
gaming space for approximately 420 slot machines and 17 table games, 309
additional hotel suites, a multi-level, 1,000 space parking garage and
Bluesville, an entertainment facility which will accommodate approximately 1,000
customers. Additional facilities will include a health club, one additional
restaurant, a relocated and expanded buffet, a remodeled steak house, meeting
room facilities and other amenities. Management expects the project will be
completed during the fourth quarter of 1997.
35
<PAGE> 38
OTHER ITEMS
The Company may be required to repurchase ownership interests held by
employees, in the event of termination of their employment, at a price
determined by independent appraisal. The total ownership interest held by
employees subject to buy-out provisions was 9.1% as of June 30, 1997. The value
of these ownership interests, amounting to $26.9 million, is reflected in the
accompanying consolidated financial statements as Redeemable Ownership
Interests.
In August 1997, the Company and Lady Luck Vicksburg, Inc. ("Lady Luck")
signed a Contribution and Sale Agreement with respect to a proposed new limited
liability company, which is intended to develop a riverboat gaming facility,
including a riverboat casino, a hotel of approximately 200 rooms, an 800-car
parking garage and other amenities, in Vicksburg, Mississippi. The consummation
of the Contribution and Sale Agreement and the development of the facility is
subject to certain conditions precedent including the mutual determination by
the Company and Lady Luck of the intended scope and cost of the proposed
facility, the obtaining of requisite regulatory approvals, and the arrangement
of appropriate project financing. The facility is to be developed and operated
by a wholly-owned subsidiary of the Company, which will have an equity interest
of 75% in the proposed limited liability company, with Lady Luck holding the
remaining 25% interest. Under the terms of the Contribution and Sale Agreement,
the Company and Lady Luck intend to contribute certain real property and other
previously acquired assets having a combined net book value of approximately $42
million. The total cost of the project, including the value of the contributed
assets, is estimated to be approximately $100 million.
36
<PAGE> 39
BUSINESS
THE COMPANY
Horseshoe Gaming owns and operates dockside casinos and related amenities
at locations in Bossier City, Louisiana and Tunica County, Mississippi. The
Horseshoe Casinos are designed to feature attractive gaming environments and to
offer the superior odds and high betting limits which are a Horseshoe tradition
to differentiate the Horseshoe Casinos from their competitors. The Horseshoe
Casinos also offer quality food and beverages, together with personal service
and player incentives intended to foster customer loyalty and repeat business.
In both Bossier City and Tunica, the Company entered an already competitive
market, yet has successfully established and maintained a dominant market
position despite the subsequent arrival of additional competitors. Management
has built upon the Horseshoe reputation and has focused its marketing efforts on
the discerning gaming patron. The Horseshoe Casinos are designed and operated to
attract a high volume of customers from all market segments. The Company
achieves broad customer appeal by providing favorable odds and having a broad
mix of slot machines as well as low-limit and higher-end table games.
The Company has embarked on a $300 million capital expenditure program
(exclusive of capitalized interest) designed to expand the market for its
product. This major expansion of the Horseshoe Casinos is designed to produce a
gaming experience and amenities which are first class. The expansion will create
606 tower suites in Bossier City and add 309 similar suites in Tunica, themed
gourmet restaurants and significant retail and entertainment amenities; all are
intended to draw customers from more distant markets and strengthen mid-week and
convention business. The expansion will also increase the number of the
Company's gaming positions by approximately 35% which, together with the hotel
suites and other amenities, is expected to lengthen the average guest stay and
increase the number of gaming customers. Management expects both expansion
projects to be completed during the fourth quarter of 1997, with earlier
openings of certain amenities.
In addition to operating the Horseshoe Casinos, the Company routinely
considers other gaming related opportunities, including new casino developments,
acquisitions and joint ventures, and may in the future pursue other gaming
related endeavors that satisfy the Company's strategic objectives. In August
1997, the Company and Lady Luck signed a Contribution and Sale Agreement with
respect to a proposed new limited liability company, which is intended to
develop a riverboat gaming facility, including a riverboat casino, a hotel of
approximately 200 rooms, an 800-car parking garage and other amenities, in
Vicksburg, Mississippi. The consummation of the Contribution and Sale Agreement
and the development of the facility is subject to certain conditions precedent
including the mutual determination by the Company and Lady Luck of the intended
scope and cost of the proposed facility, the obtaining of requisite regulatory
approvals, and the arrangement of appropriate project financing. The facility is
to be developed and operated by a wholly-owned subsidiary of the Company, which
will have an equity interest of 75% in the proposed limited liability company,
with Lady Luck holding the remaining 25% interest. Under the terms of the
Contribution and Sale Agreement, the Company and Lady Luck intend to contribute
certain real property and other previously acquired assets having a combined net
book value of approximately $42 million. The total cost of the project,
including the value of the contributed assets, is estimated to be approximately
$100 million.
Horseshoe Bossier City
The Horseshoe Bossier City is located on an approximately 17-acre parcel.
The site is highly visible and easily accessible from Interstate 20, the major
highway connecting the Bossier City/Shreveport area to the Dallas/Ft. Worth
market and other population centers along the Interstate 20 corridor. The
Company recently acquired approximately 15 acres of additional land contiguous
to its existing facility, giving the Company ownership of land on both sides of
Interstate 20 at the Traffic Street exit. The Company contemplates initially
using this property for overflow customer and employee parking. However, the
property also provides the Company with the opportunity to develop additional
amenities in the future.
Gaming is conducted on three levels of a 298 by 78-foot riverboat which
presently contains 1,068 slot machines and 53 table games. The riverboat is
connected through a two-level ramp to an approximately
37
<PAGE> 40
43,000- square-foot dockside pavilion which, when originally constructed,
contained a 110-seat steakhouse, a 350-seat buffet restaurant, and a small
retail facility.
The property is undergoing a $195 million (exclusive of capitalized
interest) expansion which will transform the existing facility into a first
class gaming destination comparable to the type of facility typically found in
more established gaming venues such as Nevada and Atlantic City. The completed
facility will feature the following: a new riverboat; a 25-story, 606 suite
hotel tower; a significantly expanded and improved pavilion containing four
restaurants; expanded retail space and a multi-level 1,000-car parking garage.
The new riverboat will be larger, wider and have higher ceilings than any
other gaming vessel presently operating in the Bossier City/Shreveport market.
Patron access will be facilitated by escalators serving each gaming level and
allowing ingress through a 30-foot wide central entrance. A spacious environment
characteristic of land-based casinos will be created by dramatically treated
16-foot high ceilings and a 108-foot wide beam. This riverboat will contain all
new furnishings and equipment including approximately 1,349 slot machines and 71
table games, one of which will be the first full-sized baccarat table in the
Bossier City/Shreveport market. The casino will have a high-limit slot area, a
stage featuring live entertainment, and a 50-seat casual dining area.
The recently topped off 25-story hotel tower will be the second tallest and
most visible building in Northern Louisiana and will serve as a beacon for
approaching customers. This new hotel will contain 606 tower suites, including
12 luxurious penthouse suites, ranging in size from 1,200 to 1,800 square feet.
Within the hotel will be 3,500 square feet of meeting facilities and a
5,500-square-foot, fully-equipped health club and spa containing
state-of-the-art exercise equipment, sauna, steam room, massage and beauty
salon. The Horseshoe will be the first casino operator in the market with
on-site hotel rooms, which management believes will provide it with a
significant competitive advantage. Immediately adjacent to the hotel lobby will
be a retail and restaurant complex within the expanded and remodeled pavilion.
This complex will contain four restaurants, one of which is the new Jack Binion
Steakhouse which was expanded, relocated and opened in December 1996 with 160
seats plus private dining facilities. The area formerly occupied by the previous
steakhouse has been renovated to house a 102-seat upscale Northern Italian
restaurant plus an additional 40-seat bar and lounge area, both of which opened
in early July, 1997. A 180-seat continental restaurant and adjacent bar and
lounge featuring live entertainment are scheduled to open prior to Labor Day.
The final restaurant, which will open concurrently with the hotel, will be a new
450-seat buffet containing a wide variety of cuisines and exhibition cooking. A
7,300-square-foot retail concourse will connect Horseshoe's four-story,
1,000-car parking garage (completed and opened in November 1996) to the hotel
lobby and restaurant area. As of June 30, 1997, $76 million of the $195 million
budget had been expended.
The Bossier City/Shreveport market is the largest in the State of Louisiana
as measured by gaming revenue statistics published by Louisiana Gaming
Authorities. For the twelve months ended June 30, 1997, the gaming win in this
market exceeded $501 million. The primary advantage of the Bossier
City/Shreveport gaming market is its local population base and its proximity to
major population centers in Louisiana, Texas, Oklahoma and Arkansas.
Approximately 334,000 people are full-time residents of Bossier City/Shreveport.
The broad market for the Horseshoe Bossier City consists of approximately 16.5
million people residing within 250 miles (approximately four hours driving
distance). Bossier City/Shreveport is the closest and most accessible casino
gaming market to a major portion of eastern and central Texas, including the
major metropolitan area of Dallas/Fort Worth. While the vast majority of patrons
arrive by automobile, numerous airlines provide scheduled air service into the
Shreveport Regional Airport, which is situated approximately seven miles to the
west of the Horseshoe Bossier City.
Horseshoe Casino Center
The Horseshoe Casino Center generates the highest gaming win among its
competitors despite being one of the smaller facilities in the Tunica,
Mississippi market. The 162,000-square-foot dockside gaming facility, which
opened on February 13, 1995 features a 30,000-square-foot casino, two
full-service restaurants and retail facilities, all located on the ground level
of a 200 by 300-foot barge structure. The casino contains 1,024 slot machines
and 40 table games and 11 poker tables. Directly above the casino are 200 hotel
rooms on
38
<PAGE> 41
two levels. The facility is located in the most desirable, center location of
the 70-acre three-property Casino Center complex, which also includes the Circus
Circus and Sheraton casinos.
The Horseshoe Casino Center is undergoing a $105 million (exclusive of
capitalized interest) expansion which is designed to greatly enhance and improve
its successful existing facility. Management is making every effort to expand
with the least possible disruption to existing operations and with minimal
modification to the present casino. A new barge-based facility is being
constructed on site which will add approximately 15,000 square feet of gaming
space seamlessly connected and integrated with the existing casino. The expanded
casino will contain approximately 1,444 slot machines and 68 table games, which
will represent an approximately 40% increase in the number of gaming positions.
The expansion involves the construction of land-based facilities immediately
adjacent to the casino barge, including a 14-story, 309-suite hotel tower, a
1,000-space, four-level parking garage and "Bluesville," a 1,000-seat
entertainment venue. As of June 30, 1997, $37 million of the $105 million budget
had been expended.
The expanded barge will feature two new restaurants, a 120-seat continental
restaurant, together with a 50-seat adjoining bar and lounge that will feature
live entertainment, and a 400-seat buffet that will offer the customer a variety
of cuisines, including Chinese, Italian, local specialties, a grill and carving
station, a French market and bakery as well as dessert and beverage stations.
The Jack Binion Steakhouse will be relocated and expanded with an increased
level of detail and finish.
The hotel will have two specially-themed Bluesville suites, as well as an
entire floor containing 12 penthouse suites, ranging up to 1,800 square feet in
size. Located on the second floor of the hotel will be a 3,500-square-foot
health club and spa with state-of-the-art exercise equipment, sauna, steam room
and massage facilities. On the ground floor of the hotel will be retail space as
well as a museum containing one of the largest collections of blues music
memorabilia in the United States. The museum will connect the hotel to the
concert facility. The exterior of Bluesville will be highly themed and the
performance area will be accessible from the casino and the hotel. In addition
to seating for 800 to 1,000 patrons at ground level, Bluesville will contain a
mezzanine area, with seating for more than 100 invited guests as well as a
Founder's Club room with additional soft seating and a bar. Management intends
to attract top-name pop, country and blues performers.
Tunica County benefits from its proximity to several major population
centers and to the popularity of the Memphis region as a vacation destination
that offers numerous attractions, ample hotel and entertainment facilities and
excellent transportation access. As a result, the Tunica market is the largest
gaming market in Mississippi with gaming win exceeding $808 million for the
twelve months ended June 30, 1997. Over 2.5 million people live within 90 miles
and over 10.7 million people live within 200 miles of the Horseshoe Casino
Center. Two interstate highways (55 & 40) and seven federal highways serve as
thoroughfares by which gaming customers travel to Tunica County.
Marketing
The Company has promoted awareness of the Horseshoe operating philosophy,
which is to provide a quality gaming experience and excellent quality food and
beverage at reasonable prices in a pleasant and friendly environment where every
customer is treated as an important player. The Company has implemented
comprehensive marketing programs to assure that the Horseshoe name is
well-recognized in its respective markets. Horseshoe Gaming has employed radio,
print, and television advertising in selected local and regional markets to
emphasize the Horseshoe brand name and its commitment to customer value and
satisfaction.
The Company has developed numerous marketing and promotional programs,
including special events, players clubs and direct marketing, to maintain
customer loyalty as well as attract new clientele. Management conducts special
events at both the Horseshoe Bossier City and the Horseshoe Casino Center on a
periodic basis, tailoring such events for the specific locale.
A key element of the Company's marketing strategy is the Winner's Circle
frequent players club designed to track and reward the gaming activity of its
members. Frequent players can earn cash, discounts, complimentaries and other
rewards based upon the amount of money wagered over a period of time. The
39
<PAGE> 42
Company maintains an extensive database on its frequent players to monitor their
gaming histories and currently has enrolled approximately 350,000 players in
Tunica and 750,000 in Bossier City. All of the slot machines at the Horseshoe
Casinos are equipped with a state-of-the-art computerized player tracking system
which enables management to compile comprehensive databases with respect to its
frequent gaming patrons. This tracking system is then used to adapt marketing
programs and other promotions to specific types of players and provides
management with the ability to better control the amount and type of
complimentaries it offers its slot customers. Management believes that its
information on its frequent players provides the Company with a unique analytic
tool and a competitive advantage.
The Horseshoe Casinos utilize sophisticated direct marketing programs and
maintain a marketing staff which is particularly active in the Dallas/Fort Worth
and Memphis areas. Because of the importance the Company has placed on effective
personal customer contact, the Horseshoe Casino's marketing strategy is heavily
focused on identifying potential new and repeat customers, and ensuring that
they are treated well upon their initial and subsequent visits.
REGULATORY MATTERS
The Company is subject to state and Federal laws which regulate businesses
generally and the gaming business specifically. Below is a brief description of
some of the more significant regulations to which the Company is subject. All
laws are subject to change and different interpretations. This is especially
true with respect to current laws regulating the gaming industry, since in many
cases these laws and the regulatory agencies that apply them are new. Changes in
laws or their interpretation may result in the imposition of more stringent,
burdensome or expensive requirements, or the outright prohibition of an
activity.
Louisiana Gaming Regulation
In July 1991, the Louisiana legislature adopted legislation permitting
certain types of gaming activity on certain rivers and waterways in Louisiana.
The legislation granted authority to supervise riverboat gaming activities to
the Louisiana Riverboat Gaming Commission and the Riverboat Gaming Enforcement
Division of the Louisiana State Police (the "Louisiana Enforcement Division").
The Louisiana Riverboat Gaming Commission was authorized to hear and determine
all appeals relative to the granting, suspension, revocation, condition or
renewal of all licenses, permits and applications. In addition, the Louisiana
Riverboat Gaming Commission was authorized to establish regulations concerning
authorized routes, duration of excursions, minimum levels of insurance,
construction of riverboats and periodic inspections. The Louisiana Enforcement
Division was authorized to investigate applicants and issue licenses,
investigate violations of the statute and conduct continuing reviews of gaming
activities.
In the 1996 special session of the Louisiana legislature, Louisiana
lawmakers passed a measure which established the Louisiana Gaming Control Board
and provides that the board is the successor to all such prior authorities with
regard to the regulation and supervision of gaming in Louisiana except for the
regulation of horse racing and offtrack betting and the conducting of charitable
gaming operations. Effective May 1, 1996, the powers, duties, functions, and
responsibilities with respect to riverboat gaming of the Louisiana Riverboat
Gaming Commission and the Louisiana Enforcement Division were transferred to the
Louisiana Gaming Control Board. The Louisiana Enforcement Division continues to
provide investigative and enforcement support to the Louisiana Gaming Control
Board.
The statute authorizes issuance of up to 15 licenses to conduct gaming
activities on a riverboat of new construction in accordance with applicable law.
However, no more than six licenses may be granted to riverboats operating from
any one parish.
In issuing a license, the Louisiana Gaming Control Board must find that the
applicant is a person of good character, honesty and integrity and a person
whose prior activities, criminal record, if any, reputation, habits, and
associations do not pose a threat to the public interest of the State of
Louisiana or to the effective regulation and control of gaming, or create or
enhance the dangers of unsuitable, unfair or illegal practices, methods and
activities in the conduct of gaming or the carrying on of business and financial
arrangements in connection therewith. The Louisiana Gaming Control Board will
not grant a license unless it finds that: (i) the
40
<PAGE> 43
applicant is capable of conducting gaming operations, which means that the
applicant can demonstrate the capability, either through training, education,
business experience, or a combination of the above, to operate a gaming casino;
(ii) the proposed financing of the riverboat and the gaming operations is
adequate for the nature of the proposed operation and from a source suitable and
acceptable to the Louisiana Gaming Control Board; (iii) the applicant
demonstrates a proven ability to operate a vessel of comparable size, capacity
and complexity to a riverboat so as to ensure the safety of its passengers; (iv)
the applicant submits a detailed plan of design of the riverboat in its
application for a license; (v) the applicant designates the docking facilities
to be used by the riverboat; (vi) the applicant shows adequate financial ability
to construct and maintain a riverboat; and (vii) the applicant has a good faith
plan to recruit, train and upgrade minorities in all employment classifications.
Certain persons affiliated with a riverboat gaming licensee, including
directors and officers of the licensee, directors and officers of any holding
company of the licensee involved in gaming operations, persons holding five
percent or greater interests in the licensee, and persons exercising influence
over a licensee ("Affiliated Gaming Persons"), are subject to the application
and suitability requirements of the Louisiana gaming law.
The Louisiana gaming law specifies certain restrictions and conditions
relating to the operation of riverboat gaming, including the following: (i)
gaming is not permitted while a riverboat is docked, other than the forty-five
minutes between excursions, and during times when dangerous weather or water
conditions exist, except that the four casinos operating in the Bossier
City/Shreveport area are permitted to operate exclusively at dockside pursuant
to a special exemption; (ii) each roundtrip riverboat cruise may not be less
than three nor more than eight hours in duration, subject to specified
exceptions; (iii) agents of the Louisiana Enforcement Division and the Louisiana
Gaming Control Board are permitted on board at any time during gaming
operations; (iv) gaming devices, equipment and supplies may only be purchased or
leased from permitted suppliers; (v) gaming may only take place in the
designated gaming area while the riverboat is upon a designated river or
waterway; (vi) gaming equipment may not be possessed, maintained or exhibited by
any person on a riverboat except in the specifically designated gaming area, or
a secure area used for inspection, repair or storage of such equipment; (vii)
wagers may be received only from a person present on a licensed riverboat;
(viii) persons under 21 are not permitted in designated gaming areas; (ix)
except for slot machine play, wagers may be made only with tokens, chips or
electronic cards purchased from the licensee aboard a riverboat; (x) licensees
may only use docking facilities and routes for which they are licensed and may
only board and discharge passengers at the riverboat's licensed berth; (xi)
licensees must have adequate protection and indemnity insurance; (xii) licensees
must have all necessary Federal and state licenses, certificates and other
regulatory approvals prior to operating a riverboat; and (xiii) gaming may only
be conducted in accordance with the terms of the license and the rules and
regulations adopted by the Louisiana Enforcement Division and the Louisiana
Gaming Control Board.
An initial license to conduct riverboat gaming operations is valid for a
term of five years. HE was issued an initial operator's license by the Louisiana
Enforcement Division on February 22, 1994. The Louisiana gaming law provides
that a renewal application for the period succeeding the initial five year term
of the operator's license must be made to the Louisiana Enforcement Division.
The application for renewal consists of a statement under oath of any and all
changes to the information, including financial information, provided in the
previous application.
The transfer of a license or permit or an interest in a license or permit
is prohibited except as permitted by the Louisiana gaming law. The sale,
purchase, assignment, transfer, pledge or other hypothecation, lease,
disposition or acquisition (a "Transfer") by any person of securities which
represent 5% or more of the total outstanding shares issued by a corporation
that holds a license is subject to Louisiana Gaming Control Board disapproval. A
security issued by a corporation that holds a license may generally disclose
these restrictions. Prior Louisiana Gaming Control Board approval is required
for the Transfer of any ownership interest of 5% or more in any non-corporate
licensee or for the Transfer of any "economic interest" of 5% or more in any
licensee or Affiliated Gaming Person. An "economic interest" is defined for
purposes of a Transfer as any interest whereby a person receives or is entitled
to receive, by agreement or otherwise, a profit, gain, thing of value, loan,
credit, security interest, ownership interest or other economic benefit.
41
<PAGE> 44
Riverboat gaming licensees and their Affiliated Gaming Persons are required
to notify the Louisiana Enforcement Division prior to the receipt by any such
persons of any loans or extensions of credit. The Louisiana Gaming Control Board
is required to investigate the reported loan or extension of credit and, subject
to certain exemptions, to either approve or disapprove the transaction. If
disapproved, the loan or extension of credit cannot be consummated by the
licensee or Affiliated Gaming Person. The Company is an Affiliated Gaming Person
of HE. HE and the Company have submitted all required disclosures to the
Louisiana Gaming Control Board and the Louisiana Enforcement Division. Any other
advances by the Company to HE in the form of loans or other intercompany
indebtedness are subject to the disapproval power of the Louisiana Gaming
Control Board and the Louisiana Enforcement Division.
Fees to the State of Louisiana for conducting gaming activities on a
riverboat include (i) $50,000 per riverboat for the first year of operation and
$100,000 per year per riverboat thereafter plus (ii) 18 1/2% of net gaming
proceeds.
Mississippi Gaming Regulation
The ownership and operation of casino gaming facilities in Mississippi are
subject to extensive state and local regulation, but primarily the licensing and
regulatory control of the Mississippi Gaming Commission and the Mississippi
State Tax Commission. The Company must register and be licensed under the
Mississippi Gaming Control Act (the "Mississippi Act") and its gaming operations
are subject to the regulatory control of the Mississippi Gaming Commission and
various local, city and county regulatory agencies. The Mississippi Act, which
legalized dockside casino gaming in Mississippi, was enacted on June 29, 1990.
Although not identical, the Mississippi Act is similar to the gaming laws of
Nevada. Effective October 29, 1991, the Mississippi Gaming Commission adopted
regulations in furtherance of the Mississippi Act which are also similar in many
respects to the Nevada gaming regulations.
The laws, regulations and supervisory procedures of Mississippi and the
Mississippi Gaming Commission seek to: (i) prevent unsavory or unsuitable
persons from having any direct or indirect involvement with gaming at any time
or in any capacity; (ii) establish and maintain responsible accounting practices
and procedures; (iii) maintain effective control over the financial practices of
licensees, including establishing minimum procedures for internal fiscal affairs
and safeguarding of assets and revenues, providing reliable record keeping and
making periodic reports to the Mississippi Gaming Commission; (iv) prevent
cheating and fraudulent practices; (v) provide a source of state and local
revenues through taxation and licensing fees; and (vi) ensure that gaming
licensees, to the extent practicable, employ Mississippi residents. The
regulations are subject to amendment and interpretation by the Mississippi
Gaming Commission.
The Mississippi Act provides for legalized dockside gaming at the
discretion of the 14 counties that either border the Gulf Coast or the
Mississippi River but only if the voters in such counties have not voted to
prohibit gaming in that county. As of March 31, 1997, dockside gaming was
permissible in nine of the 14 eligible counties in the State and gaming
operations had commenced in Adams, Coahoma, Hancock, Harrison, Tunica, Warren
and Washington counties. The law permits unlimited stakes gaming on permanently
moored vessels on a 24-hour basis and does not restrict the percentage of space
which may be utilized for gaming. There are no limitations on the number of
gaming licenses which may be issued in Mississippi. The legal age for gaming in
Mississippi is 21.
Under Mississippi law, gaming vessels in Tunica county must be located on
the Mississippi River or on navigable waters. On May 29, 1993, the Mississippi
Gaming Commission granted site approval to the site. On October 13, 1994, the
Horseshoe Casino Center received a gaming operator's license from the
Mississippi Gaming Commission. At the same meeting, certain key principals of
RPG were found suitable. Said license and findings of suitability were renewed
on September 17, 1996 and will now expire on September 17, 1998.
The Company and RPG are required to submit detailed financial, operating
and other reports to the Mississippi Gaming Commission. Substantially all loans,
leases, sales of securities and similar financing transactions entered into by
the Company and RPG must be reported to or approved by the Mississippi Gaming
Commission. RPG is also required to periodically submit detailed financial and
operating reports to the Mississippi Gaming Commission and to furnish any other
information required thereby.
42
<PAGE> 45
Each of the directors, officers and key employees of the Company who are
actively and directly engaged in the administration or supervision of gaming, or
who have any other significant involvement with the activities of the Company,
and each of the officers and directors and certain employees of the general
partner of RPG, must be found suitable therefor, and may be required to be
licensed, by the Mississippi Gaming Commission. The finding of suitability is
comparable to licensing, and both require submission of detailed personal
financial information followed by a thorough investigation. In addition, any
individual who is found to have a material relationship to, or material
involvement with, the Company or RPG may be required to be investigated in order
to be found suitable or to be licensed as a business associate of the Company or
RPG. Key employees, controlling persons or others who exercise significant
influence upon the management or affairs of the Company or RPG may also be
deemed to have such a relationship or involvement. There can be no assurance
that such persons will be found suitable by the Mississippi Gaming Commission.
An application for licensing may be denied for any cause deemed reasonable by
the Mississippi Gaming Commission. Changes in licensed positions must be
reported to the Mississippi Gaming Commission. In addition to its authority to
deny an application for a license, the Mississippi Gaming Commission has
jurisdiction to disapprove a change in corporate position. If the Mississippi
Gaming Commission were to find a director, officer or key employee unsuitable
for licensing or unsuitable to continue having a relationship with the Company
or RPG, the Company or the general partner of RPG would have to suspend, dismiss
and sever all relationships with such person. The Company or RPG would have
similar obligations with regard to any person who refuses to file appropriate
applications. Each gaming employee must obtain a work permit which may be
revoked upon the occurrence of certain specified events.
Mississippi statutes and regulations give the Mississippi Gaming Commission
the discretion to require a suitability finding with respect to anyone who
acquires any security of the Company or RPG, regardless of the percentage of
ownership. The current policy of the Mississippi Gaming Commission is to require
anyone acquiring 5% or more of any voting securities of a public company with a
licensed subsidiary or private company licensee to be found suitable. If the
owner of voting securities who is required to 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 investigation.
Any owner of voting securities found unsuitable and who holds, directly or
indirectly, any beneficial ownership of equity interests in the Company or RPG
beyond such period of time as may be prescribed by the Mississippi Gaming
Commission may be guilty of a misdemeanor. 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 Mississippi Gaming Commission may be found unsuitable.
The Company is subject to disciplinary action if, after it receives notice that
a person is unsuitable to be an owner of or to have any other relationship with
it, the Company or RPG (i) pays the unsuitable persons any dividends or interest
upon any of its securities or any payments or distribution of any kind
whatsoever, (ii) recognizes the exercise, directly or indirectly, of any voting
rights of its securities by the unsuitable person, or (iii) pays the unsuitable
person any remuneration in any form for services rendered or otherwise, except
in certain limited and specific circumstances. In addition, if the Mississippi
Gaming Commission finds any owner of voting securities unsuitable, such owner
must immediately surrender all securities to the Company or RPG, as applicable,
and the Company or RPG must purchase the security so offered for cash at fair
market value within 10 days.
The Company and RPG will be required to maintain current ownership ledgers
in the State of Mississippi which may be examined by the Mississippi Gaming
Commission at any time. If any securities are held in trust by an agent or by a
nominee, the record Holder may be required to disclose the identity of the
beneficial owner to the Mississippi Gaming Commission. A failure to make such
disclosure may be grounds for finding the record Holder unsuitable. The Company
and RPG also are required to render maximum assistance in determining the
identity of the beneficial owner. The Company may be required to disclose to the
Mississippi Gaming Commission upon request the identities of the Holders of the
Notes. In addition, the Mississippi Gaming Commission under the Mississippi Act
may, in its discretion, (i) require Holders of debt securities, such as the
Notes, to file applications, (ii) investigate such Holders, and (iii) require
such Holders to be found suitable to own such debt securities. Although the
Mississippi Gaming Commission generally does not require the individual Holders
of obligations such as notes to be investigated and found suitable, the
Mississippi
43
<PAGE> 46
Gaming Commission retains the discretion to do so for any reason, including but
not limited to a default, or where the Holder of the debt instrument exercises a
material influence over the gaming operations of the entity in question. Any
Holder of the debt securities required to apply for a finding of suitability
must pay all investigative fees and costs of the Mississippi Gaming Commission
in connection with such an investigation.
The regulations provide that a change in control of the Company or RPG may
not occur without the prior approval of the Mississippi Gaming Commission. A
Mississippi gaming licensee may not make a public offering of its securities.
Mississippi law prohibits the Company from making a public offering or private
placement of its securities without the approval of or waiver of approval by the
Mississippi Gaming Commission if any part of the proceeds of the offering is to
be used to finance the construction, acquisition or operation of gaming
facilities in Mississippi, or to retire or extend obligations incurred for one
or more of such purposes. The Mississippi Gaming Commission has approved the
sale of the Notes and certain other transactions to be consummated in connection
therewith.
The Mississippi Act requires that certificates representing securities of
the Company or RPG bear a legend to the general effect that the securities are
subject to the Mississippi Act and regulations of the Mississippi Gaming
Commission. The Mississippi Gaming Commission, through the power to regulate
licensees, has the power to impose additional restrictions on the Holders of the
Company's or RPG's securities at any time.
Neither the Company nor RPG may engage in gaming activities in Mississippi
while also conducting gaming operations outside of Mississippi without approval
of the Mississippi Gaming Commission. Such approvals were granted by the
Mississippi Gaming Commission on October 13, 1994. The failure to obtain or
retain any such approval could have a material adverse effect on the Company or
RPG. See "Risk Factors -- Requirements for Government Approvals; Gaming
Licensing and Regulation."
The licenses obtained by the Company and RPG are not transferable and will
need to be renewed every two years. There can be no assurance that any renewal
application will be approved. Each issuing agency may at any time dissolve,
suspend, condition, limit or restrict a license or approval to own equity
interests in the Company or RPG for any cause deemed reasonable by such agency.
Substantial fines for each violation of gaming laws or regulations may be levied
against the Company or RPG in Mississippi. A violation under any gaming license
held by the Company or RPG may be deemed a violation of all the other licenses
held by the Company or RPG. Suspension or revocation of any of the foregoing
licenses or of the approval of the Company or RPG would have a material adverse
effect upon the business of the Company.
License fees and taxes, computed in various ways depending on the type of
gaming involved, are payable to the State of Mississippi and to the counties and
cities in which RPG's operations will be conducted. Depending upon the
particular fee or tax involved, these fees and taxes are payable either monthly,
quarterly or annually and are based upon (i) the percentage of the gross gaming
revenues received by the casino operation, (ii) the number of slot machines
operated by the casino, (iii) the number of table games operated by the casino
or (iv) the number of casino patrons. The foregoing license fees are allowed as
a credit against RPG's Mississippi income tax liability for the year paid.
In October 1994, the Mississippi Gaming Commission adopted a regulation
requiring, as a condition of licensure or license renewal, that a gaming
establishment's site development plan include an approved 500-car parking
facility in close proximity to the casino complex and infrastructure facilities
which will amount to at least 25% of the casino cost. Such facilities may
include any of the following: a 250-room hotel of at least a two-star rating (as
defined by the current edition of the Mobil Travel Guide) a theme park, a golf
course, marinas, a tennis complex, entertainment facilities or any other such
facility as approved by the Mississippi Gaming Commission as infrastructure.
Parking facilities, roads, sewage and water systems or facilities normally
provided by governmental entities are excluded. The Mississippi Gaming
Commission may, in its discretion, reduce the number of hotel rooms required
where it is shown, to the satisfaction of the Mississippi Gaming Commission,
that sufficient rooms are available to accommodate the anticipated visitor load.
Such reduction in the number of rooms does not affect the 25% investment
requirement imposed by the regulation. The Horseshoe Casino Center and related
facilities have complied with such requirements.
44
<PAGE> 47
The sale of alcoholic beverages, including beer and wine, at the Horseshoe
Casino Center is subject to licensing, control and regulation by the Alcoholic
Beverage Control Division (the "ABC") of the Mississippi State Tax Commission.
The ABC requires that all equity owners and managers file personal record forms
and fingerprint cards for their licensing process. In addition, owners of more
than 5% of RPG's equity and RPG's officers and managers must submit detailed
financial information to ABC for licensing. All such licenses are revocable and
are non-transferable. The ABC has full power to limit, condition, suspend or
revoke any such license, and any such disciplinary action could (and revocation
would) have a material adverse effect on the operations of the Horseshoe Casino
Center.
45
<PAGE> 48
MANAGEMENT
Section 6.2 of the Limited Liability Company Agreement of the Company (the
"Company Agreement") provides that the Company shall be managed by a manager
(the "Manager"). Pursuant to Section 6.1 of the Company Agreement, HGI serves as
the Manager of the Company until the occurrence of its "Withdrawal," which
pursuant to Section 1 of the Company Agreement, means the occurrence of the
bankruptcy (as defined in the Company Agreement), dissolution or liquidation of
HGI, or the withdrawal, resignation or retirement of HGI from the Company for
any reason, and those situations when HGI may no longer continue as a member of
the Company by reason of any law or pursuant to any terms of the Company
Agreement. HGI has only one class of stock outstanding. The outstanding shares
of common stock of HGI are owned 68.52% by Mr. Binion, 15.74% by Peri Howard and
15.74% by Leslie Kenny.
The current executive officers and directors of HGI and of the Company's
wholly-owned subsidiary Horseshoe GP, Inc. ("HGP"), which is the general partner
of RPG and of New Gaming Capital Partnership, which is in turn the general
partner of HE, and certain officers of RPG and HE, are listed below, together
with their ages and all positions and offices held by them.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ----------------------- --- -----------------------------------------------------
<S> <C> <C>
Jack B. Binion 60 Chairman of the Board of Directors and Chief
Executive Officer of HGI and of HGP.
Phyllis M. Cope 62 Director of HGI and of HGP.
Peri Howard 37 Director of HGI and of HGP.
Paul R. Alanis 49 President of HGI and of HGP.
Walter J. Haybert 55 Treasurer and Chief Financial Officer of HGI and of
HGP.
John J. Schreiber 57 Senior Vice President -- Governmental Relations of
HGI and of HGP.
J. Michael Allen 50 Senior Vice President -- Operations of HGI and of
HGP.
Loren S. Ostrow 46 Senior Vice President, Secretary and General Counsel
of HGI and of HGP.
Gary Border 47 Senior Vice President -- Marketing of HGI and of HGP.
J. Lawrence Lepinski 51 Senior Vice President and General Manager of
Horseshoe Bossier City.
Bob McQueen 44 Senior Vice President and General Manager of
Horseshoe Casino Center.
</TABLE>
Mr. Binion has served as Chief Executive Officer of HGI since its inception
(under the name New Gaming Capital Corporation) in December, 1992 and as Chief
Executive Officer of HGP since its inception immediately prior to the Roll-Up
Transaction. Mr. Binion served as the Chief Executive Officer of Gaming
Consulting, Inc., the general partner of the entity that was the general partner
of RPG, from its inception in May, 1993 until it merged into HGI in the Roll-Up
Transaction. Mr. Binion has also been the President and Chief Executive Officer
since 1964 of the Horseshoe Club Operating Company, which owns and operates
Binion's Horseshoe in Las Vegas, Nevada.
Ms. Cope is the wife of Jack Binion. She was elected director of HGI in
January 1997 and will serve until further notice. Ms. Cope has been the part or
sole owner of, and has managed the operations of, three residential real estate
facilities since November, 1978.
Ms. Howard is the daughter of Phyllis Cope. She was elected director of HGI
in January 1997 and will serve until further notice. Ms. Howard has served in
Casino Player Development for RPG since January, 1996, and from August, 1994, to
January, 1996 she was a Cage Shift Manager for RPG. From September, 1993 to May,
1994, she was employed as a cage cashier at Binion's Horseshoe Hotel & Casino.
From November, 1990 to August, 1994, she was a bookkeeper for Woodside Terrace
Apartments.
Mr. Alanis has served as the President of HGI and of HGP since January 1,
1996. Mr. Alanis has served as the President of KII-Pasadena, Inc. since
December, 1988 and as President of Koar International, Inc. from 1991 until
1995.
46
<PAGE> 49
Mr. Haybert became employed by an Affiliate of the Company in July, 1995,
and became employed as the Treasurer and Chief Financial Officer of HGI and of
HGP upon the consummation of the Roll-Up Transaction. From April, 1992 until
July, 1995, Mr. Haybert was the Vice President of Gaming Development of Harrah's
Entertainment, Inc.
Mr. Schreiber has served as Senior Vice President of HGI since the Roll-Up
Transaction and, prior to that, as Senior Vice President of Horseshoe Club
Operating Company since April, 1994. From May, 1992 through April, 1994, Mr.
Schreiber served as President of St. Charles Riverfront Station and as Vice
President of Governmental Affairs for Station Casinos, Inc.
Mr. Allen has served as Senior Vice President -- Operations of Horseshoe
Gaming, Inc. since the Roll-Up Transaction and prior to that as General Manager
of the Horseshoe Casino Center since May, 1994. Prior to that, Mr. Allen served
as Principal of Gaming Associates, Inc. from September, 1992. From April, 1991
to September, 1992, Mr. Allen served as Vice President of Slot
Operations -- Player Development of Carnival Cruise Lines.
Mr. Ostrow has served as Senior Vice President and General Counsel of HGI
and of HGP since January 1, 1996. Mr. Ostrow has served as Senior Vice President
of KII-Pasadena, Inc., since December, 1988, and as Senior Vice President of
Koar International, Inc. from 1991 until 1995.
Mr. Border has served as Senior Vice President -- Marketing of HGI since
July, 1996. Since 1987, Mr. Border served as President and founder of Marketing
Results, Inc.
Mr. Lepinski has served as Senior Vice President and General Manager of the
Horseshoe Bossier City since September, 1995. Prior to that, Mr. Lepinski served
as General Manager of Bally's Saloon and Gambling Hall in Tunica, Mississippi
since August, 1993. From May, 1991 to August, 1993, Mr. Lepinski served as Vice
President Casino Operations for Genting Highlands in Malaysia.
Mr. McQueen has served as Senior Vice President and General Manager of the
Horseshoe Casino Center since July, 1996 and prior to that as Vice President of
Casino Operations for Horseshoe Casino Center since June, 1994. From April 1992
to June 1994 Mr. McQueen served as a Senior Level Executive with Carnival Cruise
Lines.
47
<PAGE> 50
EXECUTIVE COMPENSATION
The following table sets forth all compensation awarded to, earned by or
paid to the Chief Executive Officer and the other four most highly compensated
executive officers (the "Named Executive Officers") for their services to the
Company for the year ended December 31, 1996 and 1995.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
NAME AND -----------------------------------------------
PRINCIPAL OTHER ANNUAL ALL OTHER
POSITION YEAR SALARY BONUS COMPENSATION COMPENSATION
--------------------------- ----- -------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Jack B. Binion............. 1996 $ 0 $ 0 $ 0 $ 0
1995 0 0 0 0
Paul R. Alanis(1).......... 1996 494,635 200,000 0 7,351
1995 0 0 0 110,000
Walter J. Haybert(2)....... 1996 351,792 0 0 490,534
1995 94,231 35,138 0 346,779
John J. Schreiber(3)....... 1996 351,792 50,000 0 347,435
1995 94,231 0 0 983,953
J. Michael Allen(4)........ 1996 367,713 0 0 320,164
1995 90,192 0 0 622,080
</TABLE>
- ---------------
(1) While Mr. Alanis performed policy making functions of HGI similar to that of
an officer, during fiscal year 1995, he was an employee of KII-Pasadena,
Inc., which was party to a consulting agreement with HGI. The consulting
agreement provided for payments to KII-Pasadena, Inc. of $55,000 per month.
Mr. Alanis owns 67% of the stock of KII-Pasadena, Inc. The amount of
compensation to Mr. Alanis indicated is equal to his share of the consulting
payments to KII-Pasadena, Inc. for the three months ended December 31, 1995.
Other compensation for 1996 is a premium on a life insurance policy.
(2) Mr. Haybert's employment agreement provides for an additional benefit to be
payable to Mr. Haybert in the event of termination in an amount ranging from
$300,000 to $1,366,923 depending upon the date and nature of termination.
Included in other compensation in 1995 and 1996 is $342,098 and $483,749,
respectively, representing the amount of termination benefit recorded by the
Company as compensation expense. Also included in other compensation in 1995
and 1996 is $4,681 and $6,785, respectively for a premium on a life
insurance policy. In 1995, Mr. Haybert was granted an ownership interest in
the Company relating to 500,489 restricted units, of which 250,245 had
vested at December 31, 1996. The remaining units vest equally in July, 1997
and 1998. The value of the ownership interest at December 31, 1996 was
$5,417. The ownership interest provides for a right to distributions based
upon a share of the net profits after the date of grant of the ownership
interest, including appreciation in the assets of the Company over their
fair market value as of the grant date, but not including a share of the
then capital of the Company, including any appreciation in assets of the
Company up to the grant date.
(3) Mr. Schreiber's employment agreement provides for an additional benefit to
be payable to Mr. Schreiber in the event of termination in an amount ranging
from $892,510 to $1,405,105 depending upon the date and nature of
termination. Included in other compensation in 1995 and 1996 is $978,993 and
$340,683, respectively, representing the amount of termination benefit
recorded by the Company as compensation expense. Also included in other
compensation in 1995 and 1996 is $4,960 and $6,752, respectively, for a
premium on a life insurance policy. In 1995, Mr. Schreiber was granted an
ownership interest in the Company relating to 514,469 restricted units, of
which 483,190 had vested at December 31, 1996. The remaining units had fully
vested as of May 1997. The value of the ownership interest at December 31,
1996 was $5,569. The ownership interest provides for a right to
distributions based upon a share of the net profits after the date of grant
of the ownership interest, including appreciation in the assets of the
Company over their fair market value as of the grant date, but not including
a share of the then capital of the Company, including any appreciation in
assets of the Company up to the grant date.
(4) Mr. Allen's employment agreement provides for an additional benefit to be
payable to Mr. Allen in the event of termination in an amount ranging from
$0 to $1,366,923 depending upon the date and nature of
48
<PAGE> 51
termination. Included in other compensation in 1995 and 1996 is $616,427 and
$318,372, respectively, representing the amount of termination benefit
recorded by the Company as compensation expense. Also included in other
compensation in 1995 is $5,653 for a housing and automobile allowance and
$1,792 in 1996 for a premium on a life insurance policy. In 1995, Mr. Allen
was granted an ownership interest in the Company relating to 500,489
restricted units, of which none had vested at December 31, 1996. The
remaining units vest 171,484 in May, 1997, 197,484 in May, 1998 and the
remainder in May, 1999. The value of the ownership interest at December 31,
1996 was $5,417. The ownership interest provides for a right to
distributions based upon a share of the net profits after the date of grant
of the ownership interest, including appreciation in the assets of the
Company over their fair market value as of the grant date, but not including
a share of the then capital of the Company, including any appreciation in
assets of the Company up to the grant date.
COMPENSATION OF DIRECTORS; COMPENSATION COMMITTEE INTERLOCKS AND INSIDER
PARTICIPATION
The Bylaws of HGI provide for a six member board of directors. There are
currently three directors. Directors serve until the next annual meeting of
stockholders and until their successors have been elected and qualified.
Vacancies on the board of directors may be filled by a majority of the remaining
directors. Mr. Binion receives no compensation for his services on the Board.
Peri Howard receives annual compensation of $150,000 and Phyllis M. Cope
receives annual compensation of $100,000 for services on the Board. Officers
serve at the discretion of the Board. The Board has no Compensation Committee.
Mr. Alanis has participated in discussions with Mr. Binion regarding executive
compensation.
EMPLOYMENT AGREEMENTS
Mr. Binion has provided services pursuing, developing and managing gaming
operations for the Company and its Subsidiaries. Mr. Binion has not been
compensated for his services in the past nor is there an existing employment
agreement providing for Mr. Binion to receive compensation for his services in
the future. It is anticipated, however, that Mr. Binion will enter into an
employment agreement with HGI, the Manager of the Company, in 1997. Mr. Binion
is not currently compensated for his services to the Company.
Mr. Alanis is party to an employment agreement with HGI, which agreement
contains customary employment terms and provides for a current annual base
salary of $500,000, fringe benefits, participation in such health and pension
plans as HGI shall adopt for all HGI executives, and a bonus of $200,000 payable
in four equal installments on the last days of February, May, August and
November, 1996. The employment agreement provides that, if warranted by his
performance, it is HGI's intention to pay Mr. Alanis a bonus of at least equal
size in 1997 and 1998 should the Company in 1996 and 1997 sustain a level of
activity and financial performance equal or greater to the level of activity and
financial performance of the Company during calendar year 1995. The employment
agreement also contains a put/call provision whereby, upon termination of Mr.
Alanis' employment, the Company may, at its option, or must, at Mr. Alanis'
option (with either option exercisable within 30 days of such termination),
purchase Mr. Alanis' ownership interest for cash in an amount equal to its then
fair market value. The employment agreement provides that Mr. Alanis' employment
shall terminate on December 31, 1998, unless earlier terminated as provided
therein. HGI may terminate Mr. Alanis' employment for cause (including upon Mr.
Alanis' disability) or without cause. If, as of December 31, 1996, the
employment of Mr. Alanis had been terminated for cause, $141,667 would have been
payable to Mr. Alanis, and $1,400,000 would have been payable if his employment
had been terminated without cause. The employment agreement also includes
confidentiality provisions.
Mr. Haybert is party to an employment agreement with HGI, which agreement
contains customary employment terms and provides for a current annual base
salary of $350,000, fringe benefits, and participation in such health and
pension plans as HGI shall adopt for all HGI executives. The employment
agreement also provides Mr. Haybert with an ownership interest in the Company
equivalent to the share allocable to 500,489 Units of the net profits of the
Company from and after the date of the grant of such interest. Such ownership
interest is subject to a specified divestiture schedule. Under such schedule,
75% of Mr. Haybert's ownership interest is subject to divestiture upon Mr.
Haybert's termination or voluntary resignation prior to July 20, 1996, 50% is
subject to divestiture upon Mr. Haybert's termination or voluntary resignation
prior to July 20, 1997,
49
<PAGE> 52
and 25% is subject to divestiture upon Mr. Haybert's termination or voluntary
resignation prior to July 31, 1998. The employment agreement also provides that
all of Mr. Haybert's ownership interest shall become fully vested immediately
upon the occurrence of any transaction whereby Mr. Binion (including any
entities through which he holds his ownership interest in the Company), family
members of Mr. Binion and/or trusts established for the benefit of Mr. Binion's
heirs transfer a controlling interest in the Company to a third party in a
transaction other than a public offering (a "Disposition Event"). HGI also
agreed to make available, within ten (10) days after a request by Mr. Haybert, a
personal loan of up to $200,000, bearing interest at the rate of 10% per annum
to be secured by the pledge of Mr. Haybert's Units in the Company. The
employment agreement also contains a put/call provision whereby, upon
termination of Mr. Haybert's employment, the Company may, at its option, or
must, at Mr. Haybert's option (with either option exercisable within 90 days of
such termination), purchase that portion of Mr. Haybert's ownership interest
that is not subject to divestiture for cash in an amount equal to its then fair
market value. If Mr. Haybert is terminated without cause, an additional 25% of
his ownership interest shall no longer be subject to divestiture. The employment
agreement provides that Mr. Haybert's employment shall terminate on July 31,
1998, unless earlier terminated as provided therein. HGI may terminate Mr.
Haybert's employment for cause (including upon Mr. Haybert's disability) or
without cause. HGI agreed to pay, if such employment terminates for any reason
(including expiration of the employment agreement) or if a Disposition Event
occurs, an additional benefit of an amount ranging from $300,000 to $1,366,923,
depending upon the date and nature of the event causing the payment. The
employment agreement also includes confidentiality provisions. The assignment
agreement whereby the Company issued the ownership interest to Mr. Haybert
provides that, for purposes of determining the fair market value of Mr.
Haybert's ownership interest, prior to any Subsidiary's being granted a license
to own and/or operate a gaming business, the value of such Subsidiary shall be
limited to the amount of the Company's capital investment therein. Because it
originally was contemplated that Mr. Haybert would receive his ownership
interest and the share of Net Profits to which it would entitle him in July,
1995, and Mr. Haybert did not in fact receive his ownership interest until the
October 1, 1995 effective date of the Roll-Up Transaction, HGI paid Mr. Haybert
a one time bonus in an amount equal to the $35,138 in Net Profits to which he
would have been entitled.
Mr. Schreiber is party to an employment agreement with HGI, which agreement
contains customary employment terms and provides for a current annual base
salary of $350,000, fringe benefits, participation in such health and pension
plans as HGI shall adopt for all HGI executives, and a one time bonus of $50,000
payable on or before January 15, 1996. Prior to execution of the employment
agreement, Mr. Schreiber was granted an ownership interest in the Company
equivalent to the share allocable to 236,265 Units of the net profits of the
Company from and after the date of the grant of such interest. The employment
agreement increased Mr. Schreiber's ownership interest in the Company by an
ownership interest in the Company equivalent to the share allocable to 514,469
Units of the net profits of the Company from and after the date of the grant of
such interest. The employment agreement also contains a put/call provision
whereby, upon termination of Mr. Schreiber's employment, the Company may, at its
option, or must, at Mr. Schreiber's option (with either option exercisable
within 30 days of such termination), purchase Mr. Schreiber's ownership interest
for cash in an amount equal to its then fair market value. The employment
agreement provides that Mr. Schreiber's employment shall terminate on September
30, 1998, unless earlier terminated as provided therein. HGI agreed to pay, if
such employment terminates for any reason (including expiration of the
employment agreement) or if a Disposition Event occurs, an additional benefit of
an amount ranging from $892,510 to $1,405,105, depending upon the date and
nature of the event causing the payment. The employment agreement also includes
confidentiality provisions. The assignment agreement whereby the Company issued
the ownership interest to Mr. Schreiber provides that, for purposes of
determining the fair market value of Mr. Schreiber's ownership interest, prior
to any Subsidiary's being granted a license to own and/or operate a gaming
business, the value of such Subsidiary shall be limited to the amount of the
Company's capital investment therein.
Mr. Allen is party to an employment agreement with HGI, which agreement
contains customary employment terms and provides for a current annual base
salary of $350,000, fringe benefits, participation in such health and pension
plans as HGI shall adopt for all HGI executives, and a one time bonus of $67,000
payable on or before January 15, 1996. Prior to the execution of the employment
agreement, Mr. Allen was
50
<PAGE> 53
granted an ownership interest in the Company equivalent to the share allocable
to 815,714 Units of the net profits of the Company from and after the date of
the grant of such interest. The employment agreement increased Mr. Allen's
ownership interest in the Company by an ownership interest equivalent to the
share allocable to 500,489 Units of the net profits of the Company from and
after the date of the grant of such interest. Such ownership interest is subject
to a specified divestiture schedule. Under such schedule, 45% of Mr. Allen's
ownership interest vested fully upon execution of the employment agreement, and
the remaining 55% vests as follows: an additional 15% vests and shall not be
subject to divestiture beginning on May 15, 1996; an additional 15% vests and
shall not be subject to divestiture beginning on May 15, 1997; an additional 15%
vests and shall not be subject to divestiture beginning on May 15, 1998; and the
remaining 10% vests and shall not be subject to divestiture beginning on May 11,
1999. The employment agreement also provides that all of the ownership interest
shall become fully vested immediately upon the occurrence of a Disposition
Event. The employment agreement also contains a put/call provision whereby, upon
termination of Mr. Allen's employment, the Company may, at its option, or must,
at Mr. Allen's option (with either option exercisable within 30 days of such
termination), purchase that portion of Mr. Allen's ownership interest that is
not subject to divestiture for cash in an amount equal to its then fair market
value. The employment agreement provides that Mr. Allen's employment shall
terminate on May 11, 1999, unless earlier terminated as provided therein. HGI
may terminate Mr. Allen's employment for cause (including upon Mr. Allen's
disability). HGI agreed to pay, if such employment terminates for any reason
(including expiration of the employment agreement) or if a Disposition Event
occurs, an additional benefit of an amount ranging from $0 to $1,366,923,
depending upon the date and nature of the event causing the payment. The
employment agreement also includes confidentiality provisions. The assignment
agreement whereby the Company issued the ownership interest to Mr. Allen
provides that, for purposes of determining the fair market value of Mr. Allen's
ownership interest, prior to any Subsidiary's being granted a license to own
and/or operate a gaming business, the value of such Subsidiary shall be limited
to the amount of the Company's capital investment therein.
51
<PAGE> 54
OWNERSHIP OF UNITS
The following table sets forth certain information regarding beneficial
ownership of membership interests in the Company ("Units"), as of June 30, 1997,
by each person who is known by the Company to own beneficially more than 5% of
the Units, by each director of the Company, each of the executive officers and
by all directors and executive officers of the Company as a group.
<TABLE>
<CAPTION>
PERCENTAGE OF
NAME(1) NUMBER OF UNITS UNITS
--------------------------------------------------------- --------------- -------------
<S> <C> <C>
Jack B. Binion........................................... 80,999,065(2) 80.704818%
Phyllis M. Cope.......................................... 6,555,882(3) 6.532066%
Yewdale.................................................. 7,017,220(4) 6.991728%
HGI...................................................... 30,715,128(5) 30.603548%
Peri Howard.............................................. 9,027,039(6) 8.994246%
Paul Alanis.............................................. 3,155,935 3.144470%
J. Michael Allen......................................... 1,316,203 1.311422%
Walter J. Haybert........................................ 500,489 *
John Schreiber........................................... 750,734 *
Directors and executive officers as a group (11
persons)............................................... 88,948,259 88.625134%
</TABLE>
- ---------------
* Less than 1%.
(1) The persons named in this table have sole voting power and investment power
with respect to all shares of capital stock shown as beneficially owned by
them, subject to community property laws where applicable and the
information contained in this table and these notes.
(2) Includes (a) the 17,366,247 Units held by Mr. Binion as an individual; (b)
the 30,715,128 Units owned by HGI, of which Mr. Binion is President,
Chairman of the Board of Directors and the majority shareholder; (c) the
6,555,882 Units owned by Phyllis M. Cope; (d) the 9,027,039 Units owned by
Peri Howard; and (e) 17,334,769 Units held by members of Mr. Binion's family
or trusts for the benefit of members of Mr. Binion's family. Mr. Binion
expressly disclaims beneficial ownership of the 63,632,818 Units which are
held of record by HGI or by members of Mr. Binion's family or by trusts
established for the benefit of certain members of the families of Mr. Binion
or Phyllis M. Cope, for purposes of Sections 13(d) and 13(g) of the Exchange
Act.
(3) Includes 3,277,941 Units held by Phyllis M. Cope, as Trustee of the Ted J.
Fechser Trust, and 3,277,941 Units held by Phyllis M. Cope, as Trustee of
the Fancy Ann Fechser Trust. Phyllis M. Cope expressly disclaims beneficial
ownership of any Units held by her as trustee of such trusts, which are
trusts established for the benefit of certain members of the families of Mr.
Binion or Phyllis M. Cope, for purposes of Sections 13(d) and 13(g) of the
Exchange Act.
(4) Issuable upon Yewdale's exercise of Company Warrants.
(5) Includes 7,017,220 Units to be surrendered by Mr. Binion upon Yewdale's
exercise of Company Warrants.
(6) Includes 945,059 Units held by Peri Howard, as Trustee of the Ted J. Fechser
Trust, 945,059 Units held by Peri Howard, as Trustee of the Fancy Ann
Fechser Trust, 945,059 Units held by Peri Howard, as Trustee of the James
Christopher Fechser Trust, 945,059 Units held by Peri Howard, as Trustee of
the Robert Daniel Fechser Trust, 945,059 Units held by Peri Howard, as
Trustee of the Katie O'Neill Trust, 945,059 Units held by Peri Howard, as
Trustee of the Kellie O'Neill Trust, 945,059 Units held by Peri Howard, as
Trustee of the Rachel Fechser Trust, 945,059 Units held by Peri Howard, as
Trustee of the Ben E. Johnson Trust, 189,013 Units held by Peri Howard, as
Trustee of the Bonnie Binion Trust, 189,013 Units held by Peri Howard, as
Trustee of the Benny Behnen Trust, 189,013 Units held by Peri Howard, as
Trustee of the Jack Behnen Trust, 231,779 Units held by Robinson Property
Group, Inc. (of which Peri Howard is the sole shareholder, director and
officer), 289,724 Units held by Jerry Howard, and 378,025 Units held by Peri
Howard as an individual. Peri Howard expressly disclaims beneficial
ownership of any Units held by her as trustee of such trusts, which are
trusts established for the benefit of certain members of the families of Mr.
Binion or Phyllis M. Cope, for purposes of Sections 13(d) and 13(g) of the
Exchange Act.
52
<PAGE> 55
RELATED PARTY TRANSACTIONS
Entities controlled by Mr. Jack B. Binion developed and opened the
Horseshoe Bossier City, which is owned by HE, and developed and opened the
Horseshoe Casino Center, which is owned by RPG. HE commenced operations on July
9, 1994 and RPG commenced operations on February 13, 1995. The ownership
interests in such entities were transferred to the Company by Mr. Binion and
certain other related and unrelated parties in exchange for ownership interests
in the Company. Mr. Binion, the largest equityholder of Horseshoe Gaming, is
also the majority shareholder, Chairman of the Board of Directors and Chief
Executive Officer of Horseshoe Gaming, Inc. See "Directors and Executive
Officers of the Registrant." HGI became the Manager of the Company as a result
of the Roll-Up Transaction. Pursuant to the Company's Limited Liability Company
Agreement, HGI has exclusive control over the business of the Company (subject
to specified exceptions), including the power to acquire and sell property,
execute documents, make all business management decisions, and raise equity
capital on behalf of the Company. The Company pays no compensation to HGI, but
reimburses HGI for all out-of-pocket expenses, including employment expenses. As
of August 8, 1997, HGI had 32 employees.
Mr. Binion has acquired from the other shareholders of the Horseshoe Club
Operating Company the right to use and license the name "Horseshoe" in
connection with all of the present and future Horseshoe Gaming Subsidiaries. In
turn, Mr. Binion has licensed the name "Horseshoe" to the Company for a nominal,
one-time license fee of $10,000. The license is a perpetual, non-exclusive
license to use the Horseshoe name.
In 1995 the Company engaged certain placement agents, including Onyx
Partners, Inc. ("Onyx") to offer the Senior Notes and Warrants. The Company also
engaged Onyx to arrange the Credit Facility. Onyx has acted as financial advisor
to the Company in respect of the Notes, for which the Company has paid Onyx a
fee of $600,000, and Onyx may in the future perform other financial advisory
services for the Company for a fee. Certain affiliates of Onyx hold Senior
Notes. Affiliates of Onyx are owners of interests in the Company.
The Company conducts a portion of its marketing through an entity that is
owned by the wife of an officer. Amounts paid to this company totaled $748,000
for the six months ended June 30, 1997 and $1,633,000, $1,029,000 and $84,000
for the years ended December 31, 1996, 1995 and 1994, respectively.
The Company has made loans to various employees with ownership interests in
the Company. The amount outstanding under these notes was $1,970,000 as of June
30, 1997. Since January 1, 1997, Mr. Alanis has borrowed $200,000, Mr. Haybert
has borrowed $70,000 and Mr. Ostrow has borrowed $95,000. The notes to employees
are secured by their ownership interests in the Company. The notes have various
due dates ranging from February 1998 through October 1999 and interest rates
ranging from 7% to 10%.
Admissions of outside investors or Management to any Operating Entity owned
separately by the Company and JBB Gaming Investments, L.L.C., a Delaware limited
liability company in which Mr. Binion and certain related persons are owners
("JBB"), will dilute the Company and JBB in proportion to their respective
percentage interests in such Operating Entity and any proceeds received by such
Operating Entity in connection with such admissions will be distributed to the
Company and JBB in such proportion.
To facilitate further consolidation, after the gaming business of an
Operating Entity has been in operation for a period of three years, the Company
will purchase the direct or indirect interest in such Operating Entity then held
by JBB by using either cash or membership interests in the Company, at the
option of JBB, provided that JBB shall accept membership interests in the
Company in lieu of any amounts that cannot be paid in cash due to limitations
under loan documents of the Company or otherwise. In either case, the value of
the purchased interests will be determined based on a value of such Operating
Entity equal to four times the average annual EBITDA of such Operating Entity
during the preceding two-year period, less the amount of indebtedness to which
such Operating Entity is then subject. The value of any membership interests in
the Company to be issued in connection with such purchase will be determined
using the abovedescribed value for such Operating Entity and such value of the
other holdings of the Company as is determined by an independent appraisal.
53
<PAGE> 56
DESCRIPTION OF CERTAIN OTHER INDEBTEDNESS
The following is a summary of the Credit Facility, the Senior Notes, the
Horseshoe Entertainment Intercompany Senior Notes and the Robinson Property
Group Intercompany Senior Notes. This summary is qualified in its entirety by
reference to such documents, copies of which are available upon request. See
"Available Information."
CREDIT FACILITY
The Company entered into the Credit Facility on October 10, 1995, borrowing
at that time an aggregate of $93 million out of an initial availability of $100
million (the "Initial Credit Facility"). The proceeds of the Initial Credit
Facility were used to repay certain outstanding indebtedness and for other
purposes. The terms of the Credit Facility permit the Company to incur
additional indebtedness under specified circumstances. The outstanding principal
balance under the Credit Facility as of June 30, 1997 was $250,000. The Company
intends to amend the Credit Facility or enter into a new revolving credit
facility to provide for approximately $130 million of borrowing capacity. There
can be no assurance that such an amendment will be executed or that the Company
will be able to obtain additional financing on acceptable terms, if at all. See
"Risk Factors -- Liquidity."
Facility:.................. $150 million Credit Facility.
Maturity:.................. September 30, 1999.
Interest Rate:............. 6-month LIBOR + 3.00%.
Guarantees:................ The Credit Facility is guaranteed unconditionally
as to principal, premium, if any, and interest, on
a senior secured basis by RPG.
Excess Funding Offer:...... On October 10, 1996, and every six months
thereafter (the "Excess Funding Offer Dates"), if
the Company has not begun to fund any new Casino
project, has not committed funds to new projects,
and does not need to reserve funds for new
projects, and cash and cash equivalents on hand
exceed $60 million, the Company is required to use
the cash and cash equivalents on hand in excess of
$50 million at its option to either (i) repay
amounts drawn on the Credit Facility or (ii) offer
to repurchase the Senior Notes at par on a pro rata
basis for Cash in the amount of such excess over
$50 million in increments of $100,000 (an "Excess
Funding Offer"). The Company is not required to
establish a sinking fund.
Change of Control:......... Upon the occurrence of a Change of Control, the
Company will be required to make an offer to repay
the Credit Facility at a price equal to 101% of the
principal amount thereof, together with accrued and
unpaid interest, if any, to the date of repurchase.
Mandatory Amortization:.... Semi-annual principal payments of 5% of the then
existing balance, commencing March 31, 1996.
Excess Proceeds Escrow
Account:................. The Company created an Excess Proceeds Escrow
Account to hold the excess proceeds of the Senior
Notes and the Credit Facility which were not being
used at the closing for the repayment of debt or
the development of projects. The Excess Proceeds
Escrow Account restricts the use of such excess
proceeds to the pursuit and development of New
Projects and the repayment of debt. The Excess
Proceeds Escrow Account is administered by an
independent escrow agent.
54
<PAGE> 57
Certain Additional
Covenants:................. The Credit Facility contains certain customary
financial and other covenants which prohibit the
Company and its subsidiaries from incurring
indebtedness (including, except in certain
specified circumstances, any capital that is
required to be repurchased or redeemed on or prior
to September 30, 1999, the stated maturity of such
Senior Debt), other than the incurrence of (a)
additional indebtedness, if no Default or Event of
Default (as defined) has occurred and is continuing
and, after giving effect thereto, a 2.5 to 1 pro
forma Consolidated Coverage Ratio (as defined) has
been met, (b) the Senior Notes purchased pursuant
to the Warrants, (c) up to $15 million of Purchase
Money Indebtedness, (d) up to $5 million of working
capital Indebtedness for each of the Subsidiaries,
(e) certain Refinancing Indebtedness, (f) up to $10
million of additional indebtedness for the Company
and the Guarantor collectively, (g) borrowings of
up to $150 million under the Credit Facility and
(h) any Permitted Indebtedness (as defined). As of
March 31, 1997, the Company's Consolidated Coverage
Ratio was 3.3 to 1. After giving pro forma effect
to the sale of the Old Notes and the application of
the net proceeds thereof, the Consolidated Coverage
Ratio would have been 2.5 to 1. In addition, the
Credit Facility prohibits the Company and its
Subsidiaries from (a) making any Restricted
Payments (as defined) if (i) a Default or an Event
of Default has occurred and is continuing, (ii) the
Company could not incur at least $1.00 of
additional Indebtedness pursuant to the 2.5 to 1
pro forma Consolidated Coverage Ratio test, or
(iii) the aggregate amount of all Restricted
Payments made by the Company and its Subsidiaries,
including such proposed Restricted Payment, would
exceed the sum of (x) 50% of the aggregate
Consolidated Net Income of the Company of the
period from January 1, 1997 through the last fiscal
quarter then ended, plus (y) the aggregate Net Cash
Proceeds received by the Company from the sale of
the Company's Qualified Capital (as defined) after
the Issue Date (as defined), except in certain
specified circumstances. The Existing Indenture
also prohibits the Company and its Subsidiaries
from consolidating or merging with an affiliate or
third party, selling substantially all of the
Company's or its subsidiaries' assets, or making
any payment on subordinated indebtedness prior to
its scheduled maturity. The Company also must
invest excess funds in cash equivalents (as
defined) and government securities with a maturity
of one year or less.
Ranking:................... The Credit Facility is a senior obligation of the
Company and ranks Pari Passu in right of payment
with all other senior indebtedness of the Company.
Collateral:................ The Credit Facility is secured by a pledge of the
HE Intercompany Senior Note (defined below) and the
RPG Intercompany Senior Note (defined below), which
are secured by first liens on the Casino and real
property of the Horseshoe Bossier City and the
Horseshoe Casino Center, respectively.
Additionally, the Credit Facility will have a first
lien on all Intercompany Notes received by the
Company from its Subsidiaries, in each case secured
by a first lien on the Casino and real property of
each such Subsidiary, and is secured by a pledge of
the Company's ownership interests in RPG and all
present and future Subsidiaries, other than a
pledge of NGCP's interest in HE, and by a pledge of
the minority interests in all present and future
Subsidiaries owned by Binion Partners. The delivery
and enforcement of pledges of
55
<PAGE> 58
ownership interests in Subsidiaries will generally
be governed by laws and regulations concerning
gaming activities in the respective jurisdictions.
Prepayment:................ The Credit Facility will be prepayable at any time
at 101% of par, plus accrued and unpaid interest,
if any, to the prepayment date.
SENIOR NOTES
The Company entered into the Senior Indenture on October 10, 1995,
borrowing at that time an aggregate of $100 million. On April 10, 1996, the
Company issued an additional $50 million of Senior Notes pursuant to the
exercise of warrants to purchase such Senior Notes that had been issued on
October 10, 1995 (the "Warrants"). On June 25, 1997, the Company acquired $13
million in aggregate principal amount of Senior Notes.
Senior Notes:.............. $137 million aggregate principal amount of 12.75%
Senior Notes due September 30, 2000, Series B.
Maturity:.................. September 30, 2000.
Interest Rate:............. 12.75% per annum, payable semi-annually in arrears.
Guarantee:................. The Senior Notes are guaranteed unconditionally as
to principal, premium, if any, and interest, on a
senior secured basis by RPG.
Excess Funding Offer:...... On the Excess Funding Offer Dates, if the Company
has not begun to fund any new Casino project, has
not committed funds to new projects, and does not
need to reserve funds for new projects, and cash
and cash equivalents on hand exceed $60 million,
the Company will be required to use the cash and
cash equivalents on hand in excess of $50 million
to make an Excess Funding Offer. The Company is not
required to establish a sinking fund.
Change of Control:......... Upon the occurrence of a Change of Control, the
Company will be required to make an offer to
repurchase the Senior Notes at a price equal to
101% of the principal amount thereof, together with
accrued and unpaid interest, if any, to the date of
repurchase.
Excess Proceeds Escrow
Account:................. The Company created an Excess Proceeds Escrow
Account to hold the excess proceeds of the Senior
Notes and the Credit Facility which were not being
used at the closing for the repayment of debt or
the development of projects.
Certain Additional
Covenants:................. The Senior Indenture contains certain customary
financial and other covenants which prohibit the
Company and its subsidiaries from incurring
indebtedness (including, except in certain
specified circumstances, any capital that is
required to be repurchased or redeemed on or prior
to September 30, 2000, the stated maturity of such
Senior Notes, other than the incurrence of (a)
additional indebtedness, if no Default or Event of
Default (as defined) has occurred and is
continuing, and after giving effect thereto, a 2.5
to 1 pro forma Consolidated Coverage Ratio (as
defined) has been met, (b) the Senior Notes
purchased pursuant to the Warrants, (c) up to $15
million of Purchase Money Indebtedness, (d) up to
$5 million of working capital Indebtedness for each
of the Subsidiaries, (e) certain Refinancing
Indebtedness, (f) up to $10 million of additional
indebtedness for the Company and the Guarantor
collectively, (g) borrowings of up to $150 million
under the Credit Facility and
56
<PAGE> 59
(h) any Permitted Indebtedness (as defined). As of
March 31, 1997, the Company's Consolidated Coverage
Ratio was 3.3 to 1.0. After giving pro forma effect
to the sale of the Old Notes and the application of
the net proceeds thereof, the Consolidated Coverage
Ratio would have been 2.5 to 1. In addition, the
Senior Indenture prohibits the Company and its
Subsidiaries from (a) making any Restricted
Payments (as defined) if (i) a Default or an Event
of Default has occurred and is continuing, (ii) the
Company could not incur at least $1.00 of
additional Indebtedness pursuant to the 2.5 to 1
pro forma Consolidated Coverage Ratio test, or
(iii) the aggregate amount of all Restricted
Payments made by the Company and its Subsidiaries
including such proposed Restricted Payment would
exceed the sum of (x) 50% of the aggregate
Consolidated Net Income of the Company of the
period from January 1, 1997 through the last fiscal
quarter then ended, plus (y) the aggregate Net Cash
Proceeds received by the Company from the sale of
the Company's Qualified Capital (as defined) after
the Issue Date (as defined), except in certain
specified circumstances. The Senior Indenture also
prohibits the Company and its Subsidiaries from
consolidating or merging with an affiliate or third
party, selling substantially all of the Company's
or its subsidiaries' assets, or making any payment
on subordinated indebtedness prior to its scheduled
maturity. The Company also must invest excess funds
in cash equivalents (as defined) and government
securities with a maturity of one year or less.
Ranking:................... The Senior Notes are senior obligations of the
Company and rank Pari Passu in right of payment
with all other senior indebtedness of the Company.
Collateral:................ The Senior Notes are secured by a second pledge of
the HE Intercompany Senior Note (defined herein)
and the RPG Intercompany Senior Note (defined
herein), which are secured by a second lien
position on the Casino and real property of the
Horseshoe Bossier City and the Horseshoe Casino
Center, respectively. Additionally, the Senior
Notes will have a second lien on all Intercompany
Notes received by the Company from its
Subsidiaries, in each case secured by a second lien
on the Casino and real property of each such
Subsidiary, and is secured by a second pledge of
the Company's ownership interests in RPG and all
present and future Subsidiaries, other than a
pledge of NGCP's interest in HE, and by a second
pledge of the minority interests in all present and
future Subsidiaries owned by Binion Partners. The
delivery and enforcement of pledges of ownership
interests in Subsidiaries will generally be
governed by laws and regulations concerning gaming
activities in the respective jurisdictions.
Optional Redemption:....... The Senior Notes are not redeemable, in whole or in
part, prior to September 30, 1999 except as set
forth below. Thereafter, the Senior Notes will be
redeemable for cash from time to time at the
Company's option, in whole or in part, at a price
equal to 102.55% of the principal amount thereof,
together with accrued interest to the date of
redemption.
Prior to September 30, 1998, the Company may redeem
up to 35% of the aggregate principal amount of
Senior Notes then outstanding at a redemption price
of 110% of the principal amount thereof, plus
accrued and unpaid interest, if any, to the date of
redemption, with the net cash proceeds of an
underwritten public offering by the Company of
common
57
<PAGE> 60
stock pursuant to an effective registration
statement under the Securities Act.
HORSESHOE ENTERTAINMENT INTERCOMPANY SENIOR NOTES
Issuer:.................... Horseshoe Entertainment, a Louisiana limited
partnership
Issue:..................... $250 million of Horseshoe Entertainment
Intercompany Senior Notes (the "HE Intercompany
Senior Note").
Maturity:.................. September 30, 2000.
Coupon:.................... 13.31% per annum, payable quarterly in arrears.
Mandatory Redemption:...... Semi-annual principal payments of 5% of the then
existing balance, commencing March 31, 1996.
Ranking:................... The HE Intercompany Senior Note is a senior secured
obligation of HE and ranks Pari Passu in right of
payment with all other senior indebtedness of HE.
Use of Proceeds:........... The proceeds of the HE Intercompany Senior Note
have been and will be used to: (i) refinance
existing indebtedness; (ii) fund the expansion of
the Horseshoe Bossier City; and (iii) maintain
adequate working capital.
Change of Control:......... Upon the occurrence of a Change of Control, HE is
required to make an offer to repurchase the HE
Intercompany Senior Note at a price equal to 101%
of the principal amount thereof, together with
accrued and unpaid interest, if any, to the date of
repurchase.
Limitation on Restricted
Payments:................ HE shall not, as long as the HE Intercompany Senior
Note is outstanding, enter into any agreement that
would restrict distributions on outstanding limited
partnership interests or prohibit the payment of
interest and principal on the HE Intercompany
Senior Note.
ROBINSON PROPERTY GROUP INTERCOMPANY SENIOR NOTES
Issuer:.................... Robinson Property Group Limited Partnership, a
Mississippi limited partnership
Issue:..................... $125 million of Robinson Property Group
Intercompany Senior Notes (the "RPG Intercompany
Senior Note").
Maturity:.................. September 30, 2000.
Coupon:.................... 13.31% per annum, payable quarterly in arrears.
Mandatory Redemption:...... The RPG Intercompany Senior Note will be redeemed
at par with available cash flow (as defined) after
permitted tax distributions, mandatory principal
payments on indebtedness and funding of capital
reserves and working capital.
Ranking:................... The RPG Intercompany Senior Note is a senior
secured obligation of RPG and will rank Pari Passu
in right of payment with all other senior
indebtedness of RPG.
Use of Proceeds:........... The proceeds of the RPG Intercompany Senior Note
have been and will be used to: (i) refinance
existing indebtedness; (ii) fund the expansion of
the Horseshoe Casino Center; and (iii) maintain
adequate working capital.
58
<PAGE> 61
Change of Control:......... Upon the occurrence of a Change of Control, RPG is
required to make an offer to repurchase the RPG
Intercompany Senior Note at a price equal to 101%
of the principal amount thereof, together with
accrued and unpaid interest, if any, to the date of
repurchase.
Limitation on Restricted
Payment:................. RPG shall not, as long as the RPG Intercompany
Senior Note is outstanding, enter into any
agreement that would restrict distributions on
outstanding limited partnership interests or
prohibit the payment of interest and principal on
the RPG Intercompany Senior Note.
HORSESHOE ENTERTAINMENT INTERCOMPANY SENIOR SUBORDINATED NOTES
Issuer:.................... Horseshoe Entertainment, a Louisiana limited
partnership
Issue:..................... $50 million of Horseshoe Entertainment Intercompany
Senior Subordinated Notes (the "HE Intercompany
Note").
Maturity:.................. June 15, 2007.
Coupon:.................... 9.39% per annum, payable semi-annually in arrears.
Mandatory Redemption:...... None.
Ranking:................... The HE Intercompany Note is a senior secured
obligation of HE and will rank Pari Passu in right
of payment with all other senior indebtedness of
HE.
Use of Proceeds:........... The proceeds of the HE Intercompany Note will be
used to: (i) fund the expansion of the Horseshoe
Bossier City and (ii) maintain adequate working
capital.
Change of Control:......... Upon the occurrence of a Change of Control, HE is
required to make an offer to repurchase the HE
Intercompany Note at a price equal to 101% of the
principal amount thereof, together with accrued and
unpaid interest, if any, to the date of repurchase.
Limitation on Restricted
Payments:................ HE shall not, as long as the HE Intercompany Note
is outstanding, enter into any agreement that would
restrict distributions on outstanding limited
partnership interests or prohibit the payment of
interest and principal on the HE Intercompany Note.
ROBINSON PROPERTY GROUP INTERCOMPANY SENIOR SUBORDINATED NOTES
Issuer:.................... Robinson Property Group Limited Partnership, a
Mississippi limited partnership
Issue:..................... $25 million of Robinson Property Group Intercompany
Senior Subordinated Notes (the "RPG Intercompany
Note").
Maturity:.................. June 15, 2007.
Coupon:.................... 9.39% per annum, payable semi-annually in arrears.
Mandatory Redemption:...... None.
Ranking:................... The RPG Intercompany Note is a senior secured
obligation of RPG and will rank Pari Passu in right
of payment with all other senior indebtedness of
RPG.
59
<PAGE> 62
Use of Proceeds:........... The proceeds of the RPG Intercompany Note will be
used to: (i) fund the expansion of the Horseshoe
Casino Center and (ii) maintain adequate working
capital.
Change of Control:......... Upon the occurrence of a Change of Control, RPG is
required to make an offer to repurchase the RPG
Intercompany Note at a price equal to 101% of the
principal amount thereof, together with accrued and
unpaid interest, if any, to the date of repurchase.
Limitation on Restricted
Payment:................. RPG shall not, as long as the RPG Intercompany Note
is outstanding, enter into any agreement that would
restrict distributions on outstanding limited
partnership interests or prohibit the payment of
interest and principal on the RPG Intercompany
Note.
60
<PAGE> 63
DESCRIPTION OF NOTES
The New Notes will be issued pursuant to an indenture dated as of June 15,
1997 (the "Indenture"), between the Company, Robinson Property Group Limited
Partnership, as guarantor (the "Guarantor") and U.S. Trust Company of Texas,
N.A., as trustee (the "Trustee"), a copy of which will be made available to
Holders of the Notes upon request. Upon the effectiveness of the Registration
Statement of which this Prospectus is a part, the Indenture will be subject to
and governed by the Trust Indenture Act of 1939, as amended. The following
summaries of certain material provisions of the Indenture do not purport to be
complete, and where reference is made to particular provisions of the Indenture,
such provisions, including the definitions of certain terms, are incorporated by
reference as a part of such summaries or terms, which are qualified in their
entirety by such reference. The definitions of certain capitalized terms used in
the following summary are set forth below under "-- Certain Definitions."
Capitalized terms not otherwise defined herein shall have the meaning ascribed
to such terms in the Indenture.
GENERAL
The Notes will mature on June 15, 2007, and are limited to $160 million
aggregate principal amount. Each Note bears interest at the rate of 9 3/8% per
annum from June 25, 1997 (the "Issue Date"), or from the most recent interest
payment date to which interest has been paid, payable semiannually on June 15
and December 15 of each year, commencing December 15, 1997, to the person in
whose name the Note (or any predecessor Note) is registered at the close of
business on June 1 or December 1 next preceding such interest payment date.
Interest will be computed on the basis of a 360-day year of twelve, 30-day
months.
Principal of, premium, interest and Liquidated Damages, if any, on the
Notes are payable, and the Notes are exchangeable and transferable, at the
office or agency of the Company in The City of New York (which initially is the
corporate trust office of the Trustee). At the option of the Company, interest
payments and Liquidated Damages, if any, may be made by check mailed to the
Holder of the Note at such Holder's registered address. No service charge will
be made for any registration of transfer or exchange or redemption of Notes,
except for certain taxes or other governmental charges that may be imposed in
connection with any registration of transfer or exchange.
SUBORDINATION
The payment of principal of, and premium, interest and Liquidated Damages
(if any), on the Notes, and any other amounts payable by the Company with
respect to the Notes, is subordinated in right of payment, as set forth in the
Indenture, to the prior payment in full of all Senior Debt of the Company,
whether outstanding on the date of the Indenture or thereafter incurred.
Upon any distribution to creditors of the Company in a liquidation or
dissolution of the Company or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to the Company or its property, an
assignment for the benefit of creditors or any marshalling of the Company's
assets and liabilities, the holders of Senior Debt of the Company will be
entitled to receive payment in full of all Obligations due in respect of such
Senior Debt (including interest after the commencement of any such proceeding at
the rate specified in the applicable Senior Debt) before the holders of Notes
will be entitled to receive any payment with respect to the Notes, and until all
Obligations with respect to Senior Debt of the Company are paid in full in cash,
any distribution to which the holders of Notes would be entitled shall be made
to the holders of such Senior Debt (except that holders of Notes may receive
securities that are subordinated at least to the same extent as the Notes to
Senior Debt and any securities issued in exchange for Senior Debt and payments
made from the trust described under "-- Legal Defeasance and Covenant
Defeasance").
The Company also may not make any payment upon or in respect of the Notes
and may not offer to repurchase Notes (except in such subordinated securities or
from the trust described under "-- Legal Defeasance and Covenant Defeasance") if
(i) a default in the payment of the principal of or interest on Designated
Senior Debt occurs and has not been cured or waived in writing or (ii) any other
default occurs and is continuing with respect to Designated Senior Debt that
permits holders of the Designated Senior Debt as to which such default relates
to accelerate its maturity and the Trustee receives a notice of such default (a
61
<PAGE> 64
"Payment Blockage Notice") from the Company or the holders of any Designated
Senior Debt. Payments on the Notes may and shall be resumed (a) in the case of a
payment default, upon the date on which such payment default is cured or waived
and (b) in case of a nonpayment default, the earlier of the date on which such
nonpayment default is cured or waived or 179 days after the date on which the
applicable Payment Blockage Notice is received, unless the maturity of any
Designated Senior Debt has been accelerated. No new period of payment blockage
may be commenced unless and until 360 days have elapsed since the effectiveness
of the immediately prior Payment Blockage Notice. No nonpayment default that
existed or was continuing on the date of delivery of any Payment Blockage Notice
to the Trustee by any holders of Designated Senior Debt, and which is known to
the holders of such Designated Senior Debt, shall be, or be made, the basis for
a subsequent Payment Blockage Notice (unless such nonpayment default shall have
been cured or waived for a period of not less than 181 days).
The Indenture further requires that the Company promptly notify holders of
Senior Debt of the receipt of an acceleration notice following an Event of
Default.
The Guarantee of the Guarantor and each Additional Guarantor is
subordinated to the payment in full of all Obligations with respect to Senior
Debt of the Guarantor or such Additional Guarantor in the same manner and to the
same extent as the Notes are subordinated Senior Debt of the Company. See
"Guarantee" and "Certain Covenants -- Additional Subsidiary Guarantors."
As a result of the subordination provisions described above, in the event
of a liquidation or insolvency, holders of Notes may recover less ratably than
creditors of the Company who are holders of Senior Debt. As of June 30, 1997,
the Company and the Guarantor had outstanding approximately $137 million in
principal amount of Senior Debt. The Indenture limits the amount of additional
Indebtedness, including Senior Debt, that the Company and its Subsidiaries can
incur. See "Certain Covenants -- Limitation on Incurrence of Additional
Indebtedness and Disqualified Capital."
GUARANTEE
The Notes are unconditionally guaranteed by RPG. See "Summary -- Terms of
New Notes." The Company is required to cause its Subsidiaries which in the
future are wholly-owned by the Company and which operate a Casino or Related
Business and certain of its Subsidiaries that guarantee other Indebtedness of
the Company to guarantee the Notes. See "-- Certain Covenants." The obligations
of each guarantor under its guarantee are not to exceed the maximum amount
permitted by applicable law.
OPTIONAL REDEMPTION
The Notes are redeemable at the option of the Company, in whole or in part,
at any time on or after June 15, 2002 at the Redemption Prices (expressed as
percentages of the principal amount thereof) set forth below together with
accrued and unpaid interest and Liquidated Damages, if any, to the Redemption
Date, if redeemed during the 12-month period beginning on June 15 of the years
indicated:
<TABLE>
<CAPTION>
YEAR REDEMPTION PRICE
--------------------------------------------- ----------------
<S> <C>
2002......................................... 104.688%
2003......................................... 103.125%
2004......................................... 101.563%
2005 and thereafter.......................... 100.000%
</TABLE>
At any time, or from time to time, prior to June 15, 2000, up to 30% in
aggregate principal amount of Notes originally issued under the Indenture will
be redeemable, at the option of the Company, from the net proceeds of one or
more Public Equity Offerings of the Company, at a Redemption Price equal to 110%
of the principal amount thereof, together with accrued but unpaid interest and
Liquidated Damages, if any, to the Redemption Date.
If less than all of the Notes are to be redeemed at any time, selection of
Notes for redemption will be made by the Trustee not more than 60 days prior to
the Redemption Date by such method as the Trustee shall
62
<PAGE> 65
deem fair and appropriate; provided, however, that Notes will not be redeemed in
amounts less than the minimum authorized denomination of $1,000. Notice of
redemption shall be mailed by first class mail not less than 30 days nor more
than 60 days prior to the Redemption Date to each Holder of a Note to be
redeemed at its registered address. If any Note is to be redeemed in part only,
the notice of redemption that relates to such Note shall state the portion of
the principal amount thereof to be redeemed. A new Note in a principal amount
equal to the unredeemed portion thereof will be issued in the name of the Holder
thereof upon cancellation of the original Note. On and after the Redemption
Date, interest will cease to accrue on Notes or portions thereof called for
redemption.
REGULATORY REDEMPTION
The Indenture provides that if ownership of any of the Notes by any person
or entity will (i) preclude the issuance, maintenance, existence or
reinstatement of any gaming or liquor license, or permit or approval of any
Gaming Authority as determined by any Governmental Authority as a result of such
holder failing to qualify or to be found suitable under applicable Gaming Laws
or failing to apply for a finding of suitability after being notified to do so
by the Company or by the appropriate Governmental Authority, or (ii) preclude,
interfere with, threaten or delay the issuance, maintenance, existence or
reinstatement of any gaming or liquor license, permit or approval, or result in
the imposition of burdensome terms or conditions on such license, permit or
approval, as determined by the Board of Managers of the Company, the Holder
shall be obligated to dispose of such Holder's Notes (in which event the Company
shall have no obligation to pay any interest to such Holder), and, if such Notes
are not so disposed of within the required period, the Company shall have the
right to redeem such Holder's Notes for cash at a redemption price equal to (A)
in the case of a redemption pursuant to clause (a) above, the lowest of (i) the
price at which such Holder or beneficial owner acquired such Notes, without
accrued interest, if any, (ii) the principal amount of such Notes, without
accrued and unpaid interest or Liquidated Damages, if any, and (iii) the Current
Market Price of such Notes on such redemption date, without accrued and unpaid
interest or Liquidated Damages, if any (provided that, if a greater redemption
price is permitted by the relevant Gaming Authority, such higher redemption
price shall apply) and (B) in the case of a redemption pursuant to clause (b)
above, the Current Market Price, with all accrued and unpaid interest and
Liquidated Damages, if any (or such higher or lower price required by applicable
law or as specifically determined by an order of the relevant Governmental
Authority). The Indenture will provide that any Holder or beneficial owner of a
Note required to qualify or be found suitable under applicable Gaming Laws must
pay all investigative fees and costs of the Gaming Authorities in connection
with such application therefor.
Each Holder, by accepting the Notes, shall be deemed to have agreed (to the
extent permitted by applicable law) that if the Mississippi Gaming Commission
requires that a person who is a Holder or beneficial owner of any of the Notes
must be licensed or found suitable under applicable gaming laws, such Holder or
beneficial owner shall apply for a license or a finding of suitability within
the required time period. If such person fails to apply or become licensed or is
not found suitable, the Company may elect, at its option (i) to require such
Holder to dispose of its Notes or beneficial interest therein within 10 days of
receipt of notice of the Company's election or such time as may be ordered by
the Mississippi Gaming Commission, or (ii) to redeem such Notes for cash at a
price equal to the lowest of (x) the price at which such Holder or beneficial
owner acquired such Notes, (y) the principal amount of such Notes and (z) the
Current Market Price of such Notes, in each case excluding accrued and unpaid
interest and Liquidated Damages, if any from the date the Mississippi Gaming
Commission serves notice to the Company of a determination of unsuitability to
the redemption date, in accordance with applicable law.
CERTAIN COVENANTS
Set forth below are certain covenants contained in the Indenture.
Limitation on Restricted Payments
(a) The Indenture provides that the Company will not, and will not permit
any of its Subsidiaries to, directly or indirectly, make any Restricted Payment,
except as set forth in paragraphs (b) and (c) below, if,
63
<PAGE> 66
immediately prior thereto and after giving effect thereto on a pro forma basis,
(1) an Event of Default or an event which would, after notice or passage of time
or both, be an Event of Default (a "Default") shall have occurred and be
continuing, (2) the Company could not incur at least $1.00 of additional
Indebtedness pursuant to clause (ii) of paragraph (a) of the covenant described
under "Limitation on Incurrence of Additional Indebtedness and Disqualified
Capital," or (3) the aggregate amount of all Restricted Payments made by the
Company and its Subsidiaries, including after giving pro forma effect to such
proposed Restricted Payment, from and after January 1, 1997, would exceed the
sum of (a) 50% of the aggregate Adjusted Consolidated Net Income of the Company
for the period (taken as one accounting period) commencing on January 1, 1997,
to and including the last day of the latest fiscal quarter ended immediately
prior to the date of each such calculation for which financial statements are
available (or, in the event Adjusted Consolidated Net Income for such period is
a deficit, then minus 100% of such deficit), plus (b) the aggregate Net Cash
Proceeds received by the Company from the sale of specified forms of the
Company's capital (other than to a Subsidiary of the Company and other than in
connection with a Qualified Exchange) after the Issue Date, plus (c) the amount
by which Indebtedness of the Company or any Guarantor is reduced on the
Company's balance sheet upon the conversion or exchange (other than an issuance
or sale to a Subsidiary of the Company or an employee stock ownership plan or
other trust established by the Company or any of it Subsidiaries) subsequent to
the end of the most recent fiscal quarter ended immediately prior to the date of
the Indenture, of any Indebtedness of the Company or any Guarantor convertible
or exchangeable for Capital (other than Disqualified Capital) of the Company
(less the amount of any cash or other property distributed by the Company or any
Restricted Subsidiary upon such conversion or exchange), plus (d) the amount
equal to the net reduction in Investments resulting from (A) payments of
dividends, repayments of loans or advances or other transfers of assets to the
Company or any Guarantor or the satisfaction or reduction (other than by means
of payments by the Company or any Subsidiary) of obligations of other persons
which have been guaranteed by the Company or any Guarantor or (B) the
redesignation of Unrestricted Subsidiaries as Subsidiaries which execute
Guarantees, in each case of (a) through (d) such net reduction in Investments
being (x) valued as provided in the definition of "Investment," (y) in an amount
not to exceed the aggregate amount of Investments previously made by the Company
or any Guarantor which were treated as a Restricted Payment, and (z) included in
this clause (d) only to the extent not included in Consolidated Net Income. In
the event that the Company or a Subsidiary makes an Investment in a Subsidiary
pursuant to the proviso contained in the definition of Investments, and such
latter Subsidiary is subsequently designated an Unrestricted Subsidiary, such
Investment shall be deemed to be a Restricted Payment made at the time the
latter Subsidiary is designated an Unrestricted Subsidiary, and shall be subject
to the provisions of this covenant.
(b) Notwithstanding anything in paragraph (a) above to the contrary, from
and after the Issue Date, unless a Default or an Event of Default shall have
occurred and be continuing, the following Restricted Payments shall be
permitted: (u) Investments in one or more persons in an amount not in excess of
$50 million in the aggregate at any one time outstanding for all such
Investments made in any one or more persons in reliance upon this clause (u),
for the purpose of developing, constructing or acquiring (A) a Casino or Casinos
or, if applicable, any Related Business in connection with such Casino or
Casinos, or (B) a Related Business to be used primarily in connection with an
existing Casino or Casinos; provided that to the extent the Company or any
Subsidiary has received cash distributions from any such person, the amount
thereof will be deemed to reduce the amount of Investments (by 50 percent in the
case of returns in excess of capital and by 100 percent in the case of return of
capital), then outstanding under this clause (u) for the purposes of the $50
million limit, (v) in the case of any Subsidiary, pro rata distributions on its
Capital, (w) the payment of any dividend on or redemption of Qualified Capital
within 60 days after the date of its declaration or authorization, respectively,
if such dividend or redemption could have been made on the date of such
declaration or authorization, respectively, in compliance with the foregoing
provisions, (x) the redemption or repurchase of any Capital or Indebtedness of
the Company or any of its Subsidiaries (other than any Capital or Indebtedness
that is held or beneficially owned by any Excluded Person) required by the
Regulatory Redemption provisions of the Indenture (or any substantially
comparable provision governing other Indebtedness), (y) a Qualified Exchange or
(z) further Restricted Payments of any type which in the aggregate do not exceed
$50.0 million for all such Restricted Payments permitted by this clause (z)
taken together; provided,
64
<PAGE> 67
however, that no part of the Restricted Payments permitted by this clause (z)
will be made for purposes described in clause (u), it being the intention of the
parties that the $50.0 million limit set forth therein, respectively, be the
only amount available for the purposes specified in such clause (u) other than
amounts available under paragraph (a) above for Restricted Payments without
regard to the exceptions set forth in this paragraph (b); provided further,
however, that (i) no payment may be made pursuant to clause (z) to Mr. Binion,
Phyllis Cope, or members of their families unless the Company could then incur
at least $1.00 of additional Indebtedness, after taking into account any funding
of such Restricted Payments, under clause (A) described under "-- Limitation on
Incurrence of Additional Indebtedness and Disqualified Capital" and (ii) no
payments may be made pursuant to this clause (z) to any of Mr. Binion, Phyllis
Cope or members of their families until such time as the expansion projects of
the Horseshoe Casinos as described in "Summary" are complete. The full amount of
any Restricted Payment made pursuant to clause (w) or (x), however, will be
deducted in the calculation of the aggregate amount of Restricted Payments
available to be made referred to in clause (3) of the immediately preceding
paragraph.
(c) Notwithstanding anything in paragraph (a) or (b) to the contrary, from
and after the Issue Date (and for so long as Events of Default other than set
forth in clause (iii) of "-- Events of Default and Remedies" shall not have
occurred and be continuing), the Company and its Subsidiaries will be permitted
to make distributions to their equity holders in order to enable them to make
payments of taxes based upon their allocable shares of income and capital gains
of the Company and its Subsidiaries ("Permitted Tax Distributions"). The
Investor Limited Partners will be paid 100% of their percentage allocable
interest in income, gain, deduction, loss, capital gain and capital loss of HE
at the time NGCP receives the above described Permitted Tax Distribution
provided, however, that such payment of 100% of their percentage allocable
interest in income, gain, deduction, loss, capital gain or capital loss of HE to
the Investor Limited Partners with respect to each taxable year shall be limited
solely to cash distributions from HE for that taxable year. Adjusted
Consolidated Net Income will be calculated net of any such tax distributions.
Written notice of all such Permitted Tax Distributions will be given to the
Trustee within 15 days after the payment thereof.
Limitation on Incurrence of Additional Indebtedness and Disqualified Capital
The Indenture provides that, except as set forth below, neither the Company
nor any of its Subsidiaries will, directly or indirectly, issue, assume,
guarantee, incur, become directly or indirectly liable with respect to
(including as a result of an acquisition, merger or consolidation), extend the
maturity of, or otherwise become responsible for, contingently or otherwise
(individually and collectively, to "incur" or, as appropriate, an "incurrence"),
any Indebtedness or any Disqualified Capital from and after the Issue Date.
Notwithstanding the foregoing:
(a) The Company and the Guarantor may incur Indebtedness or
Disqualified Capital if (i) 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 Indebtedness or
Disqualified Capital and (ii) on the date of such incurrence (the
"Incurrence Date"), the Consolidated Coverage Ratio of the Company for the
Reference Period immediately preceding the Incurrence Date, after giving
effect on a pro forma basis to such incurrence of such Indebtedness or
Disqualified Capital, would be at least 2.0 to 1;
(b) The Company and the Guarantor may incur Indebtedness evidenced by
the Notes and represented by the Indenture and the Guarantee thereof;
(c) The Company and its Subsidiaries may incur Purchase Money
Indebtedness to finance the purchase of land, buildings, furniture,
fixtures and equipment for each Casino owned and operated by the Company or
a Subsidiary; provided, however, that such Purchase Money Indebtedness is
either (i) Non-recourse Indebtedness or (ii) limited in amount (including
any Indebtedness issued to refinance, replace or refund such Indebtedness)
with respect to any such Casino to the lesser of (A) the amount of Related
Business Assets used in such Casino and financed by such Purchase Money
Indebtedness, or (B) $15.0 million per Casino;
(d) The Company's Subsidiaries may each incur up to $5.0 million of
working capital Indebtedness at any time outstanding;
65
<PAGE> 68
(e) The Company and the Guarantor may incur indebtedness to refinance
any Indebtedness or Disqualified Capital, as applicable, described in
clauses (a), (b), (g) and (h) of this covenant and the Company and its
Subsidiaries may incur Refinancing Indebtedness with respect to any
Indebtedness described in clause (c) of this covenant;
(f) The Company and the Guarantor may incur Indebtedness (in addition
to any Indebtedness incurred in accordance with any other provision of this
covenant) in an aggregate amount outstanding at any time (including any
Indebtedness issued to refinance, replace, or refund such Indebtedness) of
up to $20.0 million for the Company and the Guarantor taken together;
(g) The Company may incur Indebtedness pursuant to the Credit Facility
(and the Guarantor may guarantee such Indebtedness) on or after the Issue
Date up to an aggregate amount outstanding at any time equal to the sum of
(i) $150.0 million minus the amount of any Indebtedness incurred pursuant
to this clause (g) which (A) is retired with the Net Cash Proceeds from any
Asset Sale, Event of Loss or assumed by a transferee in an Asset Sale, (B)
is retired, repaid, redeemed or otherwise defeased through the incurrence
of Refinancing Indebtedness, or (C) represents repayments of amounts
initially borrowed under the Credit Facility pursuant to any mandatory
redemption or mandatory principal amortization payment, plus (ii) such
additional amounts as may be deemed to be outstanding in the form of
Interest Swap and Hedging Obligations or Currency Exchange Protection
Agreements with lenders party to the Credit Facility; provided, however,
that the maximum aggregate amount permitted to be outstanding under this
paragraph (g) shall not be deemed to limit additional Indebtedness under
the Credit Facility to the extent such additional Indebtedness is permitted
pursuant to paragraph (a) hereof; and
(h) Permitted Indebtedness.
In the event that the Company incurs Indebtedness, or any Subsidiary incurs
Indebtedness or Disqualified Capital, to any Subsidiary pursuant to clause (b)
of the definition of Permitted Indebtedness, and such latter Subsidiary
thereafter ceases to remain a "Subsidiary" as defined in the Indenture, the
aggregate outstanding amount of such Indebtedness incurred by the Company, or of
such Indebtedness or Disqualified Capital incurred by such Subsidiary, to the
Subsidiary that ceases to so remain a "Subsidiary" shall be deemed to be
Indebtedness incurred by the Company or such Subsidiary at the time of such
change in Subsidiary status. Indebtedness and Disqualified Capital issued by any
person that is not a Subsidiary, which Indebtedness or Disqualified Capital is
outstanding at the time such person becomes a Subsidiary of the Company, or is
merged into or consolidated with the Company or a Subsidiary of the Company,
shall be deemed to have been incurred at the time such person becomes a
Subsidiary of the Company, or is merged into or consolidated with the Company or
a Subsidiary of the Company. A guarantee by the Company or a Subsidiary of the
Company of Indebtedness incurred by the Company or a Subsidiary is not
considered a separate incurrence for purposes of this covenant.
Limitation on Other Senior Subordinated Debt.
The Company will not incur, and will not permit any of its Subsidiaries to,
directly or indirectly, create, issue, assume, guarantee or otherwise become
directly or indirectly liable with respect to or become responsible for any
Indebtedness that is subordinate or junior in right of payment to any Senior
Debt (or in the case of a Guarantor, debt that is subordinate or junior in right
of payment to such Guarantor's Senior Debt) and senior in any respect in right
of payment to the Notes or in the case of a Guarantor, senior to the Guarantee
executed by the Guarantor.
Repurchase of Notes at the Option of the Holder Upon a Change of Control
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 irrevocable and
unconditional offer by the Company (the "Change of Control Offer"), to require
the Company to repurchase all or any part of such Holder's Notes on a date that
is no later than 30 Business Days after the occurrence of such Change of Control
(the "Change of Control Payment Date"), at a Cash price (the "Change of Control
Offer Price") equal to 101% of the principal amount thereof, together with
accrued and unpaid interest and Liquidated Damages, if any, to the purchase
date. The Change
66
<PAGE> 69
of Control Offer shall remain open for 20 Business Days following its
commencement and no longer, except to the extent that a longer period is
required by applicable law (the "Change of Control Offer Period"). Upon
expiration of the Change of Control Offer Period, the Company must purchase all
Notes tendered in response to the Change of Control Offer.
On or before the Change of Control Payment Date, the Company must (i)
accept for payment Notes or portions thereof properly tendered pursuant to the
Change of Control Offer, (ii) deposit with the Paying Agent U.S. Legal Tender or
Cash Equivalents (other than Credit Facility Notes or Senior Notes or Notes)
sufficient to pay the Change of Control Offer Price (together with accrued and
unpaid interest and Liquidated Damages if any) of all Notes so tendered and
(iii) deliver to the Trustee Notes so accepted together with an Officers
Certificate listing the Notes or portions thereof being purchased by the
Company. The Paying Agent will promptly mail to the Holders of Notes so accepted
payment in an amount equal to the Change of Control Offer Price (together with
accrued and unpaid interest and Liquidated Damages if any), the Guarantor shall
endorse and the Trustee will promptly authenticate and mail or 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 promptly mailed or delivered
by the Company to the Holder thereof. The Company will publicly announce the
results of the Change of Control Offer on or as soon as practicable after the
Change of Control Offer Period expires.
The Change of Control purchase feature of the Notes may make more difficult
or discourage a takeover of the Company, and, thus, the removal of incumbent
management.
The phrase "all or substantially all" of the assets of the Company as used
in the Indenture has no clearly established meaning under New York law (which
governs the Indenture), has been the subject of limited judicial interpretation
in few jurisdictions and will be interpreted based upon the 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 the assets of the
Company has occurred and therefore whether a Change of Control 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.
The repurchase by the Company of the Notes upon a Change of Control could
violate and result in a default under the Credit Facility, the Senior Indenture
or other Indebtedness of the Company or its Subsidiaries, even if a Change of
Control, in and of itself, would not cause a default. Any such default would
likely give the lenders under the Credit Facility or the holders of the Senior
Notes the right to proceed against any collateral securing the Indebtedness
thereunder. In any event, such lenders would likely have the right to seek
repayment of such Indebtedness at least on a Pari Passu basis with the Notes.
There can be no assurance that the Company will have sufficient financial
resources to effect a repurchase pursuant to a Change of Control Offer.
Limitation on Sale of Assets and Subsidiary Capital; Event of Loss
(a) The Indenture provides that, other than upon an Event of Loss, neither
the Company nor any of its Subsidiaries will, in one or a series of related
transactions, convey, sell, transfer, assign or otherwise dispose of, directly
or indirectly, any of its property, business or assets, including, without
limitation, upon any sale or other transfer or issuance of any Capital of any
Subsidiary or any sale and leaseback transaction, whether by the Company or any
such Subsidiary, or through the issuance, sale or transfer of Capital by a
Subsidiary (an "Asset Sale"), unless (1) the Company complies with the
provisions described in paragraph (e) below regarding the proceeds of such Asset
Sale, (2) at least eighty percent (80%) of the consideration for such
conveyance, sale, transfer or other disposition or issuance (other than
assumption of trade Indebtedness) consists of U.S. Legal Tender or Cash
Equivalents; provided, however, that for purposes of this clause (2), the
assumption of Indebtedness of the Company or a Subsidiary that is senior to or
Pari Passu with the Notes shall be deemed to be Cash Equivalents if the Company,
such Subsidiary and all other Subsidiaries of the Company, to the extent any of
the foregoing are liable with respect to such Indebtedness, are expressly
released from all liability for such Indebtedness by the holder thereof in
connection with such Asset Sale, and
67
<PAGE> 70
any securities or notes received by the Company or such Subsidiary from such
transferee that are converted by the Company or such Subsidiary into U.S. Legal
Tender or Cash Equivalents within ten (10) Business Days of the date of such
Asset Sale shall be deemed to be Cash Equivalents, (3) 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 (4) the Board
of Managers of the Company determines in good faith that the Company or such
Subsidiary, as applicable, receives not less than fair market value for such
Asset Sale.
(b) Notwithstanding the provisions described in paragraph (a) above:
(i) the Company and its Subsidiaries may in the ordinary course of
business, convey, sell, lease, transfer, assign or otherwise dispose of
assets acquired and held for resale in the ordinary course of business;
(ii) the Company and its Subsidiaries may convey, sell, lease,
transfer or otherwise dispose of assets pursuant to and in accordance with
the provisions described under "Limitation on Consolidation, Merger and
Sale of Assets" below;
(iii) the Company and its Subsidiaries may sell or dispose of damaged,
worn out or other obsolete property in the ordinary course of business so
long as such property is no longer necessary for the proper conduct of the
business of the Company or such Subsidiary, as applicable; and
(iv) the Company and its Subsidiaries may convey, sell, lease,
transfer, assign or otherwise dispose of assets to the Company or any of
its Subsidiaries.
The transactions described in this paragraph (b) will not be deemed an
Asset Sale for purposes of these limitations.
(c) The "Asset Sale Event of Loss Offer Amount" equals the cumulative total
of: (x) the product of (A)(1) the Net Cash Proceeds of all Asset Sales that have
occurred more than two hundred seventy (270) days prior to the date of
determination of such Asset Sale Event of Loss Offer Amount, minus (2) the sum
of the Net Cash Proceeds of any of such Asset Sales that, within two hundred
seventy (270) days of such Asset Sale, are (i) invested in assets or property
that is part of a Related Business of the Company or one of its Subsidiaries,
(ii) used to retire Indebtedness outstanding under the Credit Facility if,
concurrently therewith, the amount of such Indebtedness permitted pursuant to
the provisions described in paragraph (g) of "Limitation on Incurrence of
Additional Indebtedness and Disqualified Capital" (below) is permanently reduced
by the amount so retired (and any related revolving or multiple advance
arrangement is permanently reduced by a corresponding amount), (iii) used to
retire Indebtedness outstanding under the Senior Indenture, or (iv) or used to
retire Indebtedness secured by the assets sold (if required by its terms as a
result of the applicable Asset Sale), and any related revolving or multiple
advance arrangement is permanently reduced by a corresponding amount, and pay
related fees and reasonable expenses, multiplied by (B) a fraction, the
numerator of which is the aggregate principal amount of the Notes outstanding on
the date of such Asset Sale and the denominator of which is the sum of (1) the
aggregate principal amount of the Notes outstanding on the date of such Asset
Sale, plus (2) the aggregate principal amount of any other Indebtedness of the
Company or its Subsidiaries existing on the date of such Asset Sale that (w) is
not retired under clause (A)(2)(ii) or (iii) of this sentence, (x) is Pari Passu
with the Senior Notes, (y) is not assumed by the transferee in such Asset Sale
with a concurrent release in full of the Company and its Subsidiaries therefrom,
and (z) pursuant to the instruments relating thereto, is required to be repaid
with the proceeds from such Asset Sale; plus (y) the product of (A)(1) the Net
Cash Proceeds from all Events of Loss, the Net Cash Proceeds of which have been
received more than two hundred seventy (270) days prior to the date of
determination of such Asset Sale Event of Loss Offer Amount, minus (2) the sum
of the amounts that, within two hundred seventy (270) days after the receipt of
the Net Cash Proceeds from any such Event of Loss, are (i) invested in assets or
property that is part of a Related Business of the Company or one of its
Subsidiaries, (ii) used to retire Indebtedness outstanding under the Credit
Facility if, concurrently therewith, the amount of such Indebtedness permitted
pursuant the provisions described in paragraph (g) of "Limitation on Incurrence
of Additional Indebtedness and Disqualified Capital" (below) is permanently
reduced by the amount so retired (and any related revolving or multiple advance
arrangement is permanently reduced by a corresponding
68
<PAGE> 71
amount), (iii) used to retire Indebtedness outstanding under the Senior
Indenture, or (iv) used to retire Indebtedness secured by the assets to which
such Event of Loss relates (if required by its terms as a result of the
applicable Event of Loss) and any related revolving or multiple advance
arrangement is permanently reduced by a corresponding amount, and pay related
fees and reasonable expenses, multiplied by (B) a fraction, the numerator of
which is the aggregate principal amount of the Notes outstanding on the date of
such Event of Loss and the denominator of which is the sum of (1) the aggregate
principal amount of the Notes outstanding on the date of such Event of Loss,
plus (2) the aggregate principal amount of any other Indebtedness of the Company
or its Subsidiaries existing on the date of such Event of Loss that (x) is not
retired under clause (A)(2)(ii) or (iii) of this sentence, (y) is Pari Passu
with the Senior Notes and, (z) pursuant to the instruments relating thereto, is
required to be repaid with the proceeds of such Event of Loss; provided, however
that with respect to any Asset Sale consisting of the conveyance, sale,
transfer, assignment or other disposition, directly or indirectly, either (N) by
the Guarantor of its Casino or (M) by the Company or by any Subsidiary of the
Company of Capital of the Guarantor, the term "Asset Sale Event of Loss Offer
Amount" relating to such Asset Sale shall mean 100% of the Net Cash Proceeds
from such Asset Sale minus the sum of the amounts that, within two hundred
seventy (270) days of such Asset Sale, are used as described in clause
(A)(2)(ii) or (A)(2)(iii) or (A)(2)(iv) above, so that, following any Asset Sale
described in this proviso, the Net Cash Proceeds resulting from such Asset Sale
may be invested in assets or property that is part of a Related Business of the
Company or one of its Subsidiaries only after the completion of an Asset Sale
Event of Loss Offer for an Asset Sale Event of Loss Offer Amount (as defined in
this proviso).
(d) For the purposes of these provisions, "Minimum Accumulation Date" means
each date on which the accumulated Asset Sale Event of Loss Offer Amount exceeds
ten million dollars ($10 million).
(e) Not later than ten (10) Business Days after each Minimum Accumulation
Date, the Company must commence an offer (an "Asset Sale Event of Loss Offer")
to the Holders to purchase on a pro rata basis, for Cash, Notes having a
principal amount equal to the accumulated Asset Sale Event of Loss Offer Amount
at a purchase price (the "Asset Sale Event of Loss Offer Price") of one hundred
percent (100%) of principal amount, together with accrued and unpaid interest
and Liquidated Damages to the date of payment (the "Asset Sale Event of Loss
Purchase Date"). Notice of an Asset Sale Event of Loss Offer shall be sent
twenty (20) Business Days prior to the close of business on the Asset Sale Event
of Loss Put Date (as defined below), by first-class mail, by the Company to each
Holder at its registered address, with a copy to the Trustee. Each Asset Sale
Event of Loss Offer will remain open for twenty (20) Business Days following its
commencement and no longer, except to the extent that a longer period is
required by applicable law. The notice to the Holders must contain all
information, instructions and materials required by applicable law or otherwise
material to such Holders' decision to tender Notes pursuant to the Asset Sale
Event of Loss Offer. The notice, which, to the extent consistent with the
Indenture, shall govern the terms of an Asset Sale Event of Loss Offer, must
state that: (1) the Asset Sale Event of Loss Offer is being made pursuant to
such notice and the Indenture; (2) the Asset Sale Event of Loss Offer Amount,
the Asset Sale Event of Loss Offer Price (including the amount of accrued and
unpaid interest), the date by which the Holders must put their Notes (which date
shall be on or prior to thirty (30) Business Days following the Minimum
Accumulation Date); (3) any Note or portion thereof not tendered or accepted for
payment will continue to accrue interest if interest is then accruing; (4)
unless the Company defaults in depositing U.S. Legal Tender with the Paying
Agent (which may not for these purposes be the Company or any Affiliate of the
Company) in accordance with the relevant provisions of the Indenture, any Note,
or portion thereof, accepted for payment pursuant to an Asset Sale Event of Loss
Offer shall cease to accrue interest after the Asset Sale Event of Loss Purchase
Date; (5) Holders electing to have a Note, or portion thereof, purchased
pursuant to an Asset Sale Event of Loss Offer will be required to surrender the
Note, with the form entitled "Option of Holder to Elect Purchase" on the reverse
of the Note completed, to the Paying Agent (which may not for purposes of these
provisions, notwithstanding any other provision of the Indenture, be the Company
or any Affiliate of the Company) at the address specified in the notice prior to
the close of business on the third Business Day prior to the Asset Sale Event of
Loss Purchase Date (the "Asset Sale Event of Loss Put Date"); (6) Holders will
be entitled to withdraw their elections, in whole or in part, if the Paying
Agent receives, up to the close of business three Business Days prior to the
Asset Sale Event of Loss Put Date, as applicable, a telegram, telex, facsimile
69
<PAGE> 72
transmission or letter setting forth the name of the Holder, the Note number, if
in definitive form, the principal amount of the Notes the Holder is withdrawing
and a statement containing a facsimile signature and stating that such Holder is
withdrawing such Holder's election to have such principal amount of Notes
purchased; (7) if Notes in a principal amount in excess of the principal amount
of Notes to be acquired pursuant to the Asset Sale Event of Loss Offer are
tendered and not withdrawn, the Company shall purchase Notes on a pro rata basis
(with such adjustments as may be deemed appropriate by the Company so that only
Notes in denominations of one thousand dollars ($1,000) or integral multiples of
one thousand dollars ($1,000) shall be acquired); (8) Holders whose Notes were
purchased only in part will be issued new Notes equal in principal amount to the
unpurchased portion of the Notes surrendered; and (9) the circumstances and
relevant facts regarding such Asset Sale or Event of Loss, as applicable. Any
such Asset Sale Event of Loss Offer shall comply with all applicable provisions
of Federal and state laws, including those regulating tender offers, if
applicable, and any provisions of the Indenture that conflict with such laws
shall be deemed to be superseded by the provisions of such laws. On or before an
Asset Sale Event of Loss Purchase Date, the Company must (i) accept for payment
Notes or portions thereof properly tendered pursuant to the Asset Sale Event of
Loss Offer (on a pro rata basis if required pursuant to clause (7) above), (ii)
deposit with the Paying Agent U.S. Legal Tender sufficient to pay the Asset Sale
Event of Loss Offer Price for all Notes or portions thereof so accepted and
(iii) deliver to the Trustee Notes so accepted together with an Officers'
Certificate setting forth the Notes or portion thereof being purchased by the
Company. The Paying Agent will promptly mail or deliver to Holders of Notes so
accepted payment in an amount equal to the Asset Sale Event of Loss Offer Price
for such Notes, and the Trustee will promptly authenticate and mail or deliver
to such Holders new Notes equal in principal amount to any unpurchased portion
of the Notes surrendered. Any Notes not so accepted must be promptly mailed or
delivered by the Company to the Holder thereof.
(f) If the amount required to acquire all Notes tendered by Holders
pursuant to an Asset Sale Event of Loss Offer (the "Acceptance Amount") shall be
less than the Asset Sale Event of Loss Offer Amount for such Asset Sale Event of
Loss Offer, the excess of such Asset Sale Event of Loss Offer Amount over the
Acceptance Amount may be used by the Company for general corporate purposes
without restriction, unless otherwise restricted by the other provisions of the
Indenture. Upon consummation of any Asset Sale Event of Loss Offer made in
accordance with the terms of paragraph (e) above, the accumulated Asset Sale
Event of Loss Offer Amount as of the Minimum Accumulation Date shall be reduced
to zero and accumulations shall be deemed to recommence from the day next
following such Minimum Accumulation Date.
Maintenance of Insurance
The Indenture provides that, from and at all times after the Issue Date,
the Company and its Subsidiaries must have in effect customary property and
comprehensive general liability insurance coverage on terms and in an amount
reasonably sufficient (taking into account, among other factors, the
creditworthiness of the insurer) to avoid a material adverse change in the
financial condition or results of operation of the Company and its Subsidiaries,
taken as a whole.
Limitation on Transactions with Affiliates
The Indenture provides that neither the Company nor any of its Subsidiaries
will be permitted after the Issue Date to enter into any contract, arrangement,
understanding or transaction with an Affiliate (an "Affiliate Transaction") or
series of related Affiliate Transactions involving consideration to either party
in excess of $5.0 million except for transactions (i) approved by a majority of
the disinterested (as to such transaction) members of the Board of Managers of
the Company and evidenced by an Officers Certificate addressed and delivered to
the Trustee stating that such Affiliate Transaction has been so approved and is
made in good faith and that the terms of such Affiliate Transaction are fair and
reasonable to the Company and such Subsidiaries, as the case may be, and (ii)
regarding which the Company has obtained prior to the consummation thereof, a
favorable written opinion as to the fairness of such transaction to the Company
and such Subsidiaries, as the case may be, from a financial point of view from
an independent investment banking firm of national reputation. Notwithstanding
the foregoing, "Affiliate Transaction," shall not include: (a) payments of
reasonable and customary compensation, Managers fees and indemnities of
Managers,
70
<PAGE> 73
officers and employees, (b) Restricted Payments permitted under the covenant
"Limitation on Restricted Payments" described above (including transactions
which are permitted because they are excluded from the definition of the term
"Restricted Payment" or the definitions of terms used in the definition of
"Restricted Payment"), (d) transactions solely between the Company and RPG or an
Additional Guarantor (the "Subsidiary Guarantor") or among any Subsidiary
Guarantors, (e) the Intercompany Notes, (f) any employment agreement entered
into by the Company or any of its Subsidiaries in the ordinary course of
business and consistent with the usual and customary practice of the gaming
industry in the United States and (g) transactions permitted pursuant to
paragraph (b) or (c) of the definition of Permitted Indebtedness.
Limitation on Dividends and Other Payment Restrictions Affecting Subsidiaries
The Indenture provides that neither the Company nor any of its Subsidiaries
will, directly or indirectly, create, assume or suffer to exist any consensual
encumbrance or restriction on the ability of any Subsidiary to pay dividends or
make other distributions to, or to pay any obligation (including, without
limitation, in respect of the Guarantee) to, or to otherwise transfer assets or
make or pay loans or advances to, the Company or any of its Subsidiaries, except
(a) reasonable and customary provisions restricting subletting or assignment of
any lease entered into in the ordinary course of business, consistent with
industry practices, (b) restrictions imposed by applicable law, (c) restrictions
under any Acquired Indebtedness or any agreement relating to any property, asset
or business acquired by the Company or any of its Subsidiaries, which
restrictions 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, (d) restrictions with
respect solely to a Subsidiary of the Company imposed pursuant to a binding
agreement (subject only to reasonable and customary closing conditions and
termination provisions) that has been entered into for the sale or disposition
of all or substantially all of the Capital or assets to be sold of such
Subsidiary, provided such restrictions apply solely to the Capital or assets to
be sold of such Subsidiary, and such sale or disposition is permitted under the
covenant "Limitation on Sale of Assets and Subsidiary; Event of Loss," (e)
reasonable and customary restrictions on transfers of collateral imposed in
connection with Liens securing Indebtedness, to the extent such Liens are
permitted by the covenant "Liens" and to the extent such Indebtedness is
permitted by the covenant "Limitation on Incurrence of Additional Indebtedness
and Disqualified Capital," and (f) replacements of restrictions imposed pursuant
to clause (c) and this clause (f) that are not more restrictive than those being
replaced and do not apply to any additional property or assets.
Liens
The Indenture provides that neither the Company nor any of its Subsidiaries
will, directly or indirectly, create, grant, assume, incur or suffer to exist
any Lien upon any of its property or assets, whether now owned or hereafter
acquired, or any income or profits therefrom, securing Indebtedness, other than:
(i) Permitted Liens; (ii) Liens securing Indebtedness incurred in accordance
with clause (c) of the covenant "Limitation on Incurrence of Additional
Indebtedness and Disqualified Capital;" (iii) Liens securing Refinancing
Indebtedness in accordance with clause (e) of the covenant "Limitation on
Incurrence of Additional Indebtedness and Disqualified Capital" but only if such
Liens have the same relative priority and do not extend to any property or
assets other than the property or assets permitted to be subject to the Liens
securing the Indebtedness being refinanced; (iv) Liens securing Indebtedness
incurred in accordance with clause (g) of the covenant "Limitation on Incurrence
of Additional Indebtedness and Disqualified Capital" and Liens securing any
increases in the amount of Indebtedness under the Credit Facility above the
amount of Indebtedness permitted under clause (g) but only to the extent that
the increase in such Indebtedness is permitted under clause (a) of the covenant
"Limitation on Incurrence of Additional Indebtedness and Disqualified Capital"
at the time of the incurrence of such additional Indebtedness; and (v) Liens in
favor of the Company. Notwithstanding the foregoing, the Company may not and may
not permit any Subsidiary to, directly or indirectly, create, grant, assume,
incur or suffer to exist any Lien (other than Permitted Liens) upon any of its
property or assets, whether now owned or hereafter acquired, securing any
Indebtedness which is subordinated in right of payment or upon liquidation to
the Notes.
71
<PAGE> 74
Limitation on Consolidation, Merger and Sale of Assets
The Indenture provides that neither the Company nor any Subsidiary may
consolidate with or merge with or into another person or, directly or
indirectly, sell, lease or convey all or substantially all of its assets,
whether in a single transaction or a series of related transactions, to another
Person or group of affiliated Persons, unless (i) if the transaction involves
the Company or the Guarantor, either (a) the Company or the Guarantor, as the
case may be, is the continuing entity, and in the case of the Guarantor, (1) the
Guarantor remains a Subsidiary of the Company and (2) the Guarantee remains in
full force and effect and the rights of the Holders thereunder and under the
Notes and the Indenture are not adversely affected as a result thereof, or (b)
the resulting, surviving or transferee entity is a person organized under the
laws of the United States, any state thereof or the District of Columbia and
expressly assumes by supplemental indenture all of the Obligations of the
Company or the Guarantor, as the case may be, in connection with the Notes, the
Indenture, if applicable, and the Guarantee, and the rights of the Holders under
the Notes, the Indenture, if applicable, and the Guarantee are not adversely
affected as a result thereof; (ii) no Default or Event of Default shall exist or
shall occur immediately after giving effect on a pro forma basis to such
transaction; (iii) other than in the case of a transaction between the Company
and a wholly-owned Subsidiary or between wholly-owned Subsidiaries of the
Company, immediately after giving effect to such transaction on a pro forma
basis, the Consolidated Net Worth of the consolidated surviving or transferee
entity is at least equal to the Consolidated Net Worth of the Company or such
Subsidiary, as the case may be, immediately prior to such transaction; (iv)
other than in the case of a transaction solely between the Company and any
wholly-owned Subsidiary or between wholly-owned Subsidiaries of the Company, the
consolidated surviving or transferee entity would, immediately after giving
effect to such transaction on a pro forma basis, be permitted to incur at least
$1.00 of additional Indebtedness pursuant to clause (ii) of paragraph (a) under
the caption "Limitation on Incurrence of Additional Indebtedness and
Disqualified Capital;" (v) such transaction will not result in the loss of any
material gaming license; and (vi) the Company has delivered to the Trustee an
opinion of counsel reasonably satisfactory to the Trustee confirming that the
holders of the outstanding Notes will not recognize income, gain or loss for
federal income tax purposes as a result of such transaction and will be subject
to federal income tax in the same manner and at the same times as would have
been the case if such transaction had not occurred. Notwithstanding the
foregoing, a Subsidiary shall not be subject to the foregoing restrictions in
circumstances involving the disposition by the Company of such Subsidiary or a
disposition of all or substantially all of the assets of such Subsidiary in a
transaction that is not prohibited by the covenant "Limitation on Sale of Assets
and Subsidiary Capital; Event of Loss," so long as such Subsidiary does not
account for all or substantially all the assets of the Company.
Upon any consolidation or merger or any transfer of all or substantially
all of the assets of the Company or the Guarantor that is subject to the
foregoing restrictions, the successor corporation formed by such consolidation
or into which the Company or the Guarantor, as the case may be, is merged or to
which such transfer is made, shall succeed to, and be substituted for, and may
exercise every right and power of, the Company, or the Guarantor, as the case
may be, under the Indenture and the Notes (including, without limitation, the
Guarantee) with the same effect as if such successor corporation had been named
therein as the Company, or the Guarantor, as the case may be, and the Company or
the Guarantor, as the case may be, will be released from its obligations under
the Indenture, the Notes and the Guarantee, as applicable except as to any
obligations that arise from or as a result of such transaction.
Limitation on Lines of Business
The Indenture provides that neither the Company nor any of its Subsidiaries
may directly or indirectly engage to any substantial extent in any line or lines
of business activity other than in a Related Business.
Limitation on Status as Investment Company
The Indenture prohibits the Company and its Subsidiaries from becoming an
"investment company" (as that term is defined in the Investment Company Act of
1940, as amended), or from otherwise becoming subject to regulation under the
Investment Company Act.
72
<PAGE> 75
Additional Subsidiary Guarantors
The Company must cause (i) each of its current Subsidiaries which operates
a Casino or a Related Business and which becomes a wholly-owned Subsidiary after
the Issue Date and any other wholly-owned Subsidiary created or acquired after
the Issue Date which operates a Casino or Related Business and (ii) each
Subsidiary that executes a guarantee of Indebtedness of the Company that is
unsecured and Pari Passu or subordinate to the Notes (each, an "Additional
Guarantor") to execute a supplemental indenture and guarantee providing that
such Additional Guarantor guarantees the obligations of the Company in
accordance with the terms of the Guarantee and that all the terms and conditions
of the Indenture applying to the Guarantor shall apply with the same effect to
such Additional Guarantor or Additional Guarantors; provided, however, that a
Guarantee executed by a Subsidiary pursuant to clause (ii) hereof shall have the
same relative ranking with respect to the guarantee initially executed by such
Subsidiary as the Notes have to the Indebtedness initially guaranteed by such
Subsidiary. The obligations of any potential Additional Guarantor to execute a
Guarantee will be subject to the receipt of any approval required by any Gaming
Authority or any other Governmental Authority, which the Company and its
Subsidiaries must use their best efforts to obtain.
REPORTS
To the extent permitted by applicable law or regulation, whether or not the
Company is subject to the requirements of Section 13 or 15(d) of the Exchange
Act, the Company must file with the Commission all quarterly and annual reports
and such other information, documents or other reports (or copies of such
portions of any of the foregoing as the Commission may by rules and regulations
prescribe) required to be filed pursuant to such provisions of the Exchange Act.
The Company must file with the Trustee, within 5 days after it files the same
with the Commission, copies of the quarterly and annual reports and the
information, documents, and other reports (or copies of such portions of any of
the foregoing as the Commission may by rules and regulations prescribe) that it
is required to file with the Commission pursuant to this covenant. The Company
must also comply with the other provisions of TIA sec. 314(a). If the Company is
not permitted by applicable law or regulations to file the aforementioned
reports, the Company (at its own expense) must file with the Trustee and mail,
or cause the Trustee to mail, to Holders at their addresses appearing in the
register of Notes at the time of such mailing within 5 days after it would have
been required to file such information with the Commission, all information and
financial statements, including any notes thereto and with respect to annual
reports, an auditors report by an accounting firm of established national
reputation, and a "Management's Discussion and Analysis of Financial Condition
and Results of Operations," comparable to the disclosure that the Company would
have been required to include in annual and quarterly reports, information,
documents or other reports, including, without limitation, reports on Forms
10-K, 10-Q and 8-K, if the Company was subject to the requirements of such
Section 13 or 15(d) of the Exchange Act.
EVENTS OF DEFAULT AND REMEDIES
The Indenture defines an Event of Default as (i) the failure by the Company
to pay any installment of interest on the Notes or Liquidated Damages as and
when due and payable and the continuance of any such failure for 30 days, (ii)
the failure by the Company to pay all or any part of the principal of or
premium, if any, on the Notes when and as the same become due and payable at
maturity, redemption, by acceleration or otherwise, including, without
limitation, pursuant to any Offer to Purchase, or otherwise, (iii) the failure
by the Company or the Guarantor to observe or perform any other covenant or
agreement contained in the Notes, the Indenture, the Registration Rights
Agreement or the Guarantee and the continuance of such failure for a period of
30 days after written notice is given to the Company by the Trustee or to the
Company and the Trustee by the Holders of at least 25% in aggregate principal
amount of the Notes outstanding, (iv) the Guarantee or any guarantee of an
Additional Guarantor shall be held in any judicial proceeding to be
unenforceable or invalid in any material respect or shall cease for any reason
to be in full force and effect in any material respect or the Guarantor or any
Additional Guarantor or Additional Guarantors, which individually or in the
aggregate constitute a Significant Subsidiary, or any Person acting by or on
behalf of the Guarantor or any Additional Guarantor or Additional Guarantors,
which individually or in the aggregate constitute a Significant Subsidiary,
shall deny or disaffirm its Obligations under the Guarantee and the
73
<PAGE> 76
Guarantor or Additional Guarantor shall not, in the case of a judgment, procure
a stay of execution of such judgment within 60 days of the occurrence thereof
and within such 60 day period, or such longer period during which execution of
such judgment shall have been stayed, appeal therefrom and cause the execution
thereof to be stayed during such appeal, (v) certain events of bankruptcy,
insolvency or reorganization in respect of the Company, any of its Subsidiaries
that individually or as a group constitute a Significant Subsidiary, (vi) a
default in the payment of principal, premium or interest when due which extends
beyond any stated period of grace applicable thereto or an acceleration for any
other reason of the maturity of any Indebtedness of the Company or any of its
Subsidiaries with an aggregate principal amount in excess of $10 million (other
than Indebtedness of the Company to a Subsidiary of the Company or of a
Subsidiary of the Company to the Company or another Subsidiary of the Company),
(vii) final, non-appealable, unsatisfied judgments not covered by insurance
aggregating in excess of $10 million, at any one time being rendered against the
Company or any of its Subsidiaries and not stayed, bonded or discharged within
60 days, and (viii) the suspension or loss of the legal right of the Company or
any of its Subsidiaries to operate the gaming establishment included within any
Casino and such suspension or loss continuing for more than 90 days. The
Indenture provides that if a Default occurs and is continuing, the Trustee must,
within 10 days after the occurrence of such default, give to the Holders notice
of such default. Except in the case of a Default in payment of principal of or
interest on any Note, the Trustee may withhold the notice if and so long as a
committee of its Trust Officers in good faith determines that withholding the
notice is in the best interest of the Holders.
If an Event of Default occurs and is continuing (other than an Event of
Default specified in clause (v) of the preceding paragraph), then in every such
case, unless the principal of all of the Notes shall have already become due and
payable, either the Trustee or the Holders of 25% in aggregate principal amount
of the Notes then outstanding, by notice in writing to the Company (and to the
Trustee if given by Holders) (an "Acceleration Notice"), may declare all
principal and accrued interest thereon to be due and payable immediately. If an
Event of Default specified in clause (v) in the preceding paragraph occurs, all
principal and accrued interest thereon will be immediately due and payable on
all outstanding Notes without any declaration or other act on the part of
Trustee or the Holders. The Holders of no less than a majority in aggregate
principal amount of the Notes at the time outstanding generally are authorized
to rescind such acceleration if all existing Events of Default, other than the
non-payment of the principal of, premium, if any, and interest on the Notes
which have become due other than by such acceleration, have been cured or
waived.
Prior to the declaration of acceleration of the maturity of the Notes, the
Holders of a majority in aggregate principal amount of the Notes at the time
outstanding may waive on behalf of all the Holders any default, except a default
in the payment of principal of or interest on any Note not yet cured, or a
default with respect to any covenant or provision that cannot be modified or
amended without the consent of the Holder of each outstanding Note affected.
Subject to the provisions of the Indenture relating to the duties of the
Trustee, the Trustee will be under no obligation to exercise any of its rights
or powers under the Indenture at the request, order or direction of any of the
Holders, unless such Holders have offered to the Trustee reasonable security or
indemnity. Subject to all provisions of the Indenture and applicable law, the
Holders of a majority in aggregate principal amount of the Notes at the time
outstanding will have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee, or exercising
any trust or power conferred on the Trustee. The Indenture provides that the
Company must file annually with the Trustee a certificate as to the performance
by the Company of certain of the obligations under the Indenture and as to any
default in such performances.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Company may, at its option at any time elect to have the obligations of
the Company discharged with respect to the outstanding Notes ("Legal
Defeasance"). Such Legal Defeasance means that the Company shall be deemed to
have paid and discharged the entire Indebtedness represented, and the Indenture
shall cease to be of further effect as to all outstanding Notes except as to (i)
rights of Holders to receive payments in respect of the principal of, premium,
if any, and interest on such Notes when such payments are due, from the funds in
the defeasance trust; (ii) the Company's obligations with respect to such Notes
concerning
74
<PAGE> 77
issuing temporary Notes, registration of Notes, mutilated, destroyed, lost or
stolen Notes, and the maintenance of an office or agency for payment and money
for security payments held in trust; (iii) the rights, powers, trusts, duties
and immunities of the Trustee, and the Company's obligations in connection
therewith; and (iv) the Legal Defeasance provisions of the Indenture. In
addition, the Company may, at its option and at any time, elect to have the
obligations of the Company released with respect to certain covenants that are
described in the Indenture ("Covenant Defeasance") and thereafter any omission
to comply with such obligations shall not constitute a Default or Event of
Default with respect to the Notes. In the event Covenant Defeasance occurs,
certain events (not including non-payment, bankruptcy, receivership,
rehabilitation and insolvency events) described under "Events of Default" will
no longer constitute an Event of Default with respect to the Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance, (i)
the Company must irrevocably deposit with the Trustee, in trust, for the benefit
of the Holders of the Notes, U.S. Legal Tender, U.S. Government Obligations or a
combination thereof, in such amounts as will be sufficient, in the opinion of a
nationally recognized firm of independent public accountants, to pay the
principal of, premium, interest and Liquidated Damages, if any, on such Notes on
the stated date for payment thereof or on the redemption date of such principal
or installment of principal of, premium, if any, or interest on such Notes, and
the Trustee on behalf of the Holders must have a valid, perfected, exclusive
security interest in such trust; (ii) in the case of Legal Defeasance, the
Company shall have delivered to the Trustee an opinion of counsel reasonably
acceptable to Trustee confirming that (A) the Company has received from, or
there has been published by, the Internal Revenue Service a ruling or (B) since
the date of the Indenture, there has been a change in the applicable Federal
income tax law, in either case to the effect that, and based thereon such
opinion of counsel shall confirm that, the Holders of such Notes will not
recognize income, gain or loss for Federal income tax purposes as a result of
such Legal Defeasance and will be subject to Federal income tax in the same
amounts, in the same manner and at the same times as would have been the case if
such Legal Defeasance has not occurred; (iii) in the case of Covenant
Defeasance, the Company shall have delivered to the Trustee an opinion of
counsel reasonably acceptable to such Trustee confirming that the Holders of
such Notes will not recognize income, gain or loss for Federal income tax
purposes as a result of such Covenant Defeasance and will be subject to Federal
income tax on the same amounts, in the same manner and at the same times as
would have been the case if such Covenant Defeasance had not occurred; (iv) no
Default or Event of Default shall have occurred and be continuing on the date of
such deposit or insofar as Events of Default from bankruptcy or insolvency
events are concerned, at any time in the period ending on the 91st day after the
date of deposit; (v) such Legal Defeasance or Covenant Defeasance shall not
result in a breach or violation of, or constitute a default under, the Indenture
or any other material agreement or instrument to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its Subsidiaries is
bound; (vi) the Company shall have delivered to the Trustee an Officers
Certificate stating that the deposit was not made by the Company with the intent
of preferring the Holders of such Notes over any other creditors of the Company
or others; and (vii) the Company shall have delivered to the Trustee an Officers
Certificate and an opinion of counsel, each stating that all conditions
precedent provided for or relating to the Legal Defeasance or the Covenant
Defeasance have been met.
AMENDMENTS AND SUPPLEMENTS
Except as provided below, with the consent of the Holders of not less than
a majority in aggregate principal amount of the Notes at the time outstanding
(including consents obtained in connection with a tender offer or exchange offer
for Notes), the Company and the Trustee are permitted to amend or supplement the
Indenture or any supplemental indenture or modify the rights of the Holders.
Notwithstanding the foregoing, without the consent of the Holders of not less
than two-thirds in aggregate principal amount of the Notes at any time
outstanding, no amendment or waiver of the Indenture may change any provision
relating to (i) Events of Default or remedies, or (ii) the maturity of any Note
(except for changes relating to the Stated Maturity, which require the consent
of each Holder). Without the consent of each Holder affected thereby, no
amendment or waiver of the Indenture may: (i) change the Stated Maturity of any
Note, or reduce the principal amount thereof or the rate (or extend the time for
payment) of interest thereon or alter the redemption thereof (including any
price to be paid by the Company upon any redemption) in a manner
75
<PAGE> 78
adverse to any Holder, or change the place of payment where, or the coin or
currency in which, any Note or any premium or the interest thereon is payable,
or impair the right to institute suit for the enforcement of any such payment on
or after the Stated Maturity thereof (or, in the case of redemption, on or after
the Redemption Date), (ii) reduce the percentage in principal amount of the
outstanding Notes, the consent of whose Holders is required for any such
amendment, supplemental indenture or waiver provided for in the Indenture, (iii)
change the provisions described above under the caption "Repurchase of Notes at
the Option of the Holder Upon a Change of Control" or in the Summary of the
Notes under the caption "Mandatory Redemption" in a manner that adversely
affects the rights of any Holder of Notes, or (iv) change the terms of any Asset
Sale Event of Loss Offer in a manner that adversely affects the rights of any
Holder of Notes.
Notwithstanding the foregoing, without the consent of any Holder of Notes,
the Company and the Trustee may amend or supplement the Indenture or the Notes,
among other purposes, to cure any ambiguity, defect or inconsistency, to provide
for uncertificated Notes in addition to or in place of certificated Notes, to
provide for the assumption of the Company's Obligations to Holders of the Notes
in the case of a merger or consolidation, to release the Guarantee of a
Subsidiary that is sold in accordance with the provisions described in "Certain
Covenants -- Limitation on Sale of Assets and Subsidiary Capital; Event of
Loss," to make any change that would provide any additional rights or benefits
to the Holders of the Notes or that does not materially adversely affect the
legal rights under the Indenture of any Holder, to comply with the Trust
Indenture Act, or to set out the form of the New Notes and to set forth such
other matters as may be necessary or desirable in connection with the Exchange
Offer.
SATISFACTION AND DISCHARGE
The Indenture will cease to be of further effect when either (a) all such
outstanding Notes theretofore authenticated and delivered (except lost, stolen
or destroyed Notes which have been replaced or paid) have been delivered to the
Trustee for cancellation or (b) all such Notes not theretofore delivered to the
Trustee for cancellation have become due and payable and the Company has
irrevocably deposited or caused to be deposited with the Trustee funds in an
amount sufficient to pay and discharge the entire Indebtedness on the Notes not
theretofore delivered to the Trustee for cancellation, for principal of,
premium, if any, and interest to the Stated Maturity of the Notes; (ii) the
Company has paid all other sums payable under the Indenture; and (iii) the
Company has delivered to the Trustee an officers certificate and an opinion of
counsel each stating that all conditions precedent under the Indenture relating
to the satisfaction and discharge of the Indenture have been complied with.
NO PERSONAL LIABILITY OF EQUITYHOLDERS, EMPLOYEES, OFFICERS OR DIRECTORS
The Indenture provides that no direct or indirect equityholder,
incorporator, employee, officer, manager or director, as such, past, present or
future of the Company, the Guarantor or any successor entity shall have any
personal liability in respect of the Obligations of the Company or the Guarantor
under the Indenture or the Notes by reason of his, her or its status as such
equityholder, incorporator, employee, officer, manager or director.
Notwithstanding the foregoing, the holders of the Notes preserve any personal
claims that they have for fraud, liabilities under the Securities Act and the
Exchange Act, and other liabilities that cannot be waived under applicable
Federal and state laws in connection with the purchase and exchange of the
Notes.
CERTAIN DEFINITIONS
"Acquired Indebtedness" means, with respect to a person, Indebtedness of
another person existing at the time such person becomes a Subsidiary of the
subject person or is merged or consolidated into or with the subject person or
one of its Subsidiaries, and not incurred in connection with or in anticipation
of, such merger or consolidation or such other person becoming a Subsidiary of
such subject person.
"Additional Guarantor" has the meaning specified in the covenant
"Additional Subsidiary Guarantors."
"Adjusted Consolidated Net Income" means, with respect to any period,
Consolidated Net Income for such period, minus (i) 100% of the amount of any
writedowns, writeoffs or negative extraordinary charges not
76
<PAGE> 79
otherwise reflected in Consolidated Net Income during such period and minus (ii)
Permitted Tax Distributions for such period.
"Affiliate" means (i) any person directly or indirectly controlling or
controlled by or under direct or indirect common control with the Company or any
of its Subsidiaries, including, without limitation, Mr. Binion and Phyllis Cope,
(ii) any spouse, immediate family member or other relative of any person
described in clause (i) above, (iii) any trust in which any person described in
clause (i) or (ii) above has a beneficial interest, and (iv) any trust
established by any person described in clause (i) or (ii) above, whether or not
such person has a beneficial interest in such trust. For purposes of this
definition, the term "control" means (a) the power to direct the management and
policies of a person, directly or through one or more intermediaries, whether
through the ownership of voting securities, by contract, or otherwise, or (b)
the beneficial ownership of 10% or more of any class of voting Capital of a
person unless some other person beneficially owns a greater percentage of any
class of voting Capital of such person.
"Average Life" means, as of the date of determination, with respect to any
security or instrument, the quotient obtained by dividing (i) the sum of the
product of the number of years from the date of determination to the date of
each successive scheduled principal (or redemption) payment of such security or
instrument multiplied by the amount of each such respective principal (or
redemption) payment by (ii) the sum of all such principal (or redemption)
payments.
"B&O" means B&O Development Limited Partnership, a Nevada limited
partnership.
"Binion Partners" means (i) Mr. Binion and Phyllis Cope, (ii) any spouse,
immediate family member or other relative of any person described in clause (i)
above, (iii) any trust in which any person in clause (i) or (ii) above has a
beneficial interest, (iv) any trust established by any person described in
clause (i) or (ii) above, whether or not such person has a beneficial interest
in such trust or (v) any entity (other than the Company and its Subsidiaries)
controlled by any of the persons or entities described in clause (i), (ii),
(iii) or (iv) above or a combination thereof which holds Capital of, or any
other direct interest in, a Subsidiary of the Company.
"Binion Partners Escrow Agreement" means the escrow agreement, dated the
Issue Date, among Jack Binion, B&O, JBB Gaming L.L.C., the Trustee, the Credit
Facility Purchasers and the Company, as the same may be amended or modified from
time to time in accordance with its terms.
"Board of Managers" means, with respect to any person that is a limited
liability company, either the sole Manager of such person or, if there is more
than one Manager, the Managers of such person, acting as a group, or any
committee of Managers of such person authorized, with respect to any particular
matter, to exercise the power of the Managers.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday
that is not a day on which banking institutions in New York, New York or Los
Angeles, California are authorized or obligated by law or executive order to
close.
"Capital" means, (i) with respect to any corporation, any and all shares of
stock issued by that corporation and (ii) with respect to any other person, any
partnership interest, joint venture interest, limited liability company member
interest or other form of equity sharing or participation interest, as
applicable and (iii) warrants, options, participations or other equivalents of
or interests (however designated) in any of the items described in clause (i) or
(ii) above.
"Capitalized Lease Obligation" means rental obligations under a lease that
are required to be capitalized for financial reporting purposes in accordance
with GAAP, and the amount of indebtedness represented by such obligations shall
be the capitalized amount of such obligations, as determined in accordance with
GAAP.
"Cash Equivalent" means (i) securities issued or directly and fully
guaranteed or insured by the United States of America or any agency or
instrumentality thereof (provided that the full faith and credit of the Untied
States of America is pledged in support thereof), (ii) time deposits and
certificates of deposit having a maturity not greater than one year of any
domestic commercial bank, or U.S. branch of a foreign bank, of recognized
standing having capital and surplus in excess of $500 million, and time deposits
and certificates of
77
<PAGE> 80
deposit having a maturity not greater than one year of other banks located in
jurisdictions where the Company and its Subsidiaries do business; provided,
however, the aggregate amount of all time deposits and certificates of deposit
of such other banks may not exceed $5.0 million, (iii) commercial paper rated at
the time of purchase at least A-2 or the equivalent thereof by Standard & Poor's
Corporation or at least P-2 or the equivalent thereof by Moody's Investors
Service, Inc. and maturing within one year after the date of acquisition, (iv)
repurchase obligations with a term of not more than ten days for underlying
securities of the types described in clause (i) above entered into with any bank
meeting the qualifications specified in clause (ii) above, (v) marketable
obligations issued by any state of the United States of America or any political
subdivision of any such state or any public instrumentality thereof maturing, or
payable at the demand of the holder thereof, within one year from the date of
acquisition thereof and, at the time of acquisition, having one of the three
highest ratings obtainable from either Standard & Poor's Corporation or Moody's
Investors Service, Inc.; (vi) investments in money market funds substantially
all of whose assets comprise securities of the types described in clauses (i)
through (v) above, including, to the extent such funds meet the above criteria,
funds for which the Trustee acts as an investment advisor; (vii) Credit Facility
Notes; (viii) Senior Notes; and (ix) Notes.
"Casino" means any gaming establishment and other property or assets
directly ancillary thereto or used in connection therewith, including any
building, restaurant, hotel, theater, parking facilities, retail shops, land,
golf courses and other recreation and entertainment facilities, marina, vessel,
barge, ship and equipment.
"Commission" means the Securities and Exchange Commission.
"Consolidated Coverage Ratio" of any person on any date of determination
(the "Transaction Date") means, the ratio, on a pro forma basis, of (a) the
aggregate amount of Consolidated EBITDA of such person (in the case of the
Company, Adjusted Consolidated EBITDA) attributable to continuing operations and
businesses (exclusive of amounts attributable to operations and businesses
permanently discontinued or disposed of prior to the Transaction Date) to (b)
the aggregate Consolidated Fixed Charges of such person (exclusive of amounts
attributable to operations and businesses permanently discontinued or disposed
of prior to the Transaction Date but only to the extent that the obligations
giving rise to such Consolidated Fixed Charges would no longer be obligations
contributing to such person's Consolidated Fixed Charges subsequent to the
Transaction Date) during the Reference Period; provided, however, that for
purposes of such calculation, (i) Acquisitions which occurred during the
Reference Period or subsequent to the Reference Period and on or prior to the
Transaction Date shall be given pro forma effect as if they had occurred on the
first day of the Reference Period, (ii) transactions giving rise to the need to
calculate the Consolidated Coverage Ratio shall be given pro forma effect as if
they had occurred on the first day of the Reference Period, (iii) the incurrence
of any Indebtedness or issuance of any Disqualified Capital during the Reference
Period or subsequent to the Reference Period and on or prior to the Transaction
Date (and the application of the proceeds therefrom to the extent used to
refinance or retire other Indebtedness) shall be given pro forma effect as if
they had occurred on the first day of such Reference Period, and (iv) the
Consolidated Fixed Charges of such person attributable to any Indebtedness or
any Disqualified Capital bearing a floating interest (or dividend) rate shall be
computed on a pro forma basis as if the average rate in effect from the
beginning of the Reference Period to the Transaction Date had been the
applicable rate for the entire period, unless such person or any of its
Subsidiaries is a party to an Interest Swap and Hedging Obligation (which shall
remain in effect for the 12-month period immediately following the Transaction
Date) that has the effect of fixing the interest rate on the date of
computation, in which case such rate (whether higher or lower) shall be used.
"Consolidated Debt" means, with respect to any person, as of a specific
date, all Indebtedness of such person and its Consolidated Subsidiaries as of
such date, determined in accordance with GAAP.
"Consolidated Depreciation and Amortization" for any person for any period
means the total depreciation and amortization for such person and its
Consolidated Subsidiaries for such period, as determined in accordance with
GAAP.
"Consolidated EBITDA" means, with respect to any person, for any period,
the Consolidated Net Income of such person for such period adjusted to add
thereto (to the extent deducted from net revenues in determining Consolidated
Net Income), without duplication, the sum of (i) Consolidated Income Tax
78
<PAGE> 81
Expense, (ii) Consolidated Depreciation and Amortization Expense, (iii)
Consolidated Fixed Charges, (iv) Consolidated Preopening Expenses and (v)
minority interest in income of Consolidated Subsidiaries and adjusted to deduct
therefrom minority interest in the losses of Consolidated Subsidiaries; provided
that for purposes of this clause (v) there shall be excluded from the definition
of income and loss (only to the extent included in computing such net income (or
loss) and without duplication) the items described in clauses (a), (b), (c), (d)
and (e) of the definition of Consolidated Net Income.
"Consolidated Fixed Charges" of any person means, for any period, the
aggregate amount (without duplication and determined in each case in accordance
with GAAP) of (a) interest expense of such person for such period, whether
expensed or capitalized, paid or accrued (including, in accordance with the
following sentence, interest attributable to Capitalized Lease Obligations), of
such person and its Consolidated Subsidiaries during such period, including,
without limitation, to the extent such expense was deducted in computing
Consolidated Net Income for such period (i) amortization of original issue
discount and non-cash interest payments or accruals on any Indebtedness, (ii)
the interest portion of all deferred payment obligations that constitute
Indebtedness, and (iii) all commissions, discounts and other fees and charges
owed with respect to bankers acceptances and letter of credit financings and
Interest Swap and Hedging Obligations, and (b) the amount of dividends payable,
whether expensed or capitalized, paid or accrued, by such person or any of its
Consolidated Subsidiaries in respect of Disqualified Capital (other than by
Subsidiaries of such person to such person or such person's wholly-owned
Subsidiaries). For purposes of this definition, (x) interest on a Capitalized
Lease Obligation shall be deemed to accrue at an interest rate reasonably
determined by the Company to be the rate of interest implicit in such
Capitalized Lease Obligation in accordance with GAAP and (y) interest expense
attributable to any Indebtedness represented by the guarantee by such person or
a Subsidiary of such person of an obligation of another person shall be deemed
to be the interest expense attributable to the Indebtedness guaranteed.
"Consolidated Income Tax Expense" for any person for any period means the
total net income tax expense for such person and its Consolidated Subsidiaries
for such period, as determined in accordance with GAAP.
"Consolidated Net Income" means, with respect to any person for any period,
the net income (or loss) of such person and its Consolidated Subsidiaries
(determined in accordance with GAAP) for such period, adjusted to exclude (only
to the extent included in computing such net income (or loss) and without
duplication): (a) all gains and losses which are either extraordinary (as
determined in accordance with GAAP) or are either unusual or nonrecurring
(including, without limitation, from the sale of assets outside of the ordinary
course of business, from the issuance or sale of any Capital or from the
repayment, cancellation or redemption of Indebtedness), (b) the net income, if
positive, of any person, other than a Consolidated Subsidiary, in which such
person or any of its Consolidated Subsidiaries has an interest, except to the
extent of the amount of any dividends or distributions actually paid in cash to
such person or a Consolidated Subsidiary of such person during such period, but
not in excess of such person's pro rata share of such person's net income for
such period, (c) the net income (or loss) of any person acquired in a pooling of
interests transaction for any period prior to the date of such acquisition, (d)
the net income, if positive, of any of such person's Consolidated Subsidiaries
to the extent that the declaration or payment of dividends or similar
distributions is not at the time permitted by operation of the terms of its
charter or bylaws or any other agreement, instrument, judgment, decree, order,
law, statute, rule or governmental regulation (other than any Gaming Law that is
generally applicable to all persons operating Casinos through Subsidiaries in
any jurisdiction in which the Company or such Subsidiary is conducting business
so long as there is in effect no specific order, decree or other prohibition
pursuant to such Gaming Law in such jurisdiction limiting the payment of a
dividend or similar distribution by such a Consolidated Subsidiary) applicable
to such Consolidated Subsidiary and (e) the cumulative effect of a change in
accounting principles.
"Consolidated Net Worth" of any person at any date means the aggregate of
capital, surplus and retained earnings of such person and its Consolidated
Subsidiaries, as would be shown on the consolidated balance sheet of such person
prepared in accordance with GAAP, adjusted to exclude (to the extent included in
calculating such equity) and without duplication (a) the amount of capital,
surplus and accrued but unpaid dividends attributable to any Disqualified
Capital or treasury Capital of such person or any of its Consolidated
79
<PAGE> 82
Subsidiaries, and (b) all upward reevaluations and other write-ups in the book
value of any asset of such person or a Consolidated Subsidiary of such person
subsequent to the Issue Date.
"Consolidated Preopening Expenses" means those costs incurred prior to the
commencement of a new operation, including payroll, consulting fees, legal
expenses, licensing, supplies, travel, printing, relocation expense, temporary
housing and other similar expenses, that are not required, in accordance with
GAAP, to be capitalized or expensed when incurred but are acceptable in
accordance with GAAP to be deferred until the new operation commences.
"Consolidated Subsidiary" means, for any person, each Subsidiary of such
person (whether now existing or hereafter created or acquired) the financial
statements of which shall be (or should have been) consolidated for financial
statement reporting purposes with the financial statements of such person in
accordance with GAAP.
"Credit Facility" means the credit agreement, dated as of October 10, 1995,
among the Company, the Guarantor and the Credit Facility Purchasers, and any
other credit arrangements that are either Pari Passu with the Credit Facility or
subordinated to the Notes that together (subject to the succeeding sentence)
provide for no greater than an aggregate of $150.0 million in Indebtedness or
any substitute therefor, including any related notes, guarantees, collateral
documents, instruments and agreements executed in connection therewith, as such
Credit Facility and/or related documents may be amended, restated, supplemented,
renewed, replaced or otherwise modified from time to time (subject, in the case
of any increase in the Indebtedness under the Credit Facility, to the proviso in
clause (iii) of the succeeding sentence) whether or not with the same agent,
trustee, representative lenders or holders, and, subject to the proviso to the
next succeeding sentence, irrespective of any changes in the terms and
conditions thereof (including without limitation any amendment thereof to
provide for a revolving loan facility); provided, however, that no entity shall
be admitted as the agent, manager or majority participant in respect of the
Credit Facility unless such entity is a bank, savings association or other
financial institution subject to regulation by federal or state regulatory
authorities, a foreign financial institution subject to equivalent regulation by
foreign regulatory authorities, or a foreign or domestic institutional lender
engaged in the ordinary course of its business in lending activities similar to
the Credit Facility and having assets of at least $500 million. Without limiting
the generality of the foregoing, the term "Credit Facility" shall include
agreements in respect of Interest Swap and Hedging Obligations and Currency
Exchange Protection Agreements with lenders party to the Credit Facility and
(subject, in the case of any increase in the Indebtedness under the Credit
Facility, to the proviso in clause (iii) below) shall also include any
amendment, amendment and restatement, renewal, extension, restructuring,
supplement or modification to the Credit Facility and all refundings,
refinancings and replacements of the Credit Facility, and all refundings,
refinancings and replacements thereafter, including any agreement (i) extending
the maturity of any Indebtedness incurred thereunder or contemplated thereby,
(ii) adding or deleting borrowers, issuers or guarantors thereunder, so long as
such borrowers, issuers and guarantors include one or more of the Company and
its Subsidiaries and their respective successors and assigns, (iii) increasing
the amount of Indebtedness incurred thereunder or available to be borrowed
thereunder; provided, however, that on the date such additional Indebtedness is
incurred the incurrence thereof is permitted pursuant to paragraph (a) of the
covenant "Limitation on Incurrence of Additional Indebtedness and Disqualified
Capital," or (iv) otherwise altering the terms and conditions thereof in a
manner not prohibited by the terms hereof.
"Credit Facility Notes" means the Credit Facility Notes issued in
accordance with the Credit Facility, as amended or modified from time to time in
accordance with the terms thereof.
"Credit Facility Purchasers" means the purchasers of the senior secured
facility notes issued by the Company pursuant to the Credit Facility.
"Currency Exchange Protection Agreement" means, in respect of a Person, any
foreign exchange contract, currency swap agreement, currency option or other
similar agreement or arrangement designed to protect such Person against
fluctuations in currency exchange rates.
80
<PAGE> 83
"Current Market Price" on any date means the arithmetic mean of the Quoted
Price of the Notes for the 20 consecutive trading days commencing 30 days before
such date.
"Designated Senior Debt" means (a) any Indebtedness under the Credit
Facility, (b) any Indebtedness under the Senior Indenture and (c) any other
Senior Debt permitted to be incurred by the Indenture the principal amount of
which is $25 million or more and that has been designated by the Managers as
"Designated Senior Debt."
"Disqualified Capital" means (a) except as provided in (b), with respect to
any person, Capital of such person that, by its terms or by the terms of any
security into which it is convertible, exercisable or exchangeable, is, or upon
the happening of an event or the passage of time would be, required to be
redeemed or repurchased (including at the option of the holder thereof) by such
person or any of its Subsidiaries, in whole or in part, on or prior to the
Stated Maturity of the Notes and (b) with respect to any Subsidiary of such
person (including any Subsidiary of the Company), any Capital other than any
common stock or other common equity interest with no special rights and no
preferences, privileges, or redemption or repayment provisions; provided that a
provision providing for a change of control redemption at the option of the
holder that is expressly subordinated to the prior payment of the Notes shall
not cause such Capital to be treated as Disqualified Capital. For purposes of
the covenant "Limitation on Incurrence of Additional Indebtedness and
Disqualified Capital", the amount of Disqualified Capital of any person shall be
the sum of the liquidation payment or maximum redemption price (whichever is
higher at the time of measurement) of such Disqualified Capital and, if there
are any accrued and unpaid dividends at the time of the measurement of the
amount of Disqualified Capital which would be required to be paid upon
liquidation or redemption, (without duplication) such accrued but unpaid
dividends.
"Event of Loss" means, with respect to any property or asset, any (i) loss,
destruction or damage of such property or asset; or (ii) any condemnation,
seizure or taking, by exercise of the power of eminent domain or otherwise, of
such property or asset, or confiscation or requisition of the use of such
property or asset.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated by the SEC thereunder.
"Exchange Offer" means the offer by the Company and the Guarantor to
exchange the Exchange Notes and Guarantee thereof for the Notes and Guarantee
thereof made pursuant to the Registration Rights Agreement.
"Exchange Notes" means the 9 3/8% Senior Subordinated Notes due 2007 that
are identical in all material respects to the Notes issued on the Issue Date and
that are issued by the Company in exchange for such Notes.
"Excluded Person" means (a) the Company or any Subsidiary of the Company,
(b) any employee benefit plan of the Company or any trustee or similar fiduciary
holding Capital of the Company for or pursuant to the terms of any such plan,
(c) Mr. Binion, (d) Phyllis Cope and (e) members of the families and Affiliates
(where the determination of whether a person is an Affiliate is made without
reference to clause (b) of the definition of such term) of the foregoing
persons.
"GAAP"means United States generally accepted accounting principles set
forth in the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as approved by a significant segment of the
accounting profession as in effect on the Issue Date.
"Gaming Authority" means any Governmental Authority with the power to
regulate gaming in any Gaming Jurisdiction, and the corresponding Governmental
Authorities with the responsibility to interpret and enforce the laws and
regulations applicable to gaming in any Gaming Jurisdiction.
"Gaming Jurisdiction" means any Federal, state or local jurisdiction in
which any entity in which the Company has a direct or indirect beneficial, legal
or voting interest conducts casino gaming, now or in the future.
81
<PAGE> 84
"Gaming Law" means any law, rule, regulation or ordinance governing gaming
activities (including, without limitation, the Mississippi Gaming Control Act,
the Louisiana Riverboat Economic Development and Gaming Control Act and the
Missouri Riverboat Gaming Act, Mo. Rev. Stat. sec. 313.800 et seq., in each case
including all amendments or modifications thereof), any administrative rules or
regulations promulgated thereunder, and any of the corresponding statutes, rules
and regulations in each Gaming Jurisdiction.
"Governmental Authority" means any agency, authority, board, bureau,
commission, department, office or instrumentality of any nature whatsoever of
the United States or a foreign government, any state, any province or any city
or other political subdivision or otherwise and whether now or hereafter in
existence, or any officer or official thereof, and any Maritime authority.
"Guarantor" means Robinson Property Group Limited Partnership, a
Mississippi limited partnership, and any Additional Guarantor.
"HE" means Horseshoe Entertainment, a Louisiana Limited Partnership.
"HE Intercompany Note" means, collectively, the notes issued by HE to the
Company in the aggregate amount of up to $300 million.
"Holder" means the person in whose name a Note is registered on the
Registrar's books.
"Indebtedness" of any person means, without duplication, (a) all
liabilities and obligations, contingent or otherwise, of such person, (i) in
respect of borrowed money (whether or not the recourse of the lender is to the
whole of the assets of such person or only to a portion thereof), (ii) evidenced
by bonds, notes, debentures or similar instruments, (iii) representing the
balance deferred and unpaid of the purchase price of any property or services,
except (other than accounts payable or other obligations to trade creditors that
have remained unpaid for greater than 90 days past their original due date or
that are being contested in good faith and for which adequate reserves have been
made) those incurred in the ordinary course of its business that would
constitute ordinarily a trade payable to trade creditors, (iv) evidenced by
bankers acceptances or similar instruments issued or accepted by banks, (v) for
the payment of money relating to a Capitalized Lease Obligation, or (vi)
evidenced by a letter of credit or a reimbursement obligation of such person
with respect to any letter of credit; (b) all obligations of such person under
Interest Swap and Hedging Obligations; (c) all liabilities of others of the kind
described in the preceding clauses (a) or (b) that such person has guaranteed or
that is otherwise its legal liability (but only to the extent of the amount
actually guaranteed) and all obligations to purchase, redeem or acquire any
Capital; (d) all obligations secured by a Lien to which the property or assets
(including, without limitation, leasehold interests and any other tangible or
intangible property rights) of such person are subject, whether or not the
obligations secured thereby shall have been assumed by or shall otherwise be
such person's legal liability, provided, however, that the amount of such
obligations shall be limited to the lesser of the fair market value of the
assets or property to which such Lien attaches and the amount of the obligation
so secured; and (e) any and all deferrals, renewals, extensions, refinancing and
refundings (whether direct or indirect) of, or amendments, modifications or
supplements to, any liability of the kind described in any of the preceding
clauses (a), (b), (c) or (d), or this clause (e), whether or not between or
among the same parties.
"Intercompany Note" means a note issued by a Subsidiary to the Company or
another Subsidiary of the Company to evidence Indebtedness by such Subsidiary to
the Company or such other Subsidiary the terms of which are no less favorable to
the lender thereunder than the Notes are to Holders thereof.
"Interest Payment Date" means the stated due date of an installment of
interest on the Notes.
"Interest Swap and Hedging Obligation" means any obligation of any person
pursuant to any interest rate swap agreement, interest rate cap agreement,
interest rate collar agreement, interest rate exchange agreement, currency
exchange agreement or any other agreement or arrangement designed to protect
against fluctuations in interest rates or currency values, including, without
limitation, any arrangement whereby, directly or indirectly, such person is
entitled to receive from time to time periodic payments calculated by applying
either a fixed or floating rate of interest on a stated notional amount in
exchange for periodic payments made by such person calculated by applying a
fixed or floating rate of interest on the same notional amount.
82
<PAGE> 85
"Investment" by any person in any other person means (without duplication)
(a) the acquisition by such person (whether for cash, property, services,
securities or otherwise) of capital stock, bonds, notes, debentures, partnership
or other ownership interests or other securities, including any options or
warrants, of such other person or any agreement to make any such acquisition;
(b) the making by such person of any deposit with, or advance, loan or other
extension of credit to, such other person (including the purchase of property
from another person subject to an understanding or agreement, contingent or
otherwise, to resell such property to such other person) or any commitment to
make any such advance, loan or extension (but excluding accounts receivable
arising in the ordinary course of business); (c) other than the Guarantee of the
Notes and guarantees of other Indebtedness of the Company or any Subsidiary to
the extent permitted by the covenant "Limitation on Incurrence of Additional
Indebtedness and Disqualified Capital", the entering into by such person of any
guarantee of, or other credit support or contingent obligation with respect to,
Indebtedness or other liability of such other person; (d) the making of any
capital contribution by such person to another person; or (e) the designation by
the Board of Managers of the Company of a person to be an Unrestricted
Subsidiary in accordance with the definition of "Unrestricted Subsidiary;"
provided that none of the foregoing if effected by the Company with respect to a
Subsidiary or by a Subsidiary with respect to the Company or any other
Subsidiary shall constitute an "Investment"; provided, further, in the case of
any loan from the Company to a Subsidiary or from a Subsidiary to another
Subsidiary, such loan shall be evidenced by an Intercompany Note. The Company
shall be deemed to make an "Investment" in an amount equal to the fair market
value of the net assets of any person, determined by the Board of Managers of
the Company in good faith at the time that such person is designated an
Unrestricted Subsidiary, and any property transferred to an Unrestricted
Subsidiary from the Company or one of its Subsidiaries, shall be deemed an
Investment valued at its fair market value, determined by the Board of Managers
of the Company in good faith at the time of such transfer.
"Investor Limited Partners" means Cassandra Piper, Wendell Piper and August
Robin, who collectively own 8.08% of the total partnership interests in HE.
"Issue Date" means the date of first issuance of the Notes under the
Indenture.
"JBB Gaming L.L.C." means JBB Gaming Investments, L.L.C., a Delaware
limited liability company.
"Lien" means any mortgage, lien, pledge, charge, security interest, or
other encumbrance of any kind, whether or not filed, recorded or otherwise
perfected under applicable law (including any conditional sale or other title
retention agreement and any lease deemed to constitute a security interest, and
any option or other agreement to give any security interest).
"Liquidated Damages" means, collectively, damages jointly and severally
payable by the Company and the Guarantor to each Holder of the Notes pursuant to
the terms of the Registration Rights Agreement.
"NGCP" means New Gaming Capital Partnership, a Nevada limited partnership.
"Net Cash Proceeds" means the aggregate amount of U.S. Legal Tender or Cash
Equivalents received by the Company, in the case of a sale of Qualified Capital,
and by the Company and its Subsidiaries in respect of an Asset Sale or an Event
of Loss, plus, in the case of an issuance of Qualified Capital upon any
exercise, exchange or conversion of securities (including options, warrants,
rights and convertible or exchangeable debt) of the Company that were issued for
cash on or after the Issue Date, the amount of cash originally received by the
Company upon the issuance of such securities (including options, warrants,
rights and convertible or exchangeable debt), less, in each case, the sum of all
fees, commissions and other expenses incurred in connection with such sale of
Qualified Capital, Asset Sale or Event of Loss, and, in the case of an Asset
Sale or Event of Loss only, less (i) the amount (estimated reasonably and in
good faith by the Company) of income, franchise, sales and other applicable
taxes required to be paid by the Company or any of its Subsidiaries in
connection with such Asset Sale or Event of Loss, (ii) the amount of any
liabilities relating to the assets sold or transferred that are retained by the
Company or its Subsidiaries, and (iii) an amount (estimated reasonably and in
good faith by the Company) of a reserve for indemnifications and warranties or
representations made in connection with such Asset Sale.
83
<PAGE> 86
"New Projects" means any new Casino project, inclusive of the proposed
Missouri project, for which the Company or a Subsidiary has submitted or has
acquired the rights to submit and is pursuing a proposal to any Governmental
Authority to develop such Casino project which proposal has not been acted upon
by such Governmental Authority.
"Non-recourse Indebtedness" means Indebtedness of a person to the extent
that under the terms thereof (including any related instruments, documents or
filings) (i) no personal recourse shall be had against such person for the
payment of the principal of or interest or premium on such Indebtedness, and
(ii) enforcement of obligations on such Indebtedness is limited only to recourse
against interests in property and assets purchased with the proceeds of the
incurrence of such Indebtedness or the Indebtedness refinanced by such
Indebtedness and as to which neither the Company nor any Subsidiary provides any
guarantee, collateral or other credit support of any kind whatsoever.
"Note Purchase Agreement" means the Note Purchase Agreement, dated as of
June 18, 1997, among the Company, the Guarantor and the purchaser named therein,
pursuant to which, together with the Indenture, the Notes are being issued.
"Notes" means, prior to the consummation of the Exchange Offer, the 9 3/8%
Senior Subordinated Notes Due 2007 issued in accordance with the Indenture, and
after the consummation of the Exchange Offer, the Notes (if any) and the
Exchange Notes, in each case as amended or modified from time to time in
accordance with the terms thereof, issued under the Indenture.
"Obligation" means any principal, premium, interest, penalties, fees,
reimbursements, damages, indemnification and other liabilities, including costs
and expenses, relating to obligations of the Company or the Guarantor under the
Notes, the Guarantee or the Indenture, including any liquidated damages pursuant
to the Registration Rights Agreement, in each case as such documents may be
amended from time to time in accordance with their respective terms.
"Offer to Purchase" means any Change of Control Offer or Asset Sale Event
of Loss Offer.
"Pari Passu," as applied to the ranking of any Indebtedness of a person in
relation to other Indebtedness of such person, means that each such Indebtedness
either (i) is not subordinate or junior in right of payment or upon liquidation
to any Indebtedness or (ii) is subordinate or junior to the same Indebtedness as
is the other, and is so subordinate or junior to the same extent, and is not
subordinate or junior in right of payment or upon liquidation to each other or
to any Indebtedness as to which the other is not so subordinate or junior.
"Paying Agent" means the Trustee or any successor as paying agent under the
Indenture.
"Permitted Indebtedness" means any of the following:
(a) The Company and each of its Subsidiaries may incur Indebtedness
solely in respect of bankers acceptances, letters of credit and performance
bonds (to the extent that such incurrence does not result in the incurrence
of any obligation for the payment of borrowed money of any person other
than the Company or such Subsidiary), in the ordinary course of business,
in amounts and for the purposes customary in the Company's industry for
gaming operations similar to those of the Company and its Subsidiaries or
pursuant to self-insurance obligations; provided, however, that the
aggregate principal amount outstanding of such Indebtedness (including any
Indebtedness issued to refinance, refund or replace such Indebtedness) for
the Company and its Subsidiaries shall at no time exceed $5.0 million;
(b) The Company may incur Indebtedness to any Subsidiary, and any
Subsidiary may incur Indebtedness, or issue Disqualified Capital, to any
other Subsidiary or the Company, including, without limitation, the
Guarantee; provided, however, that such obligations shall be evidenced by
an Intercompany Note and, in any case where the Company or the Guarantor is
the obligor (other than the RPG Intercompany Senior Loan), shall be
subordinated in all respects to the Company's Obligations pursuant to the
Notes and the Credit Facility, the Guarantor's Obligations pursuant to the
Guarantee of the Company's Obligations under the Notes and the Credit
Facility and the obligations of any Subsidiary to the Company under any
Intercompany Note, as the case may be;
84
<PAGE> 87
(c) The Company and any Subsidiary may post a bond or surety
obligation (or incur an indemnity or similar obligation) in order to
prevent the impairment or loss by the Company or any Subsidiary of or to
obtain for the Company or any Subsidiary a Gaming license, to the extent
required by applicable law and consistent in character and amount with
customary industry practice; and
(d) The Company and any Subsidiary may enter into Interest Swap and
Hedging Obligations for the purpose of limiting interest rate risks,
provided that the obligations under such agreements are related to payment
obligations on Indebtedness otherwise permitted by the Indenture, and may
enter into Currency Exchange Protection Agreements for the purpose of
limiting exchange rate risks in connection with a Related Business.
"Permitted Liens" means any of the following:
(a) Liens for taxes, assessments or other governmental charges not yet
delinquent or which are being contested in good faith and by appropriate
proceedings by the Company or one or more of its Subsidiaries if adequate
reserves with respect thereto are maintained on the books of the Company or
such Subsidiary or Subsidiaries, as the case may be, in accordance with
GAAP;
(b) Liens of carriers, warehousemen, mechanics, landlords,
materialmen, repairmen and for crew wages or salvage or other like Liens
arising by operation of law in the ordinary course of business and
consistent with industry practices and Liens on deposits made to obtain the
release of such Liens if (i) the underlying obligations are not overdue for
a period of more than 60 days or (ii) such Liens are being contested in
good faith and by appropriate proceedings by the Company or one or more of
its Subsidiaries and adequate reserves with respect thereto are maintained
on the books of the Company or such Subsidiary, as the case may be, in
accordance with GAAP;
(c) easements, rights-of-way, zoning and similar restrictions and
other similar encumbrances or title defects incurred or imposed, as
applicable, in the ordinary course of business and consistent with industry
practices which, in the aggregate, are not substantial in amount, and which
do not in any case materially detract from the value of the property
subject thereto (as such property is used by the Company or one or more of
its Subsidiaries) or interfere with the ordinary conduct of the business of
the Company or such Subsidiary; provided, however, that any such Liens are
not incurred in connection with any borrowing of money or any commitment to
loan any money or to extend any credit;
(d) Liens disclosed on a schedule to the Indenture;
(e) Liens that secure Acquired Indebtedness of the Company or any of
its Subsidiaries, provided, however, in each case, that the incurrence of
such Acquired Indebtedness was permitted under the covenant "Limitation on
Incurrence of Additional Indebtedness and Disqualified Capital" and such
Liens do not encumber any other property or assets other than the property
and assets acquired in such acquisition, merger or consolidation and were
not put in place in connection with or in anticipation of such acquisition,
merger or consolidation;
(f) customary Liens (other than any Lien imposed by ERISA) incurred or
deposits made in the ordinary course of business in connection with
worker's compensation, unemployment insurance and other types of social
security legislation or to secure the performance of tenders, statutory
obligations, surety, indemnity and appeal bonds, bids, leases, government
contracts, trade contracts, performance and return-of-money bonds and other
similar obligations (exclusive of obligations for the payment of borrowed
money);
(g) any Liens with respect to judgments and attachments not giving
rise to an Event of Default;
(h) leases or subleases granted to others not interfering in any
material respect with the ordinary conduct of the business of the Company
or of any of its Subsidiaries or which do not in any case materially
detract from the value of the property subject thereto (as such property is
used by the Company or one or more of its Subsidiaries);
85
<PAGE> 88
(i) any (x) interest or title of a lessor or sublessor under any lease
including under any Capital Lease Obligation, (y) restriction or
encumbrance that the interest or title of such lessor or sublessor may be
subject to, or (z) subordination of the interest of the lessee or sublessee
under such lease to any restriction or encumbrance referred to in subclause
(y);
(j) Liens arising from filing of precautionary UCC financing
statements relating solely to leases not prohibited by the Indenture;
(k) any Lien in favor of the Company or any Subsidiary thereof; and
(l) any Lien on any asset of an Unrestricted Subsidiary other than any
Capital owned by such Unrestricted Subsidiary in the Company or in any
Subsidiary or Unrestricted Subsidiary of the Company.
"Permitted Tax Distributions" has the meaning ascribed thereto in the
covenant "Limitation on Restricted Payments".
"Person" or "person" means an individual, corporation, partnership,
association, limited liability company, limited liability partnership, trust,
estate or other entity.
"Public Equity Offering" means an underwritten public offering of common
stock pursuant to an effective registration statement under the Securities Act
following which the common stock is listed on a national securities exchange or
quoted on the NASDAQ National Market.
"Purchase Money Indebtedness" means any Indebtedness of such person owed to
any seller or other person incurred to finance the acquisition of any Related
Business Assets and incurred substantially concurrently with or within 270 days
following such acquisition.
"Qualified Capital" means any Capital of the Company that is not
Disqualified Capital.
"Qualified Exchange" means any defeasance, redemption, repurchase or other
acquisition of Capital or Subordinated Indebtedness of the Company with the Net
Cash Proceeds received by the Company from the substantially concurrent sale of
Qualified Capital of the Company or in exchange for Qualified Capital of the
Company.
"Quoted Price" means for any day the last reported sale price regular way
or, in case no such reported sale takes place on such day, the average of the
closing bid and asked prices regular way on such day, in either case on the
principal national securities exchange on which the Notes are listed or admitted
to trading, or if the Notes are not listed or admitted to trading on any
national securities exchange, but are traded in the over the counter market, the
closing sale price of the Notes or, in case no sale is publicly reported, the
average of the closing bid and asked prices, as furnished by two members of the
National Association of Securities Dealers, Inc. selected from time to time by
the Company for that purpose.
"RPG Intercompany Note" means, collectively, the notes issued by the
Guarantor to the Company in the aggregate amount of $150 million.
"Reference Period" with regard to any person means the four full fiscal
quarters (or such lesser period during which such person has been in existence)
for which financial information is available ended immediately preceding any
date upon which any determination is to be made pursuant to the terms of the
Notes or the Indenture.
"Refinancing Indebtedness" means Indebtedness or Disqualified Capital (a)
issued in exchange for, or the proceeds from the issuance and sale of which are
used to repay, redeem, defease, refund, refinance, discharge or otherwise retire
for value, in whole or in part, or (b) constituting an amendment, modification
or supplement to, or a deferral or renewal of ((a) and (b) above are,
collectively, a "Refinancing"), any Indebtedness or Disqualified Capital in a
principal amount or, in the case of Disqualified Capital, the amount described
in the second sentence of the definition of Disqualified Capital, not to exceed
(after deduction of reasonable and customary fees and expenses incurred in
connection with the Refinancing) the lesser of (i) the principal amount or, in
the case of Disqualified Capital, the amount described in the second sentence of
the definition of Disqualified Capital, of the Indebtedness or Disqualified
Capital so refinanced and (ii) if such
86
<PAGE> 89
Indebtedness being refinanced was issued with an original issue discount, the
accreted value thereof (as determined in accordance with GAAP) at the time of
such Refinancing; provided, however, that (a) Refinancing Indebtedness of the
Guarantor shall only be used to refinance outstanding Indebtedness or
Disqualified Capital of the Guarantor and (b) Refinancing Indebtedness shall (x)
not have an Average Life shorter than the Indebtedness or Disqualified Capital
to be so refinanced at the time of such Refinancing and (y) in all respects, be
no less subordinated, if applicable, to the rights of holders of the Notes than
was the Indebtedness or Disqualified Capital to be refinanced.
"Registration Rights Agreement" means the Exchange and Registration Rights
Agreement by and among the Company, the Guarantor and the purchasers named
therein, dated as of the Issue Date.
"Regulatory Redemption" means (i) the disposition by the Holder of any
Notes required by any Governmental Authority or the Board of Managers of the
Company or (ii) a redemption or repurchase by the Company of any of the Notes
required by any Governmental Authority or the Board of Managers of the Company
if, in either case, the ownership of any of the Notes by the Holder thereof will
preclude, interfere with, threaten or delay the issuance, maintenance, existence
or reinstatement of any gaming or liquor license, permit or approval, or result
in the imposition of burdensome terms or conditions on such license, permit or
approval.
"Related Business" means the gaming (including pari-mutuel betting)
business and any and all reasonably related businesses necessary for, in support
or anticipation of and ancillary to or in preparation for, the gaming business
including, without limitation, the development, expansion or operation of any
Casino (including any land-based, dockside, riverboat or other type of Casino),
owned, or to be owned, by the Company or one of its Subsidiaries.
"Related Business Asset" means property, goods or services pertaining to a
Related Business, other than debt or securities of any other person.
"Restricted Investment" means, in one or a series of related transactions,
any Investment other than in Cash Equivalents and in Investments of the type set
forth in clause (v) of the definition of Cash Equivalents that have a maturity
longer than one year so long as the Average Life of all such Investments does
not exceed 15 months; provided, however, that the extension of credit to
customers of Casinos consistent with industry practice in the ordinary course of
business shall not be a Restricted Investment.
"Restricted Payment" means, with respect to any person, (a) the declaration
or payment of any dividend or other distribution in respect of Capital of such
person or any Subsidiary of such person, (b) any payment on account of the
purchase, redemption or other acquisition or retirement for value of Capital of
such person, or any Subsidiary of such person, (c) any purchase, redemption or
other acquisition or retirement for value of, or any defeasance of, any
Subordinated Indebtedness, directly or indirectly, by such person or a
Subsidiary of such person, prior to the scheduled maturity, any scheduled
repayment of principal or any scheduled sinking fund payment, as the case may
be, of such Subordinated Indebtedness (including any payment in respect of any
amendment of the terms of any such Subordinated Indebtedness, which amendment is
sought in connection with any such acquisition of such Indebtedness or seeks to
shorten any such due date), and (d) any Restricted Investment (including, in any
case, the designation of a person as an Unrestricted Subsidiary) by such person;
provided, however, that the term "Restricted Payment" does not include (i) (A)
any dividend, distribution or other payment on or with respect to Capital of an
issuer or (B) the acquisition by the issuer or a wholly-owned Subsidiary of such
issuer of Capital of another Subsidiary or an Unrestricted Subsidiary of such
issuer, in the case of each of (A) and (B) of this clause (i), to the extent
payable solely in shares of Qualified Capital of such issuer; (ii) any dividend,
distribution or other payment to the Company, or to any of its wholly-owned
Subsidiaries, by any of its Subsidiaries; (iii) loans or advances to officers or
employees of the Company or any of its Subsidiaries (other than Mr. Binion,
Phyllis Cope and members of the families of the foregoing persons) (a) to pay
business related expenses or relocation costs of such officers or employees in
connection with their employment by the Company or any of its Subsidiaries in an
aggregate amount outstanding at any time not exceeding $5.0 million for all such
officers and employees or (b) for the purchase price of Capital of the Company
or any Subsidiary (provided that the Capital purchased with the proceeds of such
loan or advance shall be pledged to the Company or the Subsidiary, as
applicable, as security
87
<PAGE> 90
for the repayment of such loan or advance); (iv) any Investment received as
consideration for any Asset Sale to the extent that the Company or any of its
Subsidiaries is permitted to receive such Investment without violating the
provisions of the covenant "Limitation on Sale of Assets and Subsidiary; Event
of Loss"; and (v) Investments received as part of the settlement of litigation
or in satisfaction of extensions of credit to any Person otherwise permitted
under the Indenture pursuant to the reorganization, bankruptcy or liquidation of
such Person.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the SEC promulgated thereunder.
"Senior Indenture" means the indenture, dated as of October 10, 1995, among
the Company, the Guarantor and the trustee thereunder, and any other credit
arrangements that are either Pari Passu with the Senior Indenture or
subordinated to the Notes that together (subject to the succeeding sentence)
provide for no greater than an aggregate of $150.0 million in Indebtedness or
any substitute therefor, including any related notes, guarantees, collateral
documents, instruments and agreements executed in connection therewith, as such
Senior Indenture and/or related documents may be amended, restated,
supplemented, renewed, replaced or otherwise modified from time to time, whether
or not with the same agent, trustee, representative lenders or holders, and
irrespective of any changes in the terms and conditions thereof. Without
limiting the generality of the foregoing, the term "Senior Indenture" shall
include agreements in respect of Interest Swap and Hedging Obligations and
Currency Exchange Protection Agreements with lenders party to the Senior
Indenture and shall also include any amendment, amendment and restatement,
renewal, extension, restructuring, supplement or modification to the Senior
Indenture and all refundings, refinancings and replacements of the Senior
Indenture, and all refundings, refinancings and replacements thereafter,
including any agreement (i) extending the maturity of any Indebtedness incurred
thereunder or contemplated thereby, (ii) adding or deleting borrowers, issuers
or guarantors thereunder, so long as such borrowers, issuers and guarantors
include one or more of the Company and its Subsidiaries and their respective
successors and assigns, or (iii) otherwise altering the terms and conditions
thereof in a manner not prohibited by the terms hereof.
"Senior Notes" means the 12.75% Notes Due 2000 issued in accordance with
the Senior Indenture, as amended or modified from time to time in accordance
with the terms thereof.
"Senior Debt" means (i) any Indebtedness under the Credit Facility, (ii)
any Indebtedness under the Senior Indenture, (iii) any other Indebtedness
permitted to be incurred under the Indenture unless the instrument under which
such Indebtedness is incurred expressly provides that it is subordinated in
right of payment to any Senior Debt. Notwithstanding the foregoing, Senior Debt
will not include (i) any liability for state, federal, local or other taxes;
(ii) any Indebtedness of the Company to any of its Affiliates or Subsidiaries,
(iii) any trade payables or (iv) any Indebtedness incurred in violation of the
Indenture.
"Significant Subsidiary" means any Subsidiary that would be a "significant
subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated
pursuant to the Securities Act, as such regulation is in effect on the date
hereof.
"Stated Maturity" when used with respect to the principal of any Note,
means June 15, 2007 and, with respect to interest on any Note, means the
scheduled date for payment of such interest.
"Subordinated Indebtedness" means Indebtedness of the Company or the
Guarantor, as applicable, that is subordinated by its express terms in right of
payment to the Notes or the Guarantee, as applicable, in all respects and has no
scheduled installment of principal due, by maturity, redemption, sinking fund
payment or otherwise, on or prior to the Stated Maturity of the Notes.
"Subsidiary" with respect to any person, means (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of Capital entitled (without regard to the occurrence of any contingency)
to vote in the election of directors, managers or trustees thereof is at the
time owned or controlled, directly or indirectly, by such person, by one or more
Subsidiaries of such person or by such person and one or more Subsidiaries of
such person and (ii) any partnership (a) the sole general partner or the
managing general partner of which is such person or a Subsidiary of such person
or (b) the only general partners of which are such person or one or more
Subsidiaries of such person (or any combination thereof).
88
<PAGE> 91
When used with respect to the Company, Subsidiary shall be deemed to include any
direct Subsidiary of the Company and each indirect Subsidiary that is a direct
Subsidiary of one or more of the Company's direct or indirect Subsidiaries.
Notwithstanding the foregoing, (i) no Unrestricted Subsidiary shall be a
Subsidiary of the Company or any of its Subsidiaries and (ii) the Capital of any
entity that is owned by an Unrestricted Subsidiary shall be disregarded in
determining whether such entity is a Subsidiary or an Unrestricted Subsidiary.
"TIA" means the Trust Indenture Act of 1939 (15 U.S. Code
sec.sec. 77aaa-7bbbb) as in effect on the date of the execution of the
Indenture.
"Unrestricted Subsidiary" means any person that, at the time of
determination, shall be an Unrestricted Subsidiary as designated by the Board of
Managers of the Company (as provided below) provided that such person shall not
engage, to any substantial extent, in any line or lines of business activity
other than a Related Business. The Board of Managers of the Company may
designate any person (including any newly acquired or newly formed Subsidiary at
or prior to the time it is so formed or acquired but excluding the Guarantor and
HE) to be an Unrestricted Subsidiary if (a) such Restricted Payment is not
prohibited by the terms of the covenant "Limitation on Restricted Payments;"
provided, however, that the determination of whether a Restricted Payment is
prohibited under such covenant may be made without reference to clause (3) of
the first paragraph thereof in the case of an Investment in any person that
would be a Subsidiary but for the designation as an Unrestricted Subsidiary
(except that the definition of "Subsidiary," solely for purposes of this
proviso, shall be modified by substituting "50% or more" for the words "more
than 50%" in clause (i) of such definition) engaged solely in, or being formed
solely for the purposes of engaging in, the business of developing,
constructing, expanding or acquiring (x) a Casino or Casinos and, if applicable,
any Related Businesses in connection with such Casino or Casinos, or (y) a
Related Business to be used primarily in connection with an existing Casino or
Casinos in each case provided in clause (x) or (y) so long as the Company
directly or indirectly, through one or more of its Subsidiaries owns or controls
at least 50% of the total voting power of Capital entitled (without regard to
the occurrence of any contingency) to vote in the election of directors,
managers, general partners, trustees or other similar governing body thereof if
the Consolidated Coverage Ratio of the Company for the Reference Period
immediately preceding the date of such designation (giving pro forma effect to
the designation of such Subsidiary as an Unrestricted Subsidiary as if such
designation has been made on the first day of the Reference Period) is not less
than 2.0 to 1, provided, further, that the full amount of any Restricted Payment
pursuant to the foregoing proviso shall be deducted in the calculation of the
aggregate amount of Restricted Payments available to be made pursuant to such
clause (3) of the covenant "Limitation on Restricted Payments;" (b) such person
does not own any Capital of, or own or hold any Lien on any property of, or hold
any debt of, the Company or the Guarantor and (c) such person does not, at the
time of designation, and does not thereafter, create, incur, issue, assume,
guarantee or otherwise become directly or indirectly liable with respect to any
Indebtedness pursuant to which the holder of such Indebtedness has recourse to
any of the assets of the Company or any of its Subsidiaries. Any such
designation also constitutes a Restricted Payment for purposes of the covenant
"Limitation on Restricted Payments." The Board of Managers of the Company may
designate any Unrestricted Subsidiary to be a Subsidiary, provided, however,
that (i) no Default or Event of Default is existing or will occur as a
consequence thereof and (ii) immediately after giving effect to such
designation, on a pro forma basis, the Company could incur at least $1.00 of
additional Indebtedness pursuant to clause (ii) of paragraph (a) of the covenant
described under "Limitation on Incurrence of Additional Indebtedness and
Disqualified Capital." Each such designation shall be evidenced by filing with
the Trustee a certified copy of the resolution giving effect to such designation
and an Officers Certificate certifying that such designation complied with the
foregoing conditions. Notwithstanding anything herein to the contrary, the
Guarantor may not be designated an Unrestricted Subsidiary.
"U.S. Government Obligations" means direct non-callable obligations of, or
non-callable obligations guaranteed by, the United States of America for the
payment of which obligation or guarantee the full faith and credit of the United
States of America is pledged.
"U.S. Legal Tender" means such coin or currency of the United States of
America as at the time of payment is legal tender for the payment of public and
private debts.
89
<PAGE> 92
"wholly-owned" with respect to a Subsidiary of any person means (i) with
respect to a Subsidiary that is a partnership, limited liability company or
similar entity, a Subsidiary whose capital or other equity interest is 99% or
greater beneficially owned by such person, and (ii) with respect to a Subsidiary
that is other than a partnership, limited liability company or similar entity, a
Subsidiary whose capital stock or other equity interest is 100% beneficially
owned by such person.
FORM, DENOMINATION, TRANSFER, EXCHANGE AND BOOK-ENTRY PROCEDURES
The Notes initially will be represented by one or more Notes in registered,
global form without interest coupons (collectively, the "Global Note"). The
Global Note will be deposited upon issuance with the Trustee as custodian for
The Depository Trust Company ("DTC"), in New York, New York, and registered in
the name of DTC or its nominee, in each case for credit to an account of a
direct or indirect participant in DTC as described below. Except as set forth
below, the Global Notes may be transferred, in whole and not in part, only to
another nominee of DTC or to a successor of DTC or its nominee.
In addition, transfer of beneficial interests in the Global Note will be
subject to the applicable rules and procedures of DTC and its direct or indirect
participants, which may change from time to time. Beneficial interests in the
Global Note may not be exchanged for Notes in certificated form except in the
limited circumstances described below. See "-- Exchanges of Book-Entry Notes for
Certificated Notes."
Exchanges of Book-Entry Notes for Certificated Notes
A beneficial interest in a Global Note may not be exchanged for a Note in
certificated form unless (i) DTC (x) notifies the Company that it is unwilling
or unable to continue as Depositary for the Global Note or (y) has ceased to be
a clearing agency registered under the Exchange Act, and in either case the
Company thereupon fails to appoint a successor Depositary, (ii) the Company, at
its option, notifies the Trustee in writing that it elects to cause the issuance
of the Notes in certificated form or (iii) there shall have occurred and be
continuing an Event of Default or any event which after notice or lapse of time
or both would be an Event of Default with respect to the Notes. In all cases,
certificated Notes delivered in exchange for any Global Note or beneficial
interests therein will be registered in the names, and issued in any approved
denominations, requested by or on behalf of the depositary (in accordance with
its customary procedures). Any such exchange will be effected through the DTC
Deposit/Withdrawal at Custodian ("DWAC") system and an appropriate adjustment
will be made in the records of the Security Registrar to reflect a decrease in
the principal amount of the relevant Global Note.
Certain Book-Entry Procedures for Global Notes
The descriptions of the operations and procedures of DTC that follow are
provided solely as a matter of convenience. These operations and procedures are
solely within the control of the settlement systems and are subject to changes
by them from time to time. The Company takes no responsibility for these
operations and procedures and urges investors to contact the system or their
participants directly to discuss these matters.
DTC has advised the Company as follows: DTC is a limited purpose trust
company organized under the laws of the State of New York, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the
Uniform Commercial Code and a "Clearing Agency" registered pursuant to the
provisions of Section 17A of the Exchange Act. DTC was created to hold
securities for its participants ("participants") and facilitate the clearance
and settlement of securities transactions between participants through
electronic book-entry changes in accounts of its participants, thereby
eliminating the need for physical transfer and delivery of certificates.
Participants include securities brokers and dealers, banks, trust companies and
clearing corporations and may include certain other organizations. Indirect
access to the DTC system is available to other entities such as banks, brokers,
dealers and trust companies that clear through or maintain a custodial
relationship with a participant, either directly or indirectly ("indirect
participants").
DTC has advised the Company that its current practice upon the issuance of
the Global Notes is to credit, on its internal system, the respective principal
amount of the individual beneficial interests represented by such Global Notes
to the accounts with DTC of the participants through which such interests are to
be
90
<PAGE> 93
held. Ownership of beneficial interests in the Global Notes will be shown on,
and the transfer of that ownership will be effected only through, records
maintained by DTC or its nominees (with respect to interests of participants)
and the records of participants and indirect participants (with respect to
interests of persons other than participants).
As long as DTC, or its nominee, is the registered Holder of a Global Note,
DTC or such nominee, as the case may be, will be considered the sole owner and
Holder of the Notes represented by such Global Note for all purposes under the
Indenture and the Notes. Except in the limited circumstances described above
under "-- Exchanges of Book-Entry Notes for Certificated Notes", owners of
beneficial interests in a Global Note will not be entitled to have any portions
of such Global Note registered in their names, will not receive or be entitled
to receive physical delivery of Notes in definitive form and will not be
considered the owners or Holders of the Global Note (or any Notes represented
thereby) under the Indenture or the Notes. Investors may hold their interests in
the Global Note directly through DTC, if they are participants in such system,
or indirectly through organizations which are participants in such system.
The laws of some states require that certain persons take physical delivery
in definitive form of securities that they own. Consequently, the ability to
transfer beneficial interests in a Global Note to such persons may be limited to
that extent. Because DTC can act only on behalf of its participants, which in
turn act on behalf of indirect participants and certain banks, the ability of a
person having beneficial interests in a Global Note to pledge such interest to
persons or entities that do not participate in the DTC system, or otherwise take
actions in respect of such interests, may be affected by the lack of a physical
certificate evidencing such interests.
Payments of the principal of, premium, if any, and interest on Global Notes
will be made to DTC or its nominee as the registered owner thereof. Neither the
Company, the Trustee nor any of their respective agents will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests in the Global Notes
or for maintaining, supervising or reviewing any records relating to such
beneficial ownership interests.
The Company expects that DTC or its nominee, upon receipt of any payment of
principal or interest in respect of a Global Note representing any Notes held by
it or its nominee, will credit participants' accounts with payments in amounts
proportionate to their respective beneficial interests in the principal amount
of such Global Note for such Notes as shown on the records of DTC or its
nominee. The Company also expects that payments by participants to owners of
beneficial interests in such Global Note held through such participants will be
governed by standing instructions and customary practices, as is now the case
with securities held for the accounts of customers registered in "street name."
Such payments will be the responsibility of such participants. Neither the
Company nor the Trustee will be liable for any delay by DTC or any of its
participants in identifying the beneficial owners of the Notes, and the Company
and the Trustee may conclusively rely on and will be protected in relying on
instructions from DTC or its nominee as the registered owner of the Notes for
all purposes.
Interests in the Global Notes will trade in DTC's Same-Day Funds Settlement
System and secondary market trading activity in such interests will therefore
settle in immediately available funds, subject in all cases to the rules and
procedures of DTC and its participants. Transfers between participants in DTC
will be effected in accordance with DTC's procedures, and will be settled in
same-day funds.
DTC has advised the Company that it will take any action permitted to be
taken by a Holder of Notes only at the direction of one or more participants to
whose accounts with DTC interests in the Global Notes are credited and only in
respect of such portion of the aggregate principal amount of the Notes as to
which such participant or participants has or have given such direction.
However, if there is an Event of Default (as defined above) under the Notes, DTC
reserves the right to exchange the Global Notes for legended Notes in
certificated form, and to distribute such Notes to its participants.
Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of beneficial ownership interests in the Global Notes among
participants of DTC they are under no obligation to perform or continue to
perform such procedures, and such procedures may be discontinued at any time.
None of the Company, the Trustee nor any of their respective agents will have
any responsibility for the performance by
91
<PAGE> 94
DTC or its participants or indirect participants of their respective obligations
under the rules and procedures governing their operations, including
maintaining, supervising or reviewing the records relating to, or payments made
on account of, beneficial ownership interests in Global Notes.
CONCERNING THE TRUSTEE
U.S. Trust Company of Texas, N.A. is the Trustee under the Indenture.
GOVERNING LAW
The Indenture and the Notes will be governed by and construed in accordance
with the laws of the State of New York.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
Riordan & McKinzie, counsel to the Company, has advised the Company that
the following discussion expresses its opinion as to the material Federal income
tax consequences expected to result to Holders whose Old Notes are exchanged for
New Notes in the Exchange Offer and as to the material Federal income tax
consequences expected to result to prospective purchasers who acquire New Notes
from a person other than the Company. Such opinion is based upon the current
provisions of the Internal Revenue Code of 1986, as amended, applicable Treasury
regulations, judicial authority and administrative rulings and practice. There
can be no assurance that the Internal Revenue Service (the "Service") will not
take a contrary view, and no ruling from the Service has been or will be sought.
Legislative, judicial or administrative changes or interpretations may be
forthcoming that could alter or modify the statements and conclusions set forth
below. Any such changes or interpretations may or may not be retroactive and
could affect the tax consequences to Holders. The discussion does not cover all
aspects of Federal taxation that may be relevant to particular Holders, and it
does not address state, local, foreign or other tax laws. Certain Holders
(including insurance companies, tax-exempt organizations, financial
institutions, broker-dealers, taxpayers subject to the alternative minimum tax,
foreign corporations, persons who are not citizens or residents of the United
States and persons in special situations such as those who hold the Notes as
part of a hedging or conversion transaction or straddle) may be subject to
special rules not discussed below.
EXCHANGE OF OLD NOTES FOR NEW NOTES
The exchange of New Notes for Old Notes should not be treated as a taxable
event for Federal income tax purposes because the New Notes should not be
considered to differ materially in kind or extent from the Old Notes. As a
result, no material Federal income tax consequences should result to Holders
exchanging Old Notes for New Notes. Holders of the New Notes will continue to
have the same tax consequences relating to the purchase, holding and disposition
of the New Notes as the tax consequences associated with the Old Notes. Thus,
the provisions hereinbelow will apply to all Notes, whether in the form of New
Notes or Old Notes.
U.S. HOLDERS
The following discussion is limited to the U.S. Federal income tax
consequences relevant to a Holder of a Note that is (i) a citizen or resident
(as defined in Section 7701(b)(1) of the Code) of the United States, (ii) a
corporation created or organized under the laws of the United States or any
political subdivision thereof or therein, (iii) an estate or trust described in
Section 7701(a)(30) of the Code or (iv) a person whose income is otherwise
subject to U.S. Federal income taxation on a net income basis (a "U.S. Holder")
regardless of its source. Certain U.S. Federal income tax consequences relevant
to a Holder other than a U.S. Holder are discussed separately below.
92
<PAGE> 95
Stated Interest
In general, interest on a Note will be taxable to a U.S. Holder as ordinary
interest income at the time it accrues or is received, in accordance with such
Holder's regular method of tax accounting.
Sale, Exchange or Other Taxable Disposition
In general, the Holder of a Note will recognize gain or loss upon the sale,
exchange or other taxable disposition of such Note. Such gain will equal the
difference between the amount realized on the sale or other disposition and the
Holder's tax basis in the Note. A Holder's initial tax basis in a Note generally
will be equal to the amount paid by the Holder for such Note. Such initial tax
basis will be decreased by any payments received with respect to the Note, other
than payments of stated interest. Subject to the market discount rules discussed
below, such gain or loss should be long-term capital gain or loss if the Note
has been held for more than one year.
Market Discount
Generally, market discount will exist to the extent the tax basis of a
Holder of a Note is less than the revised issue price of the Note at the time of
purchase, subject to a statutory de minimis exception. The revised issue price
for a Note equals the issue price, presumably less any cash payments on the
Notes, other than stated interest. Generally, a Holder of a Note who acquires
the Note with market discount will be required to treat any gain realized upon
the disposition of such Note as ordinary income to the extent of the market
discount that accrued (but was not previously included in income) during the
period such Holder held the Note. Furthermore, the Code requires that partial
principal payments on a market discount bond be included in gross income to the
extent that such payments do not exceed the accrued market discount on such
bond. Thus, if a principal payment is received by a Holder, such Holder may be
required to include in income at the time such cash payment is received the
portion of the unrecognized market discount that accrued prior to the receipt of
such cash payment (up to the amount of such payment). A Holder of a Note who has
acquired the Note with market discount will also be required to defer deduction
of a portion of interest on debt incurred or continued to purchase or carry the
Note until disposition of the Note in a taxable transaction.
A Holder may elect to include market discount in income as such discount
accrues, with a corresponding increase in the Holder's tax basis in the Note. If
a Holder so elects, the rules in the preceding paragraph regarding the treatment
of income or gain upon the disposition of a Note and upon receipt of certain
cash payments as ordinary income or gain, and regarding the deferral of interest
deduction on indebtedness related to a Note, would not apply. Once made, such an
election applies to all debt obligations that are purchased by the Holder at a
market discount during the taxable year for which the election is made, and all
subsequent taxable years of the Holder, unless the Service consents to a
revocation of the election.
Amortizable Bond Premium
Generally, if the initial tax basis of a Note for a Holder exceeds its
stated redemption price at maturity (which will be determined by reference to an
earlier call date if the call price would reduce the amount of premium), such
excess may be treated as "amortizable bond premium" that is allocated among the
interest payments on the Note using a constant interest rate method over the
Note's remaining term. The amount allocated to each interest payment would be
applied against and reduce the amount of such interest payment (with a
corresponding reduction in basis). This interest offset would be available only
if an election under Section 171 of the Code is made or is in effect and if the
acquired Note is held as a capital asset. This election would apply to all debt
instruments held or subsequently acquired by the electing Holder on or after the
first day of the first taxable year to which the election applies and may not be
revoked without the consent of the Service.
Election
A Holder of a Note, subject to certain limitations, may elect to include in
gross income all interest accruing on the Note under the constant yield method.
For this purpose, interest includes stated and unstated
93
<PAGE> 96
interest, acquisition discount, original issue discount and de minimis original
issue discount, market discount and de minimis market discount, as adjusted by
any amortizable bond premium or acquisition premium. This election may not be
revoked without the consent of the Service. If made for a Note that has market
discount, the election to include market discount in income currently will apply
to all market discount obligations acquired by such Holder on or after the first
day of the first taxable year to which the election applies. If a Holder makes
this election for a Note with amortizable bond premium, the Holder is deemed to
have made the election described above under "Amortizable Bond Premium" for the
taxable year in which the Note was acquired.
NON-U.S. HOLDERS
The following discussion is limited to the U.S. Federal income tax
consequences relevant to a Holder of a Note that is not a U.S. Holder (a
"Non-U.S. Holder").
Stated Interest
Subject to the discussion of backup withholding below, payments of interest
on a Note to any Non-U.S. Holder will generally not be subject to U.S. Federal
income or withholding tax, provided that (1) the Holder is not (i) an actual or
constructive owner of 10% or more of the total voting power of all voting
capital of the Company, (ii) a controlled foreign corporation related to the
Company through stock ownership, (iii) a foreign private foundation for U.S.
Federal income tax purposes or (iv) a bank whose receipt of interest on a Note
is described in Section 881(c)(3)(A) of the Code, (2) such interest payments are
not effectively connected with the conduct by the Non-U.S. Holder of a trade or
business within the United States and (3) the Company or its paying agent
receives (i) from the Non-U.S. Holder, a properly completed Form W-8 (or
substitute Form W-8) under penalties of perjury which provides the Non-U.S.
Holder's name and address and certifies that the Non-U.S. Holder of the Note is
a Non-U.S. Holder or (ii) from a security clearing organization, bank or other
financial institution that holds the Notes in the ordinary course of its trade
or business (a "financial institution") on behalf of the Non-U.S. Holder,
certification under penalties of perjury that such a Form W-8 (or substitute
Form W-8) has been received by it, or by another such financial institution,
from the Non-U.S. Holder, and a copy of the Form W-8 (or substitute Form W-8) is
furnished to the payor. Recently proposed Treasury Regulations would provide
alternative methods for satisfying these certification requirements, and are
proposed to be effective for payments made after December 31, 1997.
A Non-U.S. Holder that does not qualify for exemption from withholding
under the preceding paragraph generally will be subject to withholding of U.S.
Federal income tax at the rate of 30% (or lower applicable treaty rate) on
payments of interest on the Notes.
If the payments of interest on a Note are effectively connected with the
conduct by a Non-U.S. Holder of a trade or business in the United States, such
payments will be subject to U.S. Federal income tax on a net basis at the rates
applicable to United States persons generally (and, with respect to corporate
Holders, may also be subject to a 30% branch profits tax). If payments are
subject to U.S. Federal income tax on a net basis in accordance with the rules
described in the preceding sentence, such payments will not be subject to U.S.
withholding tax so long as the Holder provides the Company or its paying agent
with a properly executed Form 4224. Recently proposed Treasury Regulations would
provide alternative methods for satisfying this certification requirement, and
are proposed to be effective for payments made after December 31, 1997.
Non-U.S. Holders should consult any applicable income tax treaties, which
may provide for a lower rate of withholding tax, exemption from or reduction of
branch profits tax, or other rules different from those described above.
Sale, Exchange or Redemption of Notes
Except as described below and subject to the discussion concerning backup
withholding, any gain realized by a Non-U.S. Holder on the sale, exchange,
retirement or other disposition of a Note generally will not be subject to U.S.
Federal income tax, unless (i) such gain is effectively connected with the
conduct by such Non-U.S. Holder of a trade or business within the United States,
(ii) the Non-U.S. Holder is an individual
94
<PAGE> 97
who holds the Notes as a capital asset and is present in the United States for
183 days or more in the taxable year of the disposition and certain other
conditions are satisfied, or (iii) the Non-U.S. Holder is subject to tax
pursuant to the provisions of U.S. tax law applicable to certain U.S.
expatriates.
Federal Estate Tax
Notes held (or treated as held) by an individual who is a Non-U.S. Holder
at the time of his or her death will not be subject to U.S. Federal estate tax
provided that (i) the individual does not actually or constructively own 10% or
more of the total voting power of all voting capital of the Company and (ii)
income on the Notes was not effectively connected with the conduct by such
Non-U.S. Holder of a trade or business within the United States.
Information Reporting and Backup Withholding
The Company must report annually to the Service and to each Non-U.S. Holder
any interest that is subject to withholding or that is exempt from U.S.
withholding tax. Copies of those information returns may also be made available,
under the provisions of a specific treaty or agreement, to the tax authorities
of the country in which the Non-U.S. Holder resides.
The regulations provide that backup withholding (which generally is a
withholding tax imposed at the rate of 31% on payments to persons that fail to
furnish certain required information) and information reporting will not apply
to payments made in respect of the Notes by the Company to a Non-U.S. Holder, if
the Holder certifies as to its non-U.S. status under penalties of perjury or
otherwise establishes an exemption (provided that neither the Company nor its
paying agent has actual knowledge that the Holder is a United States person or
that the conditions of any other exemption are not, in fact, satisfied).
The payment of the proceeds from the disposition of Notes to or through the
U.S. office of any broker, U.S. or foreign, will be subject to information
reporting and possible backup withholding unless the owner certifies as to its
non-U.S. status under penalty of perjury or otherwise establishes an exemption,
provided that the broker does not have actual knowledge that the Holder is a
U.S. person or that the conditions of any other exemption are not, in fact,
satisfied. The payment of the proceeds from the disposition of a Note to or
through a non-U.S. office of a non-U.S. broker that is not a U.S. related person
will not be subject to information reporting or backup withholding. For this
purpose, a "U.S. related person" is (i) a "controlled foreign corporation" for
U.S. Federal income tax purposes or (ii) a foreign person 50% or more of whose
gross income from all sources for the three-year period ending with the close of
its taxable year preceding the payment (or for such part of the period that the
broker has been in existence) is derived from activities that are effectively
connected with the conduct of a United States trade or business.
In the case of the payment of proceeds from the disposition of Notes to or
through a non-U.S. office of a broker that is either a U.S. person or a U.S.
related person, the regulations require information reporting on the payment
unless the broker has documentary evidence in its files that the owner is a
Non-U.S. Holder and the broker has no knowledge to the contrary. Backup
withholding will not apply to payments made through foreign offices of a broker
that is a U.S. person or a U.S. related person (absent actual knowledge that the
payee is a U.S. person).
Any amounts withheld under the backup withholding rules from a payment to a
Non-U.S. Holder will be allowed as a refund or a credit against such Non-U.S.
Holder's U.S. Federal income tax liability, provided that the requisite
procedures are followed.
HOLDERS OF THE OLD NOTES AND PROSPECTIVE PURCHASERS OF NEW NOTES SHOULD
CONSULT THEIR OWN ADVISORS AS TO HOW THEIR OWN PARTICULAR TAX SITUATION MIGHT BE
AFFECTED BY THE EXCHANGE OF OLD NOTES FOR NEW NOTES AND THE PURCHASE, HOLDING
AND DISPOSITION OF THEIR NOTES.
95
<PAGE> 98
PLAN OF DISTRIBUTION
Any broker-dealer who holds an Old Note that has not (i) been exchanged in
the Exchange Offer for a New Note and become entitled to be resold to the public
without complying with the prospectus delivery requirements of the Securities
Act, (ii) been effectively registered under the Securities Act and disposed of
in accordance with a Shelf Registration Statement, (iii) been distributed to the
public pursuant to Rule 144 under the Securities Act or by a broker-dealer
pursuant to the provisions described herein (including delivery of a copy of
this Prospectus), or (iv) become saleable pursuant to Rule 144(k) under the
Securities Act (a "Transfer Restricted Security") that was acquired for its own
account as a result of market-making activities or other trading activities
(other than Old Notes acquired directly from the Company) may exchange such Old
Note pursuant to the Exchange Offer; however, such broker-dealer may be deemed
to be an "underwriter" within the meaning of the Securities Act and must,
therefore, deliver a prospectus meeting the requirements of the Securities Act
in connection with any resales of the New Notes received by such broker-dealer
in the Exchange Offer, which prospectus delivery requirement may be satisfied by
the delivery by such broker-dealer of a copy of this Prospectus. The Company has
agreed that for a period of 120 days after the Expiration Date, it will make
this Prospectus, as amended or supplemented, available to any broker-dealer for
use in connection with any such resale. In addition, until January 7, 1998 (90
days after commencement of the Exchange Offer), all dealers effecting
transactions in the New Notes may be required to deliver a prospectus.
The Company will not receive any proceeds from any sale of New Notes by
broker-dealers. New Notes received by broker-dealers for their own account
pursuant to the Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions, through
the writing of options on the New Notes or a combination of such methods of
resale, at market prices prevailing at the time of resale, at prices related to
such prevailing market prices or at negotiated prices. Any such resale may be
made directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer and/or the purchasers of any such New Notes. Any broker-dealer
that resells New Notes that were received by it for its own account pursuant to
the Exchange Offer and any broker or dealer that participates in a distribution
of such New Notes may be deemed to be an "underwriter" within the meaning of the
Securities Act, and any profit on any such resale of New Notes and any
commissions or concessions received by any such persons may be deemed to be
underwriting compensation under the Securities Act.
For a period of 120 days after the Expiration Date, the Company will
promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any broker-dealer that requests such documents
in the Letter of Transmittal. The Company has agreed to pay the expenses
incident to the Exchange Offer and will indemnify the Holders of the Old Notes
against certain liabilities, including liabilities under the Securities Act, in
connection with the Exchange Offer.
LEGAL MATTERS
The validity of the New Notes offered hereby will be passed upon for the
Company by Riordan & McKinzie, a Professional Corporation, Los Angeles,
California.
EXPERTS
The audited financial statements included in this Prospectus and elsewhere
in the Registration Statement have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their reports with respect
thereto, and are included herein in reliance upon the authority of said firm as
experts in giving said reports.
96
<PAGE> 99
AVAILABLE INFORMATION
The Company has filed with the Commission a Registration Statement on Form
S-4 under the Securities Act for the registration of the New Notes offered
hereby. As permitted by the rules and regulations of the Commission, this
Prospectus does not contain all of the information set forth in the Registration
Statement and the exhibits thereto. For further information with respect to the
Company and the New Notes offered hereby, reference is made to the Registration
Statement and to the exhibits filed therewith. Statements contained in this
Prospectus concerning the contents of any contract or other document are not
necessarily complete. With respect to each such contract or other document filed
with the Commission as an exhibit to the Registration Statement, reference is
made to the exhibit for a more complete description of the matter involved, and
each such statement shall be deemed qualified in its entirety by such reference.
The Company is subject to the informational requirements of the Exchange
Act and in accordance therewith files reports and other information with the
Commission. The Registration Statement, the exhibits forming a part thereof and
the reports and other information filed by the Company with the Commission in
accordance with the Exchange Act may be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549 and will also be available for
inspection and copying at the regional offices of the Commission located at 7
World Trade Center, 13th Floor, New York, New York 10048 and at 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661. Copies of such material may also be
obtained upon written request from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed
rates. In addition, the Commission maintains a website (http://www.sec.gov) that
contains such reports and other information filed by the Company.
The Indenture provides that, following the filing date of this Registration
Statement and for so long as any of the New Notes are outstanding, the Company
will file with the Commission the periodic reports required to be filed with the
Commission under the Exchange Act, whether or not the Company is subject to
Section 13(a) or 15(d) of the Exchange Act. The Company will also, within 15
days of filing each such report with the Commission, provide the Trustee and the
Holders of the New Notes with annual reports containing the information required
to be contained in Form 10-K promulgated under the Exchange Act, quarterly
reports containing the information required to be contained in Form 10-Q
promulgated under the Exchange Act, and from time to time such other information
as is required to be contained in Form 8-K promulgated under the Exchange Act.
If filing such reports with the Commission is prohibited by the Exchange Act,
the Company will also provide copies of such reports to prospective purchasers
of the New Notes upon written request.
97
<PAGE> 100
INDEX OF DEFINED TERMS
In addition to the terms defined in "Description of New Notes -- Certain
Definitions,"
the following terms are defined on the indicated page of the Prospectus.
<TABLE>
<S> <C>
ABC...................................... 45
Acceleration Notice...................... 74
Acceptance Amount........................ 70
Affiliated Gaming Persons................ 41
Affiliate Transaction.................... 70
Asset Sale............................... 67
Asset Sale Event of Loss Put Date........ 69
Asset Sale Event of Loss Offer Amount.... 68
Asset Sale Event of Loss Purchase Date... 69
Asset Sale Event of Loss Offer Price..... 69
Asset Sale Event of Loss Offer........... 69
Change of Control Offer.................. 66
Change of Control Payment Date........... 66
Change of Control Offer Price............ 66
Change of Control Offer Period........... 67
Club..................................... 18
Commission............................... 2
Company.................................. 1
Company Agreement........................ 46
Covenant Defeasance...................... 75
Default.................................. 64
Depositor................................ 26
Disposition Event........................ 50
DTC...................................... 3
DWAC..................................... 90
Eligible Institution..................... 25
Excess Funding Offer..................... 54
Excess Funding Offer Date................ 54
Exchange Agent........................... 8
Exchange Offer........................... 1
Expiration Date.......................... 2
FBI...................................... 19
Global New Note.......................... 3
Global Note.............................. 90
Global Old Note.......................... 3
Guarantee................................ 1
Guarantor................................ 1
HE Intercompany Note..................... 59
HE Intercompany Senior Note.............. 58
HGI...................................... 31
HGP...................................... 46
Holders.................................. 2
Horseshoe Bossier City................... 5
Horseshoe Casino Center.................. 5
Horseshoe Casinos........................ 5
Horseshoe Gaming......................... 1
Horseshoe Ventures....................... 31
Incurrence Date.......................... 65
Indenture................................ 2
Indirect Participants.................... 90
Initial Credit Facility.................. 35
Initial Purchaser........................ 3
Issue Date............................... 61
JBB...................................... 53
Legal Defeasance......................... 74
Letter of Transmittal.................... 1
Louisiana Enforcement Division........... 40
Manager.................................. 46
Minimum Accumulation Date................ 69
Mississippi Act.......................... 42
Named Executive Officers................. 48
New Notes................................ 1
Non-U.S. Holder.......................... 94
Old Notes................................ 1
Onyx..................................... 53
Participants............................. 90
Payment Blockage Notice.................. 62
Permitted Tax Distributions.............. 65
Prospectus............................... 1
Registration Rights Agreement............ 2
Registration Statement................... 1
Roll-Up Transaction...................... 31
RPG...................................... 1
RPG Intercompany Note.................... 59
RPG Intercompany Senior Note............. 58
Securities Act........................... 1
Service.................................. 92
Shelf Registration Statement............. 22
Subsidiary Guarantors.................... 71
Transfer................................. 41
Transfer Restricted Security............. 96
Trustee.................................. 26
Units.................................... 52
US Holder................................ 92
Warrants................................. 56
</TABLE>
98
<PAGE> 101
HORSESHOE GAMING, L.L.C. AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
HORSESHOE GAMING, L.L.C. AND SUBSIDIARIES
Report of Independent Public Accountants.............................................. F-2
Consolidated Financial Statements:
Balance sheets as of December 31, 1996 and 1995..................................... F-3
Statements of operations for the years ended December 31, 1996, 1995 and 1994....... F-4
Statements of members' equity (deficit) for the years ended December 31, 1996, 1995
and 1994......................................................................... F-5
Statements of cash flows for the years ended December 31, 1996, 1995 and 1994....... F-6
Notes to consolidated financial statements.......................................... F-7
NEW GAMING CAPITAL PARTNERSHIP AND SUBSIDIARY
Report of Independent Public Accountants.............................................. F-18
Consolidated Financial Statements:
Balance sheets as of December 31, 1996 and 1995..................................... F-19
Statements of operations for the years ended December 31, 1996, 1995 and 1994....... F-20
Statements of partners' capital (deficit) for the years ended December 31, 1996,
1995 and 1994.................................................................... F-21
Statements of cash flows for the years ended December 31, 1996, 1995 and 1994....... F-22
Notes to consolidated financial statements.......................................... F-23
ROBINSON PROPERTY GROUP, L.P.
Report of Independent Public Accountants.............................................. F-31
Financial Statements:
Balance sheets as of December 31, 1996 and 1995..................................... F-32
Statements of operations for the years ended December 31, 1996, 1995 and 1994....... F-33
Statements of partners' capital (deficit) for the years ended December 31, 1996,
1995 and 1994.................................................................... F-34
Statements of cash flows for the years ended December 31, 1996, 1995 and 1994....... F-35
Notes to financial statements....................................................... F-36
HORSESHOE GAMING, L.L.C. AND SUBSIDIARIES:
Consolidated Condensed Balance Sheets at June 30, 1997 (unaudited) and December 31,
1996............................................................................. F-43
Consolidated Condensed Statements of Operations (unaudited) for the three and six
months ended June 30, 1997 and 1996.............................................. F-44
Consolidated Condensed Statements of Cash Flows (unaudited) for the six months ended
June 30, 1997 and 1996........................................................... F-45
Notes to Consolidated Condensed Financial Statements................................ F-46
NEW GAMING CAPITAL PARTNERSHIP AND SUBSIDIARY:
Consolidated Condensed Balance Sheets at June 30, 1997 (unaudited) and December 31,
1996............................................................................. F-47
Consolidated Condensed Statements of Operations (unaudited) for the three and six
months ended June 30, 1997 and 1996.............................................. F-48
Consolidated Condensed Statements of Cash Flows (unaudited) for the six months ended
June 30, 1997 and 1996........................................................... F-49
Notes to Consolidated Condensed Financial Statements................................ F-50
ROBINSON PROPERTY GROUP, L.P.:
Condensed Balance Sheets at June 30, 1997 (unaudited) and December 31, 1996......... F-51
Condensed Statements of Operations (unaudited) for the three and six months ended
June 30, 1997 and 1996........................................................... F-52
Condensed Statements of Cash Flows (unaudited) for the six months ended June 30,
1997 and 1996.................................................................... F-53
Notes to Condensed Financial Statements............................................. F-54
</TABLE>
F-1
<PAGE> 102
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Horseshoe Gaming, L.L.C.:
We have audited the accompanying consolidated balance sheets of Horseshoe
Gaming, L.L.C. (a Delaware limited liability company) and subsidiaries as of
December 31, 1996 and 1995, and the related consolidated statements of
operations, members' equity (deficit) and cash flows for each of the three years
in the period ended December 31, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Horseshoe Gaming, L.L.C. and
subsidiaries as of December 31, 1996 and 1995, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1996, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Las Vegas, Nevada,
March 4, 1997.
F-2
<PAGE> 103
HORSESHOE GAMING, L.L.C. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1996 1995
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Current Assets:
Cash and cash equivalents............................................ $ 79,159 $ 65,541
Accounts receivable, net of allowance for doubtful accounts of $3,451
and $2,663........................................................ 8,026 5,207
Inventories.......................................................... 1,435 1,481
Prepaid expenses and other........................................... 1,639 1,404
-------- --------
Total current assets......................................... 90,259 73,633
-------- --------
Property and Equipment:
Land................................................................. 10,225 6,920
Buildings, boat, barge and improvements.............................. 121,807 100,849
Furniture, fixtures and equipment.................................... 41,572 35,568
Less: accumulated depreciation....................................... (26,493) (13,642)
-------- --------
147,111 129,695
Construction in progress............................................. 38,644 9,187
-------- --------
Net property and equipment................................... 185,755 138,882
-------- --------
Other Assets:
Escrow funds......................................................... 42,235 31,316
Goodwill, net........................................................ 39,226 40,640
Other................................................................ 20,122 15,617
-------- --------
$377,597 $300,088
======== ========
LIABILITIES AND MEMBERS' EQUITY
Current Liabilities:
Current maturities of long-term debt................................. $ 11,060 $ 10,747
Accounts payable..................................................... 3,184 3,910
Construction payables................................................ 14,106 3,200
Accrued expenses and other........................................... 23,751 25,313
-------- --------
Total current liabilities.................................... 52,101 43,170
Long-term Debt, less current maturities................................ 221,648 186,856
Minority Interest...................................................... (827) (1,128)
Commitments and Contingencies (Notes 8 and 9)
Redeemable Ownership Interests, net of deferred compensation of $3,033
and $6,375........................................................... 24,893 18,443
Members' Equity........................................................ 79,782 52,747
-------- --------
$377,597 $300,088
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE> 104
HORSESHOE GAMING, L.L.C. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------
1996 1995 1994
-------- -------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Revenues:
Casino.................................................... $317,479 $283,402 $59,230
Food and beverage......................................... 26,947 24,299 5,879
Hotel..................................................... 7,919 7,289 1,830
Other..................................................... 4,419 4,092 881
-------- -------- -------
356,764 319,082 67,820
Promotional allowances.................................... (25,033) (20,697) (4,417)
-------- -------- -------
Net revenues...................................... 331,731 298,385 63,403
-------- -------- -------
Expenses:
Casino.................................................... 162,408 133,299 24,339
Food and beverage......................................... 12,317 12,741 3,167
Hotel..................................................... 6,798 5,662 1,144
Other..................................................... 1,359 1,728 676
General and administrative................................ 55,527 46,298 17,844
Development............................................... 6,629 4,387 2,128
Depreciation and amortization............................. 15,989 12,545 2,499
Preopening................................................ -- 7,021 6,665
-------- -------- -------
Total expenses.................................... 261,027 223,681 58,462
-------- -------- -------
Operating Income............................................ 70,704 74,704 4,941
-------- -------- -------
Other Income (Expense):
Interest expense.......................................... (28,090) (20,188) (6,797)
Interest and other income................................. 6,126 1,453 538
Gain on sale of land...................................... -- -- 5,242
Other, net................................................ 82 -- --
Minority interest in income of subsidiaries............... (1,861) (8,850) (5,691)
-------- -------- -------
Income (Loss) Before Extraordinary Loss on Early Retirement
of Debt................................................... 46,961 47,119 (1,767)
Extraordinary Loss on Early Retirement of Debt.............. -- (7,179) --
-------- -------- -------
Net Income (Loss)........................................... $ 46,961 $ 39,940 $(1,767)
======== ======== =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE> 105
HORSESHOE GAMING, L.L.C. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF MEMBERS' EQUITY (DEFICIT)
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
MEMBERS' CONTRIBUTIONS
EQUITY RECEIVABLE TOTAL
-------- ------------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Balance at December 31, 1993............................. $ 1,031 $(3,500) $ (2,469)
Contributions............................................ 4,164 -- 4,164
Collections of contributions receivable.................. -- 3,500 3,500
Distributions............................................ (4,169) -- (4,169)
Warrants and partnership interests issued in conjunction
with senior and subordinated notes (Note 5)............ 4,374 -- 4,374
Net loss................................................. (1,767) -- (1,767)
-------- -------- --------
Balance at December 31, 1994............................. 3,633 -- 3,633
Contributions............................................ 1,273 (1,150) 123
Distributions:
Cash................................................... (21,222) -- (21,222)
Payable................................................ (1,857) -- (1,857)
Increase in redeemable ownership interests............... (13,963) -- (13,963)
Capital accounts of minority interests purchased......... 4,543 -- 4,543
Step-up in basis of assets due to purchase of minority
interests.............................................. 41,755 (205) 41,550
Net income............................................... 39,940 -- 39,940
-------- -------- --------
Balance at December 31, 1995............................. 54,102 (1,355) 52,747
Collection of contributions receivable................... -- 1,355 1,355
Distributions............................................ (18,853) -- (18,853)
Increase in redeemable ownership interests............... (2,428) -- (2,428)
Net income............................................... 46,961 -- 46,961
-------- -------- --------
Balance at December 31, 1996............................. $ 79,782 $ -- $ 79,782
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE> 106
HORSESHOE GAMING, L.L.C. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------
1996 1995 1994
-------- --------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)....................................... $ 46,961 $ 39,940 $ (1,767)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Minority interest in income of subsidiaries.......... 1,861 8,850 5,691
Depreciation and amortization........................ 15,989 12,545 2,499
Amortization of debt discount, deferred finance
charges and other.................................. 3,032 2,849 1,682
(Gain) loss on disposal of land and other assets..... 1,011 -- (5,242)
Provision for doubtful accounts...................... 4,388 2,186 477
Increase in redeemable ownership interests........... 4,546 6,003 1,414
Extraordinary loss on early retirement of debt....... -- 7,179 --
Preopening expenses.................................. -- 7,021 6,665
Net change in assets and liabilities................. (8,390) 4,544 (1,484)
-------- --------- --------
Net cash provided by operating activities....... 69,398 91,117 9,935
-------- --------- --------
Cash flows from investing activities:
Purchases of property and equipment..................... (58,824) (18,986) (65,675)
Increase (decrease) in construction payables............ 10,906 (84) 3,284
Proceeds from sale of land.............................. 1,400 -- 8,595
Deferred license fee.................................... -- -- (1,000)
Purchase of land held for sale.......................... -- (1,344) --
Net increase in escrow funds............................ (10,919) (31,316) --
Net increase in other assets............................ (8,024) (6,588) (1,565)
-------- --------- --------
Net cash used in investing activities........... (65,461) (58,318) (56,361)
-------- --------- --------
Cash flows from financing activities:
Proceeds from debt and warrants......................... 49,073 200,772 80,954
Payments on debt........................................ (15,547) (149,879) (11,624)
Capital contributions................................... -- 123 7,664
Capital distributions................................... (20,710) (21,222) (4,169)
Contributions from minority holders..................... -- 600 575
Distributions to minority holders....................... (1,560) (6,069) (6,102)
Deferred interest payable............................... -- (2,467) 2,101
Debt issue costs and commitment fees.................... (1,575) (7,700) (4,399)
-------- --------- --------
Net cash provided by financing activities....... 9,681 14,158 65,000
-------- --------- --------
Net change in cash and cash equivalents................... 13,618 46,957 18,574
Cash and cash equivalents, beginning of period............ 65,541 18,584 10
-------- --------- --------
Cash and cash equivalents, end of period.................. $ 79,159 $ 65,541 $ 18,584
======== ========= ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE> 107
HORSESHOE GAMING, L.L.C. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND BASIS OF PRESENTATION
General
Horseshoe Gaming, L.L.C. (the "Company") was formed in Delaware in August
1995 to acquire, through a roll-up transaction effective October 1, 1995, four
entities under the control of Mr. Jack B. Binion ("Mr. Binion"), which conduct
gaming, hotel and other related operations in Bossier City, Louisiana, and
Tunica County, Mississippi, and are actively involved in efforts to develop
gaming operations in new jurisdictions. Because of the integrated nature of
these operations, the Company is considered to be engaged in one industry
segment. A description of each entity is as follows:
- New Gaming Capital Partnership ("NGCP") is a Nevada limited partnership
which was formed on February 4, 1993. NGCP is 100% owned by the Company
and its subsidiary Horseshoe GP, Inc. As of December 31, 1996 and 1995,
NGCP owned 91.92% of Horseshoe Entertainment, L.P. ("HE"), a Louisiana
limited partnership which owns and operates the Horseshoe Bossier City
(see Note 9).
- Robinson Property Group, L.P. ("RPG") is a Mississippi limited
partnership which was formed on June 7, 1993. RPG owns and operates the
Horseshoe Casino Center located in Tunica County, Mississippi, and is
100% owned by the Company and its subsidiary Horseshoe GP, Inc.
- Horseshoe Casinos (Indiana), LLC ("HIND") is an Indiana limited liability
company which was formed in October 1994, to pursue a new casino
development in Indiana and is 50% owned and managed by the Company.
- Horseshoe Ventures, L.L.C. ("Horseshoe Ventures") is a Delaware limited
liability company which was formed in August 1995 to pursue the
development of casinos in new jurisdictions other than in Indiana and is
80% owned and managed by the Company.
NGCP and RPG
The Company obtained its ownership interest in NGCP and RPG by exchanging
ownership interests in the Company for partnership interests in NGCP and RPG.
The exchange of ownership interests between the Company and Mr. Binion and
certain affiliates of Mr. Binion has been accounted for at historical cost
similar to that in pooling of interests accounting. On the effective date of the
roll-up transaction, Mr. Binion and certain affiliates of Mr. Binion owned 80.0%
and 82.7% of NGCP and RPG, respectively. The exchange for the remaining
partnership interests of NGCP and RPG, other than ownership interests issued
pursuant to employee compensation arrangements (see Note 8), have been accounted
for as a purchase of minority interests based on fair value as determined by an
independent appraisal. The total cost of the minority interests in NGCP and RPG
acquired by the Company, based on the fair value of the ownership interests
exchanged, was $17,729,000 and $24,026,000, respectively, which has been
allocated as follows (in thousands):
<TABLE>
<CAPTION>
NGCP RPG TOTAL
------- ------- -------
<S> <C> <C> <C>
Land........................................ $ 149 $ 2,231 $ 2,380
Gaming licenses............................. 154 76 230
Goodwill.................................... 17,426 21,514 38,940
Contribution receivable..................... -- 205 205
------- ------- -------
Total............................. $17,729 $24,026 $41,755
======= ======= =======
</TABLE>
Gaming licenses are amortized over the remaining term of each license,
which is approximately two and one-half years for NGCP and approximately twelve
months for RPG. Goodwill is amortized on a straight-line basis over 25 years,
which management estimates is the related benefit period (see discussion of the
Company's accounting policy for long-lived assets below). Management regularly
evaluates whether or not the future undiscounted cash flows of NGCP and RPG are
sufficient to recover the carrying amount of the goodwill associated with each
entity. Additionally, management continually monitors such factors as the status
of new or proposed legislation, the competitive environment and the general
economic conditions of the markets in which it operates. If the estimated future
undiscounted cash flows are not sufficient to recover the carrying amount of
goodwill and, accordingly, an impairment has occurred, management intends to
write
F-7
<PAGE> 108
HORSESHOE GAMING, L.L.C. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
down the carrying amount of goodwill to its estimated fair value based on
discounted cash flows. The amount of amortization expense recorded for the year
ended December 31, 1996 and for the three months in 1995 following the roll-up
transaction was $1,647,000 and $418,000, respectively.
The financial statements for NGCP and RPG are consolidated for all periods
presented. Prior to the roll-up transaction, the ownership interests not owned
by Mr. Binion and certain affiliates of Mr. Binion, other than ownership
interests issued pursuant to employee compensation arrangements (see Note 8),
are included in minority interests in the accompanying consolidated financial
statements. Such minority interests represented 15.4% of NGCP and 15.1% of RPG
for all periods prior to the roll-up transaction. Subsequent to October 1, 1995,
minority interests represent the limited partners of HE, which owned 11% of HE
at the time of the roll-up transaction and 8.08% at December 31, 1996 and 1995
(see Note 9).
HIND
The Company is the manager of HIND and obtained its 50% ownership interest
from Mr. Binion in exchange for a promissory note of $500,000, which equaled 50%
of the total equity initially contributed to HIND by Mr. Binion and certain
affiliates of Mr. Binion. The note was paid in full on October 26, 1995, at
which time the Company also advanced HIND $1,689,000 to reimburse Mr. Binion for
costs and expenses incurred pursuing a new development in Indiana. The Company
also committed to provide all future financing to HIND for its development,
operation and maintenance of a casino gaming establishment and all related
facilities. The remaining 50% of HIND is owned by Mr. Binion and affiliates of
Mr. Binion.
The purchase of 50% of HIND has also been accounted for as a combination of
entities under common control. Prior to the roll-up transaction, HIND was
controlled by Mr. Binion. HIND is now controlled by the Company. The Company has
unilateral and perpetual control over the assets and operations of HIND by
virtue of legal contract. Accordingly, there exists a parent/subsidiary
relationship by means other than record ownership of majority voting stock.
Therefore, the financial statements of HIND are consolidated for all periods
presented.
The amount of HIND's net loss, which is included in development expenses in
the accompanying consolidated statements of operations, was $3,945,000,
$1,724,000 and $427,000 for the years ended December 31, 1996, 1995 and 1994,
respectively. In 1996, the state of Indiana announced its decision not to select
HIND's proposal for a riverboat casino license in Harrison County, Indiana.
Minority interest in HIND's losses is recognized only to the extent funded by
Mr. Binion and affiliates. The amount of minority interest included in the
accompanying consolidated statements of operations was $0, $286,000 and $214,000
for the years ended December 31, 1996, 1995 and 1994, respectively. The Company
is obligated to fund 100% of the future losses of HIND.
Horseshoe Ventures
The Company and JBB Gaming Investments, L.L.C. ("JBB"), a Delaware limited
liability company owned by Mr. Binion and an affiliate of Mr. Binion, formed
Horseshoe Ventures to pursue the development of casinos in new jurisdictions
other than Indiana. The Company is the manager of Horseshoe Ventures and
contributed a note for $400,000, plus a commitment to provide future financing,
in exchange for an 80% membership interest. The note was paid in full on October
26, 1995. JBB contributed $100,000 in cash in exchange for a 20% membership
interest. Horseshoe Ventures reimbursed Mr. Binion for the total costs and
expenses incurred pursuing the development of casinos in new jurisdictions,
other than Indiana, in the form of a note for $4,269,000, which was paid in full
on October 26, 1995. Since these costs and expenses were reimbursed to Mr.
Binion, such amounts are included in the accompanying consolidated financial
statements as if they were incurred by the Company and its subsidiaries. The
amount of Horseshoe Ventures' net loss, which is included in development
expenses in the accompanying consolidated statements of operations, was
$2,183,000, $2,663,000 and $1,701,000 for the years ended December 31, 1996,
1995 and 1994, respectively. There is no minority interest in these losses
reflected in the accompanying consolidated statements of operations, because the
Company funded 100% of such losses and is obligated to fund 100% of future
losses.
F-8
<PAGE> 109
HORSESHOE GAMING, L.L.C. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Other
The Company is managed by Horseshoe Gaming, Inc. ("HGI"), which owns
approximately 30.6% of the Company and is owned by Mr. Binion and certain
affiliates of Mr. Binion. Mr. Binion is the Chief Executive Officer of HGI. The
Company reimburses HGI for expenses associated with the management of the
Company but does not compensate HGI for services as manager. HGI's sole purpose
is to manage the Company; accordingly, all expenses incurred by HGI are charged
to the Company and are reflected in the accompanying consolidated statements of
operations in the period such expenses are incurred by HGI.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of the Company
and all of its subsidiaries (see Note 1), since the Company either holds more
than a 50% ownership interest or has the ability to control such subsidiaries in
its capacity as manager. All significant intercompany accounts and transactions
have been eliminated.
Cash and Cash Equivalents
Cash and cash equivalents include commercial paper, amounts held in mutual
funds and other investments with original maturities of 90 days or less when
purchased.
Inventories
Inventories are stated at the lower of cost, as determined on a first-in,
first-out basis, or market value and consist primarily of food, beverage, retail
merchandise, kitchen smallwares and employee wardrobe.
Property and Equipment
Property and equipment are stated at cost. The costs of normal repairs and
maintenance are expensed as incurred while major expenditures that extend the
useful lives of assets are capitalized.
Depreciation is provided for on the straight-line basis over the estimated
useful lives of the assets as follows:
<TABLE>
<S> <C>
Buildings, boat, barge and improvements............... 15 to 30 years
Furniture, fixtures and equipment..................... 3 to 10 years
</TABLE>
Capitalized Interest
The Company capitalizes interest for associated borrowing costs of major
construction projects. Capitalization of interest ceases when the asset is
substantially complete and ready for its intended use. Interest capitalized
during the years ended December 31, 1996, 1995 and 1994 was $1,272,000, $651,000
and $3,595,000, respectively.
Casino Revenues
In accordance with industry practice, casino revenues represent the net win
from gaming activities, which is the difference between gaming wins and losses.
Casino Promotional Allowances
Casino promotional allowances consist primarily of the retail value of
complimentary food and beverage, rooms and other services furnished to guests
without charge. Such amounts are included in gross revenues and deducted as
promotional allowances. The estimated costs of providing such complimentary
services, which are substantially included in casino department expenses, are as
follows (in thousands):
F-9
<PAGE> 110
HORSESHOE GAMING, L.L.C. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1996 1995 1994
------- ------- ------
<S> <C> <C> <C>
Food and beverage.............................. $22,055 $17,165 $2,998
Hotel.......................................... 3,034 2,665 814
Other operating expenses....................... 619 486 18
------- ------- ------
$25,708 $20,316 $3,830
======= ======= ======
</TABLE>
Development and Preopening Expenses
Until all necessary approvals to proceed with the development of a new
casino project are obtained from the appropriate regulatory authorities, the
related development costs are expensed as incurred. Preopening costs incurred
after the receipt of necessary approvals are deferred as incurred and expensed
upon the opening of the related casino. Preopening costs of $6,665,000 were
expensed in connection with the opening of Horseshoe Bossier City in July 1994,
and preopening costs of $7,021,000 were expensed in connection with the opening
of the Horseshoe Casino Center in February 1995.
Deferred Finance Charges
As of December 31, 1994, deferred finance charges, which are included in
other assets, consisted of fees and expenses incurred to issue the Old Notes
discussed in Note 5, including placement fees paid for by the issuance of
ownership interests and warrants to purchase ownership interests (the "Equity
Warrants") in RPG and NGCP. The value of such ownership interests and Equity
Warrants, based on independent appraisal, was recorded as deferred finance
charges with a corresponding credit to members' equity. These ownership
interests and Equity Warrants were subsequently exchanged for ownership
interests and warrants to purchase ownership interests in the Company.
The deferred finance charges related to the Old Notes were being amortized
over the period from the initial funding of the debt through the latest date of
repayment of the debt using the effective interest method. In October 1995, the
Company wrote off the balance of unamortized deferred finance charges of
approximately $3,182,000 which is included in the extraordinary loss on early
retirement of debt in the 1995 consolidated statement of operations.
The balance of deferred finance charges as of December 31, 1996 and 1995
was $5,880,000 and $6,692,000, respectively, and consists of fees and expenses
incurred to issue the New Senior Notes and to obtain the Senior Secured Credit
Facility in October 1995, as discussed in Note 5. The deferred finance charges
related to the New Senior Notes and Senior Secured Credit Facility are being
amortized over the term of the debt using the effective interest method.
Income Taxes
The Company is organized as a limited liability company under Delaware
laws. The Internal Revenue Service will classify a limited liability company as
a partnership for federal income tax purposes if the limited liability company
lacks certain characteristics of corporations.
Management believes that the Company lacks the corporate characteristics
and will be classified as a partnership for federal income tax purposes.
Accordingly, no provision is made in the accounts of the Company for federal
income taxes, as such taxes are liabilities of the members. The Company's income
tax return and the amount of allocable taxable income are subject to examination
by federal taxing authorities. If an examination results in a change to taxable
income, the income tax reported by the members may also change. The tax bases in
the Company's assets and liabilities were in excess of the amounts reported in
the accompanying consolidated financial statements by $7,754,000 and $13,027,000
at December 31, 1996 and 1995, respectively. Taxable income was in excess of net
income reported in the accompanying consolidated statements of operations for
all periods presented.
F-10
<PAGE> 111
HORSESHOE GAMING, L.L.C. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Redeemable Ownership Interests
The Company is obligated to repurchase ownership interests held by certain
employees in the event of their termination at a price equal to the then fair
market value, based on an independent appraisal. The fair value of such
ownership interests is reported outside of members' equity in the accompanying
consolidated balance sheets for all periods presented. The ownership interests
issued to employees pursuant to employment contracts is recorded as deferred
compensation in the accompanying consolidated balance sheets and expensed at
fair market value over the vesting period (see Note 8).
In addition, certain individuals obtained ownership interests in the
Company or its subsidiaries prior to becoming employees of the Company. Upon
becoming an employee, each individual entered into an employment agreement which
includes, among other things, a put/call provision in the event of the
employee's termination at a price equal to the then fair market value, based on
an independent appraisal. These individuals became employees of the Company
between October 1, 1995, and January 1, 1996, and held ownership interests in
the Company totaling 5.1% as of December 31, 1996 and 1995. The fair value of
these ownership interests of $16,391,000 and $13,516,000 has also been
classified outside of members' equity in the accompanying consolidated balance
sheets as of December 31, 1996 and 1995, respectively.
Some of the employment agreements also include a guaranteed severance
payment in the event of termination. The amount of such liability, which is
included in Redeemable Ownership Interests in the accompanying Consolidated
Balance Sheets amounted to $3,289,000 and $658,000 at December 31, 1996 and
1995, respectively.
Capital Distributions
The New Senior Notes and the Senior Secured Credit Facility contain
covenants that limit capital distributions to the members. Capital distributions
to the members are to be based upon taxable income and the federal and state
corporate statutory tax rates in effect. Such distributions are to be paid
quarterly based upon estimated taxable income. After filing by the Company and
its subsidiaries of their annual tax returns, each member is to reimburse the
Company for overpayments of capital distributions or the Company is to withhold
such amounts from future distributions to the members.
Impairment of Long-Lived Assets
In accordance with Statement of Financial Accounting Standards No. 121
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of," management continually evaluates whether events or changes in
circumstances indicate that the carrying amount of long-lived assets may not be
recoverable. Based on management's evaluations, no significant impairments of
long-lived assets have occurred during the three years ended December 31, 1996.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, and
disclosure of contingent assets and liabilities, at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Prior Year Reclassifications
Certain prior year balances have been reclassified to conform with the
current year presentation.
3. CONSOLIDATED STATEMENTS OF CASH FLOWS
Non-cash investing and financing activities consist of the following:
Purchases of property and equipment financed through payables totaled
$0, $17,833,000 and $31,115,000 for the years ended December 31, 1996, 1995
and 1994, respectively.
F-11
<PAGE> 112
HORSESHOE GAMING, L.L.C. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
A capital contribution of $1,150,000 was made through the issuance of
a contribution receivable during the year ended December 31, 1995. The
Company received land in satisfaction of the receivable during 1996.
Distributions totaling $1,857,000, which were accrued at December 31,
1995, were paid during 1996. Additionally, in 1995, the Company recorded a
payable for the purchase of an employee's ownership in the Company in the
amount of $3,306,000 of which $1,653,000 is included in current maturities
of long-term debt and $1,653,000 is included in long-term debt as of
December 31, 1995.
The net change in assets and liabilities consists of the following (in
thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
(Increase) decrease in assets:
Accounts receivable......................... $(7,207) $(6,327) $(1,543)
Inventories................................. 46 (142) (1,339)
Prepaid expenses and other.................. (281) (335) (1,069)
Preopening expenses......................... -- (3,202) (8,879)
Increase (decrease) in liabilities:
Accounts payable............................ (726) (24) 1,689
Accrued expenses and other.................. (222) 14,574 9,657
------- ------- -------
$(8,390) $ 4,544 $(1,484)
======= ======= =======
</TABLE>
Cash payments made for interest, excluding amounts capitalized, totaled
$24,799,000, $19,848,000 and $3,619,000 for the years ended December 31, 1996,
1995 and 1994, respectively.
4. ACCRUED EXPENSES AND OTHER
Accrued expenses and other consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1996 1995
------- -------
<S> <C> <C>
Payroll and related tax liabilities...................... $ 2,811 $ 2,056
Vacation and other employee benefits..................... 3,969 3,060
Accrued interest......................................... 5,283 5,116
Gaming, sales, use and property taxes.................... 2,400 3,417
Progressive slot and slot club liabilities............... 4,325 4,053
Other accrued expenses................................... 4,963 7,611
------- -------
$23,751 $25,313
======= =======
</TABLE>
5. LONG-TERM DEBT
Long-term debt consists of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1996 1995
-------- --------
<S> <C> <C>
Senior Secured Credit Facility; variable interest at
LIBOR plus 3%; due in semi-annual installments with
remaining balance due September 30, 1999............. $ 79,303 $ 93,185
12.75% Senior Notes (effective interest rate of
approximately 13.01%), due September 30, 2000, net of
unamortized discount of $2,272 and $1,900............ 147,728 98,100
Notes Payable, interest ranging from 6% to 9%, due in
various installments through January 1999............ 5,677 6,318
------- -------
232,708 197,603
Less: current maturities............................... (11,060) (10,747)
------- -------
$221,648 $186,856
======= =======
</TABLE>
F-12
<PAGE> 113
HORSESHOE GAMING, L.L.C. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
In April 1994, Horseshoe Riverboat Casinos, LLC ("HRC"), which was owned
50% by HE and 50% by RPG, completed a private placement of debt securities which
were used for the construction of the Horseshoe Bossier City and the Horseshoe
Casino Center. The total amount of Senior Notes and Subordinated Notes
(collectively, the "Old Notes") issued by HRC was $38,000,000 and $32,000,000,
respectively, and was loaned to HE and RPG on identical terms. These notes were
retired in October 1995 with the proceeds from the New Senior Notes and Senior
Secured Credit Facility (see discussion below).
The Old Notes carried warrants to purchase partnership interests in RPG and
NGCP. The value of these warrants on the date of issue, based on independent
appraisal, was recorded as a discount against the face value of the Old Notes
with a corresponding credit to members' equity. Certain of the warrant holders
exercised such warrants and exchanged their newly issued partnership interests
for membership interests in the Company. The remaining warrants were exchanged
for warrants to purchase an approximate aggregate 7.01% membership interest in
the Company. Upon exercise of the warrants, the Company shall distribute to HGI
the amounts received with respect thereto. HGI shall reduce its membership
interest in the Company by an amount equal to the membership interest in the
Company acquired by the warrant holders upon exercise thereof.
The Old Notes were secured by HE and RPG's land, buildings and certain
personal property. Mr. Binion personally guaranteed the repayment of $10,000,000
of the Senior Notes payable. All of the partners in RPG and all of the partners
of NGCP pledged their individual partnership interests as guarantees for payment
of the Old Notes.
On October 10, 1995, the Company retired the Old Notes, the senior vessel
financing and certain notes payable to affiliates with a portion of the proceeds
from a $150,000,000 Senior Secured Credit Facility due September 30, 1999 (the
"Credit Facility") and a private placement of $100,000,000 of 12.75% senior
notes (with an effective interest rate of approximately 13.01%) due September
30, 2000 (the "New Senior Notes"). The senior equipment financing was retired in
December 1995. An extraordinary loss on early retirement of debt of $7,179,000
was recognized in 1995 for prepayment penalties and the write-off of the
unamortized discounts and deferred finance charges.
The commitment fee for the Credit Facility was $1,200,000, and at closing
the Company issued notes totaling $93,185,000. The Company may issue additional
notes under the Credit Facility of up to $6,815,000 through September 30, 1999.
Notes issued under the first $100,000,000 of the Credit Facility bear interest
at six-month LIBOR plus 3.0% and require 5% of the outstanding principal balance
to be repaid semi-annually.
The Credit Facility and the related interest are guaranteed unconditionally
by RPG and are secured by a first pledge of the Company's ownership interest in
all present and future subsidiaries with the exception of NGCP's ownership
interest in HE. The Credit Facility is also secured by (i) a first lien position
on substantially all of the assets of Horseshoe Casino Center other than certain
gaming equipment; (ii) a first lien position on all intercompany notes received
by the Company from its subsidiaries, in each case secured by a first lien on
the casino and real property of each subsidiary; (iii) a first lien on
substantially all of the assets of HIND, excluding equipment; and (iv) a first
pledge of the minority interest in all present and future subsidiaries owned by
Mr. Binion and certain affiliates of Mr. Binion. In addition, Mr. Binion
personally guaranteed the repayment of $8,250,000 of the Credit Facility.
The New Senior Notes were issued at 98% of par value and included warrants
to purchase an additional $50,000,000 of New Senior Notes at a price of 98.15%
of par value. These warrants were exercised on April 10, 1996, and the Company
received proceeds of $49,073,000. The New Senior Notes and the related interest
are guaranteed unconditionally by RPG and are secured by a second pledge of the
Company's ownership interest in all present and future subsidiaries with the
exception of NGCP's ownership interest in HE. The New Senior Notes are also
secured by (i) a second lien position on substantially all of the assets of
Horseshoe Casino Center other than certain gaming equipment; (ii) a second lien
position on all intercom-
F-13
<PAGE> 114
HORSESHOE GAMING, L.L.C. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
pany notes received by the Company from its subsidiaries, in each case secured
by a second lien on the casino and real property of each subsidiary; and (iii) a
second pledge of the minority interest in all present and future subsidiaries
owned by Mr. Binion and certain affiliates of Mr. Binion.
The New Senior Notes and the Credit Facility contain covenants that, among
other things, (i) limit the amount of additional indebtedness which may be
incurred by the Company and its subsidiaries; (ii) prohibit any consolidation or
merger of the Company or its subsidiaries with an affiliate or third party, any
sale of substantially all of the Company or its subsidiaries' assets, or any
payment of subordinated indebtedness prior to its scheduled maturity; and (iii)
require the Company and its subsidiaries to invest excess funds in cash
equivalents, as defined, and government securities with a maturity of one year
or less.
The New Senior Notes are not redeemable prior to September 30, 1999, except
prior to September 30, 1998, the Company may redeem up to 35% of the aggregate
principal amount at 110% of the par value with the net cash proceeds of a public
offering of the Company's stock. In addition, the Credit Facility may be repaid
at 101% of par value prior to September 30, 1998.
The excess proceeds from the New Senior Notes and the Credit Facility of
approximately $31,100,000, as well as the $49,073,000 of proceeds received on
April 10, 1996, were placed in an escrow account to be used solely for the
expansion of the Company's existing facilities, development of new casinos and
retirement of debt.
As of December 31, 1996, the five year maturities for long-term debt are as
follows (in thousands):
<TABLE>
<S> <C>
1997...................................................... $ 11,060
1998...................................................... 8,153
1999...................................................... 65,767
2000...................................................... 150,000
2001...................................................... --
--------
234,980
Less unamortized discount................................. (2,272)
--------
$232,708
========
</TABLE>
As of December 31, 1996 and 1995, the fair market value of the New Senior
Notes, based on quoted market prices was $162,750,000 and $99,125,000,
respectively. The fair market value of the Company's other long-term debt
approximated its carrying value as of December 31, 1996 and 1995, based on the
borrowing rates currently available for debt with similar terms.
6. TRANSACTIONS WITH RELATED PARTIES
On the inception date of NGCP and RPG (February 4, 1993, and June 7, 1993,
respectively), the partners were required to make capital contributions of
$4,000,000 and $3,000,000, respectively. Such contributions were not paid in
cash until 1994; therefore, a contributions receivable was recorded for the
required contributions. The contributions receivable earned interest at an
annual rate of 10% until paid. The related interest receivable balance was $0
and $305,000 as of December 31, 1996 and 1995, respectively.
Mr. Binion has provided services pursuing, developing and managing gaming
operations for the Company and its subsidiaries. Mr. Binion has not been
compensated for his services in the past nor is there an existing employment
agreement providing for Mr. Binion to receive compensation for his services in
the future; however, the Company and Mr. Binion may enter into such an
employment agreement during 1997.
KII-Pasadena, Inc., which is owned by two individuals that became executive
officers of HGI on January 1, 1996, has acted on behalf of the Company as
developer for the Horseshoe Bossier City and the
F-14
<PAGE> 115
HORSESHOE GAMING, L.L.C. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Horseshoe Casino Center and has provided consulting services to the Company
related to pursuing new gaming developments. Total fees paid to KII-Pasadena,
Inc. for such services were $0, $660,000 and $460,000 for the years ended
December 31, 1996, 1995 and 1994, respectively. Additionally, one of the
placement agents for the New Senior Notes and Credit Facility discussed in Note
5 agreed to pay the principals of KII-Pasadena, Inc. a finders' fee equal to 30%
of the net fees, commissions and other compensation received, or to be received,
by the placement agent for its services related to these financing transactions.
The total fees paid to KII-Pasadena, Inc., or its principals, by the placement
agent was $260,000 and $891,000 during the years ended December 31, 1996 and
1995, respectively.
The principals of the placement agent referred to above own approximately
3.9% of the Company and are expected to own interests in certain of the
Company's proposed casino developments in new jurisdictions. In connection with
the sale of the New Senior Notes and the arrangement of the Credit Facility, the
Company paid fees to the placement agent of $3,210,000 and indemnified the
placement agent and its principals against certain liabilities, including
liabilities under the Securities Act of 1933. In connection with the exercise of
the warrants to purchase an additional $50,000,000 of New Senior Notes, the
Company paid fees to the placement agent of $981,000. These fees were recorded
as deferred finance charges in the accompanying financial statements. Additional
fees were paid to the placement agent during 1996 for various financial advisory
services totaling $510,000.
Included in other assets in the accompanying consolidated balance sheets
are notes receivable from employees with ownership interests in the Company and
limited partners of HE totaling $3,734,000 and $1,175,000 as of December 31,
1996 and 1995, respectively. The notes to employees are secured by their
ownership interests in the Company, and the notes to the limited partners are
secured by their ownership interests in HE. The notes have various due dates
ranging from February 1998 through October 1999 and interest rates ranging from
7% to 10%.
In November 1995, HE canceled a legal service retainer agreement it had
entered into in 1993 with an individual for a one-time fee of $600,000, which is
included in general and administrative expenses in 1995. Two relatives of such
individual are limited partners in HE, holding an aggregate ownership interest
of 5.08%. The original agreement covered legal services for a period of five
years commencing December 1, 1993, and ending November 30, 1998, and required
sixty monthly payments of $16,667. The amounts paid under this contract for
legal services amounted to $0, $167,000 and $200,000 for the years ended
December 31, 1996, 1995 and 1994. HE has no further obligations under the legal
service retainer agreement.
During the years ended December 31, 1996, 1995 and 1994, there were
numerous transactions with parties affiliated with the Company. These
transactions included, but are not limited to, payments for consulting fees,
various operating expenses and other items. The total amount of such
expenditures for the years ended December 31, 1996, 1995 and 1994 were
$3,267,000, $9,133,000 and $2,338,000, respectively.
7. GAIN ON SALE OF LAND
The Company, through its subsidiary RPG, acquired land for the development
of the Horseshoe Casino Center in 1993 for approximately $4,696,000. The funds
to purchase the land were loaned to the Company directly and indirectly by Mr.
Binion. RPG's partnership agreement required that any gain from the sale of this
land be distributed to certain of the original limited partners of RPG. Such
limited partners are affiliates of Mr. Binion and have subsequently exchanged
their partnership interests in RPG for ownership interests in the Company in
connection with the roll-up transaction discussed in Note 1.
In June 1994, RPG sold a portion of the land and recognized a gain of
$5,242,000. Of this gain, $3,155,000 was distributed to the original limited
partners of RPG in cash, and $2,087,000 was distributed in the form of a note.
Since not all of the Company's members received the benefit of the gain on sale,
such gain is included in minority interest in (income) loss of subsidiaries in
the accompanying consolidated statements
F-15
<PAGE> 116
HORSESHOE GAMING, L.L.C. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
of operations for the year ended December 31, 1994. The remaining land, which
had a net book value of $1,058,000, was transferred to RPG's original limited
partners on October 20, 1995.
8. EMPLOYEE COMPENSATION AND BENEFITS
Employment Agreements
During 1994, HE and RPG entered into employment agreements with certain key
employees that provide certain benefits in the event such employees are
terminated. These employees also received ownership interests in NGCP and RPG,
which were subsequently exchanged for membership interests in the Company and
vest over the terms specified in the various employment agreements, which is
generally five years. These employment agreements include a put/call provision
which if exercised by the employee would require the Company to repurchase these
ownership interests in the event of termination at the then fair market value
based on an independent appraisal. Accordingly, these compensation agreements
are accounted for as variable stock purchase plans. Compensation expense is
recorded each period equal to the change in the fair market value of ownership
interests issued pursuant to these agreements.
During the fourth quarter of 1995, certain employees of HGI received
ownership interests in the Company, vesting generally over three years, pursuant
to similar employment agreements which also include put/call provisions in the
event of termination. As stated in Note 1, the Company is required to reimburse
HGI for all expenses incurred related to the operations of the Company and would
be required to fund any repurchase of HGI employees' ownership interests in the
Company, pursuant to these employment agreements. Accordingly, the deferred
compensation and related compensation expense associated with the HGI employees
are included in the accompanying consolidated financial statements of the
Company.
The total ownership interest in the Company issued to employees pursuant to
such employment agreements was 4.0% and 3.8% as of December 31, 1996 and 1995,
respectively, of which 2.4% and 1.5% was vested as of December 31, 1996 and
1995, respectively. The amount of compensation expense recorded in the
accompanying consolidated statements of operations related to these ownership
interests was $4,340,000, $6,272,000 and $1,514,000 for the years ended December
31, 1996, 1995 and 1994, respectively.
During September 1995, one of the HE employees who had entered into an
employment agreement during 1993 resigned from HE. Pursuant to a settlement
agreement with the employee, HE agreed to pay severance benefits of $230,000
which was expensed in 1995. In addition, the Company agreed to acquire the
employee's vested ownership interest in the Company of .95% for $3,306,000 based
on an independent appraisal, which is included in the 1995 compensation expense
amount discussed above. Such amount is payable in two equal installments on
April 1, 1996 and 1997, and bears interest at 9%.
401(k) Savings Plan
Effective January 1, 1995, a 401(k) savings plan was established at RPG
whereby eligible employees may contribute up to 15% of their salary. An
identical 401(k) savings plan was established on January 1, 1996 for employees
of the Company and its subsidiaries other than RPG. The Company matches 50% of
the employees' contributions up to a maximum of 6% of their salary, and the
employees vest in the matching contribution over six years. Employees are
eligible to participate in the plan on the first day of the next calendar
quarter following six months of service. The Company's matching contributions
were $667,000 and $158,000 for the year ended December 31, 1996 and 1995,
respectively.
F-16
<PAGE> 117
HORSESHOE GAMING, L.L.C. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9. COMMITMENTS AND CONTINGENCIES
Litigation
The Company and its subsidiaries, during the normal course of operating its
business, become engaged in various litigation. In the opinion of the Company's
management, the ultimate disposition of such litigation will not have a material
impact on the Company's operations.
Minority Interest Purchase Commitments
In February 1996, NGCP entered into an option agreement to purchase an
additional 1% limited partnership interest in HE for $1,541,000, of which
approximately $514,000 was paid at closing. The option expires on December 31,
1997. In September 1996, NGCP loaned the limited partner $900,000, which is
included in other assets in the accompanying consolidated balance sheet as of
December 31, 1996. The note, including interest at 7%, is due December 31, 1998.
Effective December 31, 1995, NGCP purchased a 2.92% limited partnership
interest in HE for $4,473,000, of which $1,473,000 was paid at closing during
January 1996, with the remaining $3,000,000 evidenced by a 6% per annum
promissory note, payable in three annual installments of $1,000,000, plus
accrued interest, beginning January 2, 1997. The limited partner agreed to remit
to HE approximately $123,000, which was equal to his negative capital balance at
the time of closing. The purchase agreement allocated $2,384,000 of the purchase
price to a non-compete agreement with the remaining $2,089,000 allocated to the
purchase of the limited partner's interest. The asset related to the non-compete
agreement is being amortized over the life of the agreement (three years). The
purchase price of the limited partnership interest is included in goodwill and
is being amortized over an estimated benefit period of approximately 25 years.
The Company has agreed to pay additional consideration of up to $500,000 a year
for three years based on certain earnings criteria which will be added to the
purchase price and amortized accordingly. At December 31, 1996, the earnings
criteria were met and additional consideration of $500,000 was recorded.
$267,000 of the additional consideration was allocated to the non-compete
agreement, and the remaining $233,000 was allocated to goodwill. The unamortized
balance of the non-compete agreement is included in other assets in the
accompanying consolidated balance sheets and was $2,384,000 and $1,584,000 as of
December 31, 1996 and 1995, respectively.
The Company is also required to purchase the minority ownership interests
in any new projects developed by Horseshoe Ventures following 36 months of
operations. The purchase price is to be based on earnings during the 36-month
period and is payable in cash or ownership interests in the Company.
Construction Commitments
The Company is currently expanding both of its existing casino properties,
which are expected to be completed during the fourth quarter of 1997 at a total
estimated cost of $280,000,000. As of December 31, 1996, the total amount
incurred was $59,603,000, of which $20,959,000 had been placed in service as of
December 31, 1996.
F-17
<PAGE> 118
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Partners of New Gaming Capital Partnership:
We have audited the accompanying consolidated balance sheets of New Gaming
Capital Partnership (a Nevada partnership) and subsidiary as of December 31,
1996 and 1995, and the related consolidated statements of operations, partners'
capital (deficit) and cash flows for each of the three years in the period ended
December 31, 1996. These financial statements are the responsibility of the
Partnership's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of New Gaming Capital
Partnership and subsidiary as of December 31, 1996 and 1995, and the results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1996, in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Las Vegas, Nevada,
March 4, 1997.
F-18
<PAGE> 119
NEW GAMING CAPITAL PARTNERSHIP AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1996 1995
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Current Assets:
Cash and cash equivalents............................................ $ 14,913 $ 27,025
Accounts receivable, net of allowance for doubtful accounts of $803
and $1,407........................................................ 1,901 1,825
Inventories.......................................................... 957 1,063
Prepaid expenses and other........................................... 1,102 1,225
-------- --------
Total current assets......................................... 18,873 31,138
-------- --------
Property and Equipment:
Land................................................................. 6,115 4,215
Buildings, boat and improvements..................................... 71,554 50,678
Furniture, fixtures and equipment.................................... 24,125 19,403
Less: accumulated depreciation....................................... (15,028) (8,247)
-------- --------
86,766 66,049
Construction in progress............................................. 18,482 8,889
-------- --------
Net property and equipment................................... 105,248 74,938
-------- --------
Other Assets:
Goodwill, net........................................................ 18,788 19,341
Other................................................................ 11,269 8,314
-------- --------
$154,178 $133,731
======== ========
LIABILITIES AND PARTNERS' CAPITAL
Current Liabilities:
Current maturities of long-term debt................................. $ 11,854 $ 7,320
Accounts payable..................................................... 1,882 1,239
Due to affiliates.................................................... 2,536 5,596
Construction payables................................................ 7,161 3,200
Accrued expenses and other........................................... 8,373 12,398
-------- --------
Total current liabilities.................................... 31,806 29,753
Long-term Debt, less current maturities................................ 97,837 70,692
Minority Interest...................................................... (827) (1,128)
Commitments and Contingencies (Notes 7 and 8)
Partners' Capital...................................................... 25,362 34,414
-------- --------
$154,178 $133,731
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-19
<PAGE> 120
NEW GAMING CAPITAL PARTNERSHIP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------
1996 1995 1994
-------- -------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Revenues:
Casino.................................................... $166,768 $151,210 $59,230
Food and beverage......................................... 15,573 14,618 5,879
Hotel..................................................... 4,431 4,197 1,830
Other..................................................... 1,650 1,863 881
-------- -------- -------
188,422 171,888 67,820
Promotional allowances.................................... (13,559) (11,106) (4,417)
-------- -------- -------
Net revenues...................................... 174,863 160,782 63,403
-------- -------- -------
Expenses:
Casino.................................................... 89,713 78,071 24,339
Food and beverage......................................... 8,484 9,246 3,167
Hotel..................................................... 3,429 3,600 1,144
Other..................................................... 597 1,035 676
General and administrative................................ 31,090 26,402 16,468
Development............................................... 500 -- --
Depreciation and amortization............................. 8,855 6,162 2,433
Preopening................................................ -- -- 6,665
-------- -------- -------
Total............................................. 142,668 124,516 54,892
-------- -------- -------
Operating Income............................................ 32,195 36,266 8,511
-------- -------- -------
Other Income (Expense):
Interest expense.......................................... (11,436) (10,235) (4,939)
Interest income........................................... 867 664 142
Other, net................................................ 418 -- --
Minority interest in income of subsidiary................. (1,861) (2,580) (442)
-------- -------- -------
Income Before Extraordinary Loss on Early Retirement of
Debt...................................................... 20,183 24,115 3,272
Extraordinary Loss on Early Retirement of Debt.............. -- (4,081) --
-------- -------- -------
Net Income.................................................. $ 20,183 $ 20,034 $ 3,272
======== ======== =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-20
<PAGE> 121
NEW GAMING CAPITAL PARTNERSHIP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL (DEFICIT)
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
PARTNERS' CONTRIBUTIONS
CAPITAL RECEIVABLE TOTAL
-------- ------------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Balance at December 31, 1993............................. $ 13 $ (500) $ (487)
Net income............................................... 3,272 -- 3,272
Collection of contributions receivable................... -- 500 500
Contributions............................................ 4,739 -- 4,739
Distributions............................................ (4,369) -- (4,369)
Warrants and partnership interests issued in conjunction
with senior and subordinated notes (Note 5)............ 2,867 -- 2,867
-------- ------ --------
Balance at December 31, 1994............................. 6,522 -- 6,522
Net income............................................... 20,034 -- 20,034
Contributions............................................ 123 -- 123
Distributions:
Cash................................................... (8,137) -- (8,137)
Payable (Note 2)....................................... (1,857) -- (1,857)
Step-up in basis of assets due to purchase of minority
interest............................................... 17,729 -- 17,729
-------- ------ --------
Balance at December 31, 1995............................. 34,414 -- 34,414
Net income............................................... 20,183 -- 20,183
Distributions............................................ (29,235) -- (29,235)
-------- ------ --------
Balance at December 31, 1996............................. $ 25,362 $ -- $ 25,362
======== ====== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-21
<PAGE> 122
NEW GAMING CAPITAL PARTNERSHIP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1996 1995 1994
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income............................................... $ 20,183 $ 20,034 $ 3,272
Adjustments to reconcile net income to net cash provided
by operating activities:
Minority interest in income of subsidiary............. 1,861 2,580 442
Depreciation and amortization......................... 8,855 6,162 2,433
Provision for doubtful accounts....................... 987 930 477
Amortization of debt discounts, deferred finance
costs and other..................................... 708 3,171 2,364
Gain on land held for sale............................ (96) -- --
Extraordinary loss on early retirement of debt........ -- 4,081 --
Preopening expenses................................... -- -- 6,665
Change in assets and liabilities...................... (2,359) 2,144 (516)
-------- -------- --------
Net cash provided by operating activities............. 30,139 39,102 15,137
-------- -------- --------
Cash flows from investing activities:
Purchase of property and equipment....................... (37,326) (13,788) (43,154)
Increase (decrease) in construction payables............. 3,961 (84) 3,284
Deferred license fee..................................... -- -- (1,000)
Sale of land held for sale............................... 1,440 -- --
Purchase of land held for sale........................... -- (1,344) --
Increase in other assets................................. (4,379) (4,895) (662)
-------- -------- --------
Net cash used in investing activities................. (36,304) (20,111) (41,532)
-------- -------- --------
Cash flows from financing activities:
Proceeds from debt and warrants.......................... 40,000 81,600 49,597
Payments on debt......................................... (8,821) (70,925) (11,821)
Capital contributions.................................... -- 123 5,239
Capital distributions.................................... (31,092) (8,137) (4,369)
Distributions to minority interests...................... (1,560) (3,460) (660)
Increase (decrease) in due to affiliates................. (3,128) (259) 2,214
Debt issue costs......................................... (1,346) (2,524) (2,189)
-------- -------- --------
Net cash (used in) provided by financing activities... (5,947) (3,582) 38,011
-------- -------- --------
Net change in cash and cash equivalents.................... (12,112) 15,409 11,616
Cash and cash equivalents, beginning of period............. 27,025 11,616 --
-------- -------- --------
Cash and cash equivalents, end of period................... $ 14,913 $ 27,025 $ 11,616
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-22
<PAGE> 123
NEW GAMING CAPITAL PARTNERSHIP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND BASIS OF PRESENTATION
New Gaming Capital Partnership (the "Partnership") was formed as a Nevada
limited partnership on February 4, 1993. The Partnership is 100% owned, directly
and indirectly, by Horseshoe Gaming, L.L.C. ("Gaming"), and is the 89% general
partner of Horseshoe Entertainment, L.P. ("HE"), a Louisiana limited
partnership, which owns and operates the Horseshoe Bossier City (the "Casino"),
a dockside riverboat casino located in Bossier City, Louisiana. The minority
interest amounts in the accompanying consolidated financial statements represent
the 11% of HE owned by limited partners. Effective December 31, 1995, the
Partnership purchased a 2.92% limited partnership interest from one of the
minority owners (see Note 8). HE also leased and operated the Le Bossier Hotel
(the "Le Bossier"), a 201 room hotel located approximately five miles from the
Casino in Bossier City, before purchasing it in March 1996. HE was formed on
February 4, 1993, the Le Bossier opened in May 1994 and the Casino opened on
July 9, 1994. Consistent with Louisiana state law, the gaming license granted to
HE is for a five year period, after which it may be renewed.
On October 1, 1995, Gaming completed a roll-up transaction which resulted
in the acquisition by Gaming of approximately 15% of the Partnership's ownership
interests (the "Roll-up"). The total cost of the Partnership interests purchased
by Gaming , based on the fair value of the ownership interests in Gaming
exchanged, was $17,729,000, of which $149,000 was allocated to land, $154,000
was allocated to gaming licenses and $17,426,000 was allocated to goodwill. The
purchase price allocation was based on an independent appraisal of the
individual assets, and these amounts were pushed down to the accompanying
financial statements of the Partnership.
The gaming license will be amortized over its remaining term, which is
approximately two and one-half years. Goodwill, which represents various
intangibles with indeterminate values, will be amortized on a straight-line
basis over 25 years, which management estimates is the related benefit period
(see discussion of the Company's accounting policy for long-lived assets below).
Management intends to regularly evaluate whether or not the future undiscounted
cash flows of the Partnership are sufficient to recover the carrying amount of
the goodwill associated with each entity. Additionally, management continually
monitors such factors as the status of new or proposed legislation, the
competitive environment and the general economic conditions of the market in
which it operates. If the undiscounted cash flows are not sufficient to recover
the carrying amount of goodwill and, accordingly, an impairment has occurred,
management intends to write down the carrying amount of goodwill to its
estimated fair value based on discounted cash flows. The amount of amortization
expense recorded in the year ended December 31, 1996, and for the three months
in 1995 following the roll-up transaction was $748,000 and $187,000,
respectively.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of the
Partnership and HE. All significant intercompany accounts and transactions have
been eliminated.
Casino Revenues
In accordance with industry practice, casino revenues represent the net win
from gaming activities, which is the difference between gaming wins and losses.
F-23
<PAGE> 124
NEW GAMING CAPITAL PARTNERSHIP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Casino Promotional Allowances
Casino promotional allowances consist primarily of the retail value of
complimentary food and beverage, rooms and other services furnished to guests
without charge. Such amounts are included in gross revenues and deducted as
promotional allowances. The estimated costs of providing such complimentary
services are substantially included in casino department expenses as follows (in
thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------
1996 1995 1994
------- ------ ------
<S> <C> <C> <C>
Food and beverage............................... $10,276 $6,921 $2,998
Hotel........................................... 1,631 1,663 814
Other operating expenses........................ 112 85 18
------- ------ ------
$12,019 $8,669 $3,830
======= ====== ======
</TABLE>
Inventories
Inventories are stated at the lower of cost, as determined on a first-in,
first-out basis, or market value and consist primarily of food, beverage, retail
merchandise, kitchen smallwares and employee wardrobe.
Property and Equipment
Property and equipment are stated at cost. The costs of normal repairs and
maintenance are expensed as incurred while major expenditures that extend the
useful lives of assets are capitalized.
Depreciation is provided for on the straight-line basis over the estimated
useful lives or of the assets, as follows:
<TABLE>
<S> <C>
Buildings, boat and improvements....................... 15 to 30 years
Furniture, fixtures and equipment...................... 3 to 10 years
</TABLE>
Capitalized Interest
The Partnership capitalizes interest for associated borrowing costs of
major construction projects. Capitalization of interest ceases when the asset is
substantially complete and ready for its intended use. Interest capitalized
during the years ended December 31, 1996, 1995 and 1994, was $667,000, $0 and
$1,709,000, respectively.
Development and Preopening Expenses
Until all necessary approvals to proceed with the development of a new
casino project are obtained from the appropriate regulatory authorities, the
related development costs are expensed as incurred. Preopening costs incurred
after the receipt of necessary approvals are deferred as incurred and expensed
upon the opening of the related casino. Preopening costs of $6,665,000 were
expensed in connection with the opening of the Casino in July 1994.
Deferred Finance Charges
As of December 31, 1994, deferred finance charges, which are included in
other assets, consisted of fees and expenses incurred to issue the Old Notes
discussed in Note 5, including placement fees paid for by the issuance of
ownership interests and warrants to purchase ownership interests (the "Equity
Warrants") in the Partnership and Robinson Property Group, L.P. ("RPG"), an
affiliate which owns and operates the Horseshoe Casino Center in Tunica County,
Mississippi. The value of such ownership interests and Equity Warrants, based on
independent appraisal, was recorded as deferred finance charges with a
corresponding credit to partners' capital. These ownership interests and Equity
Warrants were subsequently exchanged for
F-24
<PAGE> 125
NEW GAMING CAPITAL PARTNERSHIP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
ownership interests and warrants to purchase ownership interests in Gaming.
These deferred finance charges were being amortized over the period from the
initial funding of the debt through the latest date for repayment using the
effective interest method. In October 1995, the Partnership wrote off the
balance of unamortized deferred finance charges of $1,727,000 which is included
in the extraordinary loss on early retirement of debt in the 1995 consolidated
statement of operations.
The balance of deferred finance charges as of December 31, 1996 and 1995,
was $3,005,000 and $2,367,000, respectively, and consists of fees and expenses
incurred by Gaming to issue the New Senior Notes and to obtain the Senior
Secured Credit Facility of which $75,000,000 was loaned to HE in 1995 as
discussed in Note 5 and an additional $40,000,000 was loaned in 1996 for
construction of a new hotel and completion of the parking garage. Accordingly,
Gaming has charged HE a portion of the related finance charges. These deferred
finance charges are being amortized from the initial funding date through the
latest repayment date of September 30, 2000, using the effective interest
method.
Cash and Cash Equivalents
Cash and cash equivalents include commercial paper, amounts held in mutual
funds and other investments with original maturities of 90 days or less when
purchased.
Advertising Costs
The Partnership expenses all costs associated with advertising as incurred,
and such amounts are included in general and administrative expenses in the
accompanying statements of operations.
Income Taxes
No provision is made in the accounts of the Partnership for federal and
state income taxes, as such taxes are liabilities of the members of Gaming. The
Partnership's income tax return and the amount of allocable taxable income are
subject to examination by federal and state taxing authorities. If an
examination results in a change to Partnership income, the income tax reported
by the members of Gaming may also change. The tax bases in the Partnership's
assets and liabilities were in excess of the amounts reported in the
accompanying consolidated financial statements by $4,677,000 and $3,887,000 at
December 31, 1996 and 1995, respectively. Taxable income was in excess of net
income reported in the accompanying consolidated statements of operations for
all periods presented.
Capital Distributions
The New Senior Notes and the Senior Secured Credit Facility contain
covenants that limit capital distributions to the limited partners of HE equal
to the limited partners' share of taxable income for each period. Such
distributions are to be paid quarterly based upon estimated taxable income.
Promptly after filing by HE of its annual tax returns, each limited partner of
HE is to reimburse HE for overpayments of capital distributions or HE is to
withhold such amounts from future distributions to the limited partners.
Distributions to limited partners are a component of minority interest in the
accompanying consolidated balance sheets. All required distributions to the
limited partners for 1996, 1995 and 1994 were made in full prior to the end of
each year.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the
F-25
<PAGE> 126
NEW GAMING CAPITAL PARTNERSHIP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
Reclassifications
Certain prior year balances have been reclassified to conform with the
current year presentation.
Impairment of Long-Lived Assets
In accordance with Statement of Financial Accounting Standards No. 121
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of," management continually evaluates whether events or changes in
circumstances indicate that the carrying amount of long-lived assets may not be
recoverable. Based on management's evaluations, no significant impairments of
long-lived assets have occurred during the three years in the period ended
December 31, 1996.
3. CONSOLIDATED STATEMENTS OF CASH FLOWS
Non-cash financing and investing activities consist of the following:
Ownership interests in HE valued at $378,000 were issued for payment
of certain deferred offering costs as of December 31, 1994.
Property and equipment was acquired through the issuance of debt
totaling $0, $16,000 and $19,089,000 for the years ended December 31, 1996,
1995 and 1994, respectively.
The net change in assets and liabilities consists of the following (in
thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
(Increase) decrease in assets:
Accounts receivable......................... $(1,063) $(1,849) $(1,383)
Inventories................................. 106 187 (1,250)
Prepaid expenses and other.................. 123 (653) (572)
Preopening expenses......................... -- -- (5,674)
Increase (decrease) in liabilities:
Accounts payable............................ 643 (1,828) 2,457
Accrued expenses and other.................. (2,168) 7,957 4,602
Deferred interest payable................... -- (1,670) 1,304
------- ------- -------
$(2,359) $ 2,144 $ (516)
======= ======= =======
</TABLE>
Cash payments made for interest, excluding amounts capitalized, totaled
$10,530,000, $12,999,000 and $2,941,000 for the three years ended December 31,
1996, 1995 and 1994.
F-26
<PAGE> 127
NEW GAMING CAPITAL PARTNERSHIP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. ACCRUED EXPENSES AND OTHER
Accrued expenses and other consists of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1996 1995
-------- --------
<S> <C> <C>
Payroll and related tax liabilities..................... $ 1,479 $ 974
Vacation and other employee benefits.................... 2,173 2,202
Accrued interest........................................ 181 --
Gaming, sales, use and property taxes................... 1,349 2,414
Outstanding chip and token liabilities.................. 614 429
Distributions payable................................... -- 1,857
Progressive slot and slot club liabilities.............. 1,896 1,853
Other accrued expenses.................................. 681 2,669
-------- -------
$ 8,373 $ 12,398
======== =======
</TABLE>
5. LONG-TERM DEBT
Long-term debt consists of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1996 1995
-------- --------
<S> <C> <C>
13.31% Intercompany Note Payable, due in semi-annual
installments of 5% of the outstanding balance with
remaining balance due in full on September 30, 2000... $106,191 $ 75,000
6% Promissory Note Payable, due in annual installments
through January 1999 (see Note 8)..................... 3,500 3,000
Other................................................... -- 12
-------- -------
109,691 78,012
Less: current maturities................................ (11,854) (7,320)
-------- -------
$ 97,837 $ 70,692
======== =======
</TABLE>
In April 1994, Horseshoe Riverboat Casinos, LLC ("HRC"), which was owned
50% by HE and 50% by RPG, completed a private placement of debt securities which
were used for the construction of the Horseshoe Bossier City and the Horseshoe
Casino Center. The total amount of Senior Notes and Subordinated Notes
(collectively, the "Old Notes") issued by HRC was $38,000,000 and $32,000,000,
respectively, and was loaned to HE and RPG on identical terms. The Old Notes
were retired in October 1995 with the proceeds from the New Senior Notes and
Senior Secured Credit Facility (see discussion below).
The Old Notes carried warrants to purchase partnership interests in RPG and
the Partnership. The value of these warrants on the date of issue, based on
independent appraisal, was recorded as a discount against the face value of the
Old Notes with a corresponding credit to partners' capital. Certain of the
warrant holders exercised such warrants and exchanged their newly issued
partnership interests for membership interests in Gaming. The remaining warrants
were exchanged for new warrants to purchase an approximate aggregate membership
interest in Gaming of 7.01%.
The Old Notes were secured by HE's land, buildings and certain personal
property. Mr. Jack B. Binion ("Mr. Binion"), the Chief Executive Officer of
Gaming, personally guaranteed the repayment of $10,000,000 of the Senior Notes
payable.
F-27
<PAGE> 128
NEW GAMING CAPITAL PARTNERSHIP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
On October 10, 1995, Gaming loaned HE $75,000,000 from a portion of the
proceeds of a $150,000,000 Senior Secured Credit Facility due September 30, 1999
(the "Credit Facility") and a private placement of $100,000,000 of 12.75% Senior
Notes due September 30, 2000 (the "New Senior Notes"), to retire substantially
all of HE's existing debt. An extraordinary loss on early retirement of debt of
$4,081,000 was recognized in 1995 for prepayment penalties and the write-off of
the unamortized discounts and deferred finance charges.
The Credit Facility and the related interest are guaranteed unconditionally
by RPG and are secured by a first pledge of Gaming's ownership interest in all
present and future subsidiaries with the exception of the Partnership's
ownership interest in HE. The Credit Facility is also secured by (i) a first
lien position on substantially all of the assets of Horseshoe Casino Center
other than certain gaming equipment; (ii) a first lien position on all
intercompany notes received by Gaming from its subsidiaries, in each case
secured by a first lien on the casino and real property of each subsidiary;
(iii) a first lien on substantially all of the assets of Horseshoe Casinos
(Indiana), LLC, excluding equipment; and (iv) a first pledge of the minority
interests in all present and future subsidiaries owned by Mr. Binion and certain
affiliates of Mr. Binion. In addition, Mr. Binion personally guaranteed the
repayment of $8,250,000 of the Credit Facility.
The New Senior Notes and the related interest are guaranteed
unconditionally by RPG and are secured by a second pledge of Gaming's ownership
interest in all present and future subsidiaries with the exception of the
Partnership's ownership interest in HE. The New Senior Notes are also secured by
(i) a second lien position on substantially all of the assets of Horseshoe
Casino Center other than certain gaming equipment; (ii) a second lien position
on all intercompany notes received by Gaming from its subsidiaries, in each case
secured by a second lien on the casino and real property of each subsidiary; and
(iii) a second pledge of the minority interests in all present and future
subsidiaries owned by Mr. Binion and certain affiliates of Mr. Binion.
The New Senior Notes and the Credit Facility contain covenants that, among
other things, (i) limit the amount of additional indebtedness which may be
incurred by Gaming and its subsidiaries; (ii) prohibit any consolidation or
merger of Gaming or its subsidiaries with an affiliate or third party, any sale
of substantially all of Gaming or its subsidiaries' assets, or any payment of
subordinated indebtedness prior to its scheduled maturity; and (iii) require
Gaming and its subsidiaries to invest excess funds in cash equivalents and
government securities with a maturity of one year or less.
HE's new note with Gaming is $150,000,000, bears interest at 13.31% and
requires that HE repay 5% of the outstanding balance of the note on a
semi-annual basis. The new note can not be repaid prior to maturity, which is
September 30, 2000. In January 1997 an additional $10,000,000 was loaned by
Gaming to HE.
As of December 31, 1996, the maturities for long-term debt are $11,854,000
(1997), $10,344,000 (1998), $9,433,000 (1999) and $78,060,000 (2000).
6. TRANSACTIONS WITH AFFILIATES
During 1994, HRC advanced $2,214,000 in excess of HE's pre-established
Senior and Subordinated Note payable borrowings which was repaid in early 1995.
At December 31, 1996 and 1995, the due to affiliates balance relates primarily
to costs and expenses of the Partnership and HE paid for by Gaming.
Initial funding to HE was provided by loans from affiliates of the
Partnership. Such notes payable to affiliates accrued interest at 10% and had a
scheduled maturity of April 15, 2004. The notes payable to affiliates, and the
related deferred interest payable balances, were repaid in October 1995 with
proceeds from the intercompany loan from Gaming discussed in Note 5.
On the inception date of HE (February 4, 1993), the partners were required
to make capital contributions of $4,000,000. Such contributions were not paid in
cash until 1994; therefore, a contributions
F-28
<PAGE> 129
NEW GAMING CAPITAL PARTNERSHIP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
receivable was recorded for the required contributions. The contributions
receivable earned interest at an annual rate of 10% until paid. The related
interest receivable balance as of December 31, 1994, was $478,000, which was
repaid during 1995.
Included in other assets in the accompanying consolidated balance sheets
are notes receivable from limited partners of HE totaling $1,969,000 and
$527,000 as of December 31, 1996 and 1995, respectively. The notes are secured
by their ownership interests in HE and are due in December 1998 with interest at
10%.
In November 1995, HE canceled a legal service retainer agreement it had
entered into in 1993 with an individual for a one-time fee of $600,000 which is
included in general and administrative expenses in 1995. Two relatives of such
individual are limited partners in HE holding an aggregate ownership interest of
5.08%. The original agreement covered legal services for a period of five years
commencing December 1, 1993, and ending November 30, 1998, and required sixty
monthly payments of $16,667. The amounts paid under this contract for legal
services amounted to $167,000 and $200,000 for the years ended December 31, 1995
and 1994, respectively. HE has no further obligations under the legal service
retainer agreement.
During the years ended December 31, 1996, 1995 and 1994, there were
numerous transactions with limited partners of HE, parties affiliated with the
general and limited partners and other affiliates. These transactions included,
but are not limited to, payments for consulting fees, expense reimbursements,
various operating expenses and other items. The total amount of such
expenditures for the years ended December 31, 1996, 1995 and 1994, were
$7,848,000, $4,717,000 and $1,972,000, respectively.
7. EMPLOYEE COMPENSATION AND BENEFITS
Employment Agreements
During 1994, HE entered into employment agreements with certain key
employees that provide certain benefits in the event such employees are
terminated. These employees also received ownership interests in the
Partnership, which were subsequently exchanged for membership interests in
Gaming and vest over terms specified in the various employment agreements, which
is generally five years. These employment agreements include a put/call
provision which if exercised by the employee would require Gaming to repurchase
these ownership interests in the event of termination at the then fair market
value based on an independent appraisal. Accordingly, these compensation
agreements are accounted for as variable stock purchase plans. Compensation
expense is recorded each period equal to the change in the fair market value of
ownership interests issued pursuant to these agreements. NGCP reimburses Gaming
for the expense related to these ownership interests; therefore, there is no
deferred compensation reported in the accompanying balance sheet at December 31,
1996.
The amount of compensation expense recorded in the accompanying
consolidated statements of operations related to these ownership interests was
$1,720,000, $3,547,000 and $1,477,000 for the years ended December 31, 1996,
1995 and 1994, respectively.
During September 1995, one of the Partnership's employees who had entered
into an employment agreement during 1993 resigned from the Partnership. Pursuant
to a settlement agreement with the employee, the Partnership agreed to pay
severance benefits of $230,000 which was expensed in 1995. In addition, Gaming
agreed to acquire the employee's vested ownership interest in the Partnership
for $3,306,000 based on an independent appraisal which is included in the 1995
compensation expense amount discussed above. Such amount is payable in two equal
installments on April 1, 1996 and 1997, and bears interest at 9%.
401(k) Savings Plan
Effective January 1, 1996, a 401(k) savings plan was established whereby
eligible employees of HE may contribute up to 15% of their salary. HE will match
50% of the employees' contributions up to a maximum of
F-29
<PAGE> 130
NEW GAMING CAPITAL PARTNERSHIP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6% of their salary. Employees vest in HE's matching contribution over six years.
Employees are eligible to participate in the Plan on the first day of the next
calendar quarter following six months of service. HE's matching contributions
were $368,000 for the year ended December 31, 1996.
8. COMMITMENTS AND CONTINGENCIES
Litigation
The Partnership and its subsidiary, during the normal course of operating
its business, became engaged in various litigation. In the opinion of the
Partnership's management, the ultimate disposition of such litigation will not
have a material impact on the Partnership's operations.
Minority Interest Purchase Commitment
In February 1996, the Partnership entered into an option agreement to
purchase an additional 1% limited partnership interest in HE for $1,541,000, of
which approximately $514,000 was paid at closing. The option expires on December
31, 1997. In September 1996, the Partnership loaned the limited partner
$900,000, which is included in other assets in the accompanying consolidated
balance sheet as of December 31, 1996. The note, including interest at 7%, is
due on December 31, 1998.
Effective December 31, 1995, the Partnership purchased a 2.92% limited
partnership interest in HE for $4,473,000, of which $1,473,000 was paid at
closing during January 1996, with the remaining $3,000,000 evidenced by a 6% per
annum promissory note, payable in three annual installments of $1,000,000, plus
accrued interest, beginning January 2, 1997. The limited partner agreed to remit
to the partnership approximately $123,000, which was equal to his negative
capital balance at the time of closing. The purchase agreement allocated
$2,384,000 of the purchase price to a non-compete agreement with the remaining
$2,089,000 allocated to the purchase of the limited partner's interest. The
asset related to the non-compete agreement is being amortized over the life of
the agreement (three years). The purchase price of the limited partnership
interest is included in goodwill and is being amortized over an estimated
benefit period of approximately 25 years. The Partnership has agreed to pay
additional consideration of up to $500,000 a year for three years based on
certain earnings criteria. At December 31, 1996, the earnings criteria were met
and additional consideration of $500,000 was recorded. $267,000 of the
additional consideration was allocated to the non-compete agreement, and the
remaining $233,000 was allocated to goodwill. The unamortized balance of the
non-compete agreement is included in other assets in the accompanying
consolidated balance sheets and was $2,384,000 and $1,584,000 as of December 31,
1996 and 1995, respectively.
Construction Commitments
The Partnership is currently expanding its casino and hotel facilities,
which are expected to be completed during the fourth quarter of 1997 at a total
estimated cost of $185,000,000. As of December 31, 1996, the total amount
incurred was $39,441,000, of which $20,959,000 had been placed in service as of
December 31, 1996.
F-30
<PAGE> 131
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Partners of Robinson Property Group, L.P.:
We have audited the accompanying balance sheets of Robinson Property Group,
L.P. (a Mississippi limited partnership) as of December 31, 1996 and 1995, and
the related statements of operations, partners' capital (deficit) and cash flows
for each of the three years in the period ended December 31, 1996. These
financial statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Robinson Property Group,
L.P. as of December 31, 1996 and 1995, and the results of its operations and its
cash flows for each of the three years in the period ended December 31, 1996, in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Las Vegas, Nevada,
March 4, 1997.
F-31
<PAGE> 132
ROBINSON PROPERTY GROUP, L.P.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1996 1995
-------- --------
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents.......................................... $ 22,858 $ 32,706
Accounts receivable, net of allowance for doubtful accounts of
$2,649 and $1,256............................................... 5,883 3,144
Inventories........................................................ 478 418
Prepaid expenses and other......................................... 275 166
-------- --------
Total current assets....................................... 29,494 36,434
-------- --------
Property and Equipment:
Land............................................................... 4,110 2,505
Buildings, barge and improvements.................................. 50,253 50,171
Furniture, fixtures and equipment.................................. 16,933 16,142
Less: accumulated depreciation..................................... (11,370) (5,390)
-------- --------
59,926 63,428
Construction in progress........................................... 20,162 298
-------- --------
Net property and equipment................................. 80,088 63,726
-------- --------
Other Assets:
Goodwill, net...................................................... 20,438 21,299
Other.............................................................. 3,857 4,403
-------- --------
$133,877 $125,862
======== ========
LIABILITIES AND PARTNERS' CAPITAL
Current Liabilities:
Accounts payable................................................... $ 1,274 $ 2,671
Construction payables.............................................. 6,945 --
Due to affiliates.................................................. 1,736 4,710
Accrued expenses and other......................................... 8,503 8,404
-------- --------
Total current liabilities.................................. 18,458 15,785
Long-term Debt....................................................... 43,000 70,000
Commitments and Contingencies (Notes 8 and 9)
Partners' Capital.................................................... 72,419 40,077
-------- --------
$133,877 $125,862
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-32
<PAGE> 133
ROBINSON PROPERTY GROUP, L.P.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------
1996 1995 1994
-------- -------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Revenues:
Casino.................................................... $150,711 $132,192 $ --
Food and beverage......................................... 11,374 9,681 --
Hotel..................................................... 3,488 3,092 --
Other..................................................... 2,769 2,229 --
-------- -------- -------
168,342 147,194 --
Promotional allowances.................................... (11,474) (9,591) --
-------- -------- -------
Net revenues...................................... 156,868 137,603 --
-------- -------- -------
Expenses:
Casino.................................................... 72,695 55,228 --
Food and beverage......................................... 3,833 3,495 --
Hotel..................................................... 3,369 2,062 --
Other..................................................... 762 693 --
General and administrative................................ 24,515 19,898 1,376
Depreciation and amortization............................. 7,114 6,376 66
Preopening expenses....................................... -- 7,021 --
-------- -------- -------
Total............................................. 112,288 94,773 1,442
-------- -------- -------
Operating Income (Loss)..................................... 44,580 42,830 (1,442)
-------- -------- -------
Other Income (Expense):
Interest expense.......................................... (6,190) (8,381) (1,770)
Interest and other income................................. 797 445 302
Gain on sale of land...................................... -- -- 5,242
-------- -------- -------
Income Before Extraordinary Loss on Early Retirement of
Debt...................................................... 39,187 34,894 2,332
Extraordinary Loss on Early Retirement of Debt.............. -- (3,098) --
-------- -------- -------
Net Income.................................................. $ 39,187 $ 31,796 $ 2,332
======== ======== =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-33
<PAGE> 134
ROBINSON PROPERTY GROUP, L.P.
STATEMENTS OF PARTNERS' CAPITAL (DEFICIT)
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
PARTNERS' CONTRIBUTIONS
CAPITAL RECEIVABLE TOTAL
--------- ------------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Balance at December 31, 1993............................ $ 2,816 $(3,000) $ (184)
Net income.............................................. 2,332 -- 2,332
Collection of contributions receivable.................. -- 3,000 3,000
Distributions:
Cash.................................................. (3,155) -- (3,155)
Payable............................................... (2,087) -- (2,087)
Warrants and partnership interests issued in conjunction
with senior and subordinated notes (Note 5)........... 1,507 -- 1,507
-------- ------- -------
Balance at December 31, 1994............................ 1,413 -- 1,413
Net income.............................................. 31,796 -- 31,796
Contributions........................................... 1,150 (1,150) --
Distributions........................................... (16,953) -- (16,953)
Step-up in basis of assets due to purchase of minority
interest.............................................. 24,026 (205) 23,821
-------- ------- -------
Balance at December 31, 1995............................ 41,432 (1,355) 40,077
Net income.............................................. 39,187 -- 39,187
Collection of contributions receivable.................. -- 1,355 1,355
Distributions........................................... (8,200) -- (8,200)
-------- ------- -------
Balance at December 31, 1996............................ $ 72,419 $ -- $72,419
======== ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-34
<PAGE> 135
ROBINSON PROPERTY GROUP, L.P.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1996 1995 1994
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income............................................. $ 39,187 $ 31,796 $ 2,332
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization....................... 7,114 6,376 66
Amortization of debt discount, deferred finance
charges and other................................. 482 2,931 651
Gain on sale of land................................ -- -- (5,242)
Provision for doubtful accounts..................... 3,401 1,256 --
Preopening expenses................................. -- 7,021 --
Extraordinary loss on early retirement of debt...... -- 3,098 --
Change in assets and liabilities.................... (7,302) (1,722) (1,433)
------- ------- -------
Net cash provided by (used in) operating
activities................................... 42,882 50,756 (3,626)
------- ------- -------
Cash flows from investing activities:
Purchases of property and equipment.................... (21,007) (1,690) (25,813)
Increase (decrease) in construction payables........... 6,945 (3,284) 3,284
Proceeds from sale of land............................. -- -- 8,595
Increase in other assets............................... (257) (1,411) (252)
------- ------- -------
Net cash used in investing activities.......... (14,319) (6,385) (14,186)
------- ------- -------
Cash flows from financing activities:
Proceeds from long-term debt........................... 5,000 72,987 35,856
Payments on long-term debt............................. (32,000) (75,592) (9,080)
Capital contributions.................................. -- -- 3,000
Capital distributions.................................. (8,200) (15,875) (3,155)
Increase (decrease) in due to affiliates............... (3,042) 2,204 --
Debt issue costs....................................... (169) (2,355) (1,843)
------- ------- -------
Net cash (used in) provided by financing
activities................................... (38,411) (18,631) 24,778
------- ------- -------
Net change in cash and cash equivalents.................. (9,848) 25,740 6,966
Cash and cash equivalents, beginning of period........... 32,706 6,966 --
------- ------- -------
Cash and cash equivalents, end of period................. $ 22,858 $ 32,706 $ 6,966
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-35
<PAGE> 136
ROBINSON PROPERTY GROUP, L.P.
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND BASIS OF PRESENTATION
Robinson Property Group, L.P. (the "Partnership") was formed as a
Mississippi limited partnership on June 7, 1993 and is 100% owned, directly and
indirectly, by Horseshoe Gaming, L.L.C. ("Gaming"). The Partnership owns and
operates the Horseshoe Casino Center (the "Casino"), a permanently moored vessel
consisting of a casino and hotel located in Tunica County, Mississippi, which
opened on February 13, 1995. Consistent with state law, the gaming license
granted to the Partnership in the State of Mississippi is for a two year period
and must be renewed. In February 1997, the Partnership renewed its license for
an additional two year period.
On October 1, 1995, Gaming completed a roll-up transaction which resulted
in the acquisition by Gaming of approximately 15% of the Partnership's ownership
interest held by minority interests (the "Roll-up"). The total cost of the
Partnership interests purchased by Gaming, based on the fair value of the
ownership interests in Gaming exchanged, was $24,026,000, of which $2,231,000
was allocated to land, $76,000 was allocated to gaming licenses, $205,000 was
allocated to contribution receivable and $21,514,000 was allocated to goodwill.
The purchase price allocation was based on an independent appraisal of the
individual assets, and these amounts were pushed down to the accompanying
financial statements of the Partnership.
The gaming license was amortized over its initial remaining term, and at
December 31, 1996 was fully amortized. Goodwill is amortized on a straight-line
basis over 25 years, which management estimates is the related benefit period
(see discussion of the Partnership's accounting policy for long-lived assets
below). Management regularly evaluates whether or not the future undiscounted
cash flows of the Partnership are sufficient to recover the carrying amount of
the goodwill. Additionally, management continually monitors such factors as the
status of new or proposed legislation, the competitive environment and the
general economic conditions of the market in which it operates. If the estimated
future undiscounted cash flows are not sufficient to recover the carrying amount
of goodwill and accordingly, an impairment has occurred, management intends to
write down the carrying amount of goodwill to its estimated fair value based on
discounted cash flows. The amount of amortization expense for goodwill recorded
in 1996 and for the three months in 1995 following the roll-up transaction was
$861,000 and $215,000, respectively.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Casino Revenues
In accordance with industry practice, casino revenues represent the net win
from gaming activities, which is the difference between gaming wins and losses.
Casino Promotional Allowances
Casino promotional allowances consist primarily of the retail value of
complimentary food and beverage, rooms and other services furnished to guests
without charge. Such amounts are included in gross revenues and deducted as
promotional allowances. The estimated costs of providing such complimentary
services, which are substantially included in casino department expenses, are as
follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
Food and beverage............................. $11,779 $10,244 $ --
Hotel......................................... 1,403 1,002 --
Other operating expenses...................... 507 401 --
------- ------- -------
$13,689 $11,647 $ --
======= ======= =======
</TABLE>
F-36
<PAGE> 137
ROBINSON PROPERTY GROUP, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Inventories
Inventories are stated at the lower of cost, as determined on a first-in,
first-out basis, or market value and consist primarily of food, beverage and
retail merchandise.
Property and Equipment
Property and equipment are stated at cost. The costs of normal repairs and
maintenance are expensed as incurred while major expenditures that extend the
useful lives of assets are capitalized.
Depreciation is provided for on a straight-line basis over the estimated
useful lives as follows:
<TABLE>
<S> <C>
Buildings, barge and improvements.................... 15 to 30 years
Furniture, fixtures and equipment.................... 3 to 10 years
</TABLE>
Capitalized Interest
The Partnership capitalizes interest for associated borrowing costs of
major construction projects. Capitalization of interest ceases when the asset is
substantially complete and ready for its intended use. Interest capitalized
during the years ended December 31, 1996, 1995 and 1994 was $620,000, $651,000
and $1,886,000, respectively.
Development and Preopening Expenses
Until all necessary approvals to proceed with the development of a new
casino project are obtained from the appropriate regulatory authorities, the
related development costs are expensed as incurred. Preopening costs incurred
after the receipt of necessary approvals are deferred as incurred and expensed
upon the opening of the related casino. Preopening costs of $7,021,000 were
expensed in connection with the opening of the Casino in February 1995.
Deferred Finance Charges
As of December 31, 1994, deferred finance charges, which are included in
other assets, consisted of fees and expenses incurred to issue the Old Notes
discussed in Note 5, including placement fees paid for by the issuance of
ownership interests and warrants to purchase ownership interests (the "Equity
Warrants") in the Partnership and New Gaming Capital Partnership ("NGCP"), an
affiliate which owns 91.92% of Horseshoe Entertainment, L.P. ("HE"), which owns
and operates the Horseshoe Bossier City in Bossier City, Louisiana. The value of
such ownership interests and Equity Warrants, based on independent appraisal,
was recorded as deferred finance charges with a corresponding credit to
partners' capital. These ownership interests and Equity Warrants were
subsequently exchanged for ownership interests and warrants to purchase
ownership interests in Gaming. These deferred finance charges were being
amortized over the period from the initial funding of the debt through the
latest date for repayment using the effective interest method. In October 1995,
the Partnership wrote off the balance of unamortized deferred finance charges of
$1,455,000 which is included in the extraordinary loss on early retirement of
debt in the 1995 statements of operations.
The balance of deferred finance charges as of December 31, 1996 and 1995,
was $1,924,000 and $2,237,000, respectively, and consists of fees and expenses
incurred by Gaming to issue the New Senior Notes and to obtain the Senior
Secured Credit Facility of which $70,000,000 was loaned to the Partnership as
discussed in Note 5. Accordingly, Gaming has charged the Partnership a portion
of the related finance charges. These deferred finance charges are being
amortized from the initial funding date through the required repayment date of
September 30, 2000, using the straight-line method.
F-37
<PAGE> 138
ROBINSON PROPERTY GROUP, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Cash and Cash Equivalents
Cash and cash equivalents include commercial paper, amounts held in mutual
funds and other investments with original maturities of 90 days or less when
purchased.
Advertising Costs
The Partnership expenses all costs associated with advertising as incurred,
and such amounts are included in general and administrative expenses in the
accompanying statements of operations.
Income Taxes
No provision is made in the accounts of the Partnership for federal and
state income taxes, as such taxes are liabilities of the individual partners.
The Partnership's income tax return and the amount of allocable taxable income
are subject to examination by federal and state taxing authorities. If an
examination results in a change to Partnership income, the income tax reported
by the individual partners may also change. The tax bases in the Partnership's
assets and liabilities were greater than the amounts reported in the
accompanying financial statements by $3,077,000 and $9,140,000 at December 31,
1996 and 1995, respectively. In 1996, taxable income was less than net income
reported in the accompanying statements of operations, and in 1995 and 1994,
taxable income was in excess of net income reported in the accompanying
statements of operations.
Impairment of Long-Lived Assets
In accordance with Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of," management continually evaluates whether events or changes in
circumstances indicate that the carrying amount of long-lived assets may not be
recoverable. Based on management's evaluations, no significant impairments of
long-lived assets have occurred during the three years ended December 31, 1996.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Reclassifications
Certain prior year balances have been reclassified to conform with the
current year presentation.
3. STATEMENTS OF CASH FLOWS
Non-cash financing and investing activities consist of the following:
Ownership interests in the partnership valued at $317,000 were issued
for payment of certain deferred offering costs as of December 31, 1994.
Property and equipment was acquired through the issuance of debt
totaling $0, $17,817,000 and $17,183,000 for the years ended December 31,
1996, 1995 and 1994, respectively.
A capital contribution of $1,150,000 was made through the issuance of
a contribution receivable during the year ended December 31, 1995. The
Partnership received land in satisfaction of the receivable during 1996.
F-38
<PAGE> 139
ROBINSON PROPERTY GROUP, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
The net change in assets and liabilities consists of the following (in
thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
(Increase) decrease in assets:
Accounts receivable......................... $(6,140) $(4,400) $ --
Due from affiliates......................... -- 2,214 --
Interest receivable -- related party........ 305 32 (151)
Inventories................................. (60) (329) (89)
Prepaid expenses and other.................. (109) 215 (2,595)
Preopening expenses......................... -- (3,202) (3,205)
Increase (decrease) in liabilities:
Accounts payable............................ (1,397) 2,100 (1,064)
Accrued expenses and other.................. 99 2,445 4,874
Deferred interest payable -- related
party.................................... -- (797) 797
------- ------- -------
$(7,302) $(1,722) $(1,433)
======= ======= =======
</TABLE>
Cash payments for interest, excluding amounts capitalized, totaled
$8,436,000, $8,271,000 and $678,000 for the years ended December 31, 1996, 1995
and 1994, respectively.
4. ACCRUED EXPENSES AND OTHER
Accrued expenses and other consists of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1996 1995
------ ------
<S> <C> <C>
Payroll and related tax liabilities........................ $1,225 $1,082
Vacation and other employee benefits....................... 1,793 858
Accrued interest........................................... -- 2,122
Gaming, sales, use and property taxes...................... 1,051 1,003
Outstanding chip and token liabilities..................... 939 734
Progressive slot and slot club liabilities................. 2,429 2,200
Other accrued expenses..................................... 1,066 405
------ ------
$8,503 $8,404
====== ======
</TABLE>
5. LONG-TERM DEBT
Long-term debt consists of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1996 1995
------- -------
<S> <C> <C>
13.31% Intercompany Note Payable, requiring the
Partnership to apply 100% of its available cash flow,
as defined in the agreement, towards the outstanding
principal balance with the balance due in full on
September 30, 2000..................................... $43,000 $70,000
Less: current maturities................................. -- --
------- -------
$43,000 $70,000
======= =======
</TABLE>
In April 1994, Horseshoe Riverboat Casinos, LLC ("HRC"), which was owned
50% by the Partnership and 50% by HE, completed a private placement of debt
securities which were used for the construction of the
F-39
<PAGE> 140
ROBINSON PROPERTY GROUP, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Horseshoe Bossier City and the Casino. The total amount of senior notes and
subordinated notes (collectively, the "Old Notes") issued by HRC was $38,000,000
and $32,000,000, respectively, and was loaned to HE and the Partnership on
identical terms. These notes were retired in October 1995 with the proceeds from
the New Senior Notes and Senior Secured Credit Facility (see discussion
following).
The Old Notes carried warrants to purchase partnership interests in the
Partnership and NGCP. The value of these warrants on the date of issue, based on
independent appraisal, was recorded as a discount against the face value of the
Old Notes with a corresponding credit to partners' capital. Certain of the
warrant holders exercised such warrants and exchanged their newly issued
partnership interests for membership interests in Gaming. The remaining warrants
were exchanged for new warrants to purchase an approximate aggregate membership
interest in Gaming of 7.01%.
The Old Notes were secured by the Partnership's land, buildings and certain
personal property. Mr. Jack B. Binion ("Mr. Binion"), the Chief Executive
Officer of Gaming, personally guaranteed the repayment of $10,000,000 of the
Senior Notes Payable.
On October 10, 1995, Gaming loaned the Partnership $70,000,000 from a
portion of the proceeds of a $150,000,000 Senior Secured Credit Facility due
September 30, 1999 (the "Credit Facility") and a private placement of
$100,000,000 of 12.75% senior notes due September 30, 2000 (the "New Senior
Notes"), to retire substantially all of the Partnership's existing debt. An
extraordinary loss on early retirement of debt of $3,098,000 was recognized in
1995 for prepayment penalties and the write-off of the unamortized discounts and
deferred finance charges.
The Credit Facility and the related interest are guaranteed unconditionally
by the Partnership and are secured by a first pledge of Gaming's ownership
interest in all present and future subsidiaries with the exception of NGCP's
ownership interest in HE. The Credit Facility is also secured by (i) a first
lien position on substantially all of the assets of the Casino other than
certain gaming equipment; (ii) a first lien position on all intercompany notes
received by Gaming from its subsidiaries, in each case secured by a first lien
on the casino and real property of each subsidiary; (iii) a first lien on
substantially all of the assets of Horseshoe Casinos (Indiana), LLC, excluding
equipment; and (iv) a first pledge of the minority interests in all present and
future subsidiaries owned by Mr. Binion and certain affiliates of Mr. Binion. In
addition, Mr. Binion personally guaranteed the repayment of $8,250,000 of the
Credit Facility.
The New Senior Notes and the related interest are guaranteed
unconditionally by the Partnership and are secured by a second pledge of
Gaming's ownership interest in all present and future subsidiaries with the
exception of NGCP's ownership interest in HE. The New Senior Notes are also
secured by (i) a second lien position on substantially all of the assets of the
Casino other than certain gaming equipment; (ii) a second lien position on all
intercompany notes received by Gaming from its subsidiaries, in each case
secured by a second lien on the Casino and real property of each subsidiary; and
(iii) a second pledge of the minority interests in all present and future
subsidiaries owned by Mr. Binion and certain affiliates of Mr. Binion.
The New Senior Notes and the Credit Facility contain covenants that, among
other things, (i) limit the amount of additional indebtedness which may be
incurred by Gaming and its subsidiaries; (ii) prohibit any consolidation or
merger of Gaming or its subsidiaries with an affiliate or third party, any sale
of substantially all of Gaming or its subsidiaries' assets or any payment of
subordinated indebtedness prior to its scheduled maturity; and (iii) require
Gaming and its subsidiaries to invest excess funds in cash equivalents and
government securities with a maturity of one year or less.
The Partnership's new intercompany note with Gaming bears interest at
13.31% and requires the Partnership to apply 100% of its available cash flow, as
defined, towards the outstanding principal balance with the balance due in full
on September 30, 2000. There are no material restrictions on the amount of cash
or other assets which the Partnership may distribute to Gaming, and the
Partnership may prepay the outstanding balance of the intercompany note at any
time prior to maturity without premium or penalty. During 1996, the
F-40
<PAGE> 141
ROBINSON PROPERTY GROUP, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Partnership repaid $32,000,000 of the outstanding intercompany note and borrowed
an additional $5,000,000. Management of the Partnership intends to reborrow
additional amounts during 1997 for future capital expenditures; accordingly, as
of December 31, 1996, no amounts have been classified as a current obligation.
As of December 31, 1995, the balance of accrued interest payable to Gaming was
$2,122,000 and was included in accrued expenses and other in the accompanying
balance sheet. The Partnership had paid all accrued interest due to Gaming as of
December 31, 1996.
6. GAIN ON SALE OF LAND
The Partnership acquired land for the development of the Casino in 1993 for
$4,696,000. The funds to purchase the land were loaned to the Partnership
directly and indirectly by Mr. Binion. The partnership agreement required that
any gain from the sale of this land be distributed to certain of the original
limited partners of the Partnership. Such limited partners are affiliates of Mr.
Binion and have subsequently exchanged their partnership interests in the
Partnership for ownership interests in Gaming.
In June 1994, the Partnership sold a portion of the land and recognized a
gain of $5,242,000. Of this gain, $3,155,000 was distributed to the original
limited partners of the Partnership in cash and $2,087,000 was distributed in
the form of a note. The remaining land, which had a net book value of
$1,078,000, was distributed to the original limited partners on October 20,
1995.
7. TRANSACTIONS WITH AFFILIATES
During 1994, HRC advanced HE $2,214,000 of the Partnership's
pre-established Senior and Subordinated Note Payable borrowings, which was
repaid in early 1995.
Initial funding to the Partnership was provided by loans from affiliates of
the Partnership. Such notes payable to affiliates accrued interest at 10% and
were due April 15, 2004. The notes had an outstanding balance of $5,605,000 as
of December 31, 1994. These notes payable to affiliates, and the related
deferred interest payable balance, were repaid in October 1995 with proceeds
from the intercompany loan from Gaming discussed in Note 5.
On the inception date of the Partnership (June 7, 1993), the partners were
required to make capital contributions of $3,000,000. Such contributions were
not paid in cash until 1994; therefore, a contributions receivable was recorded
for the required contributions. The contributions receivable earned interest at
an annual rate of 10% until paid. The related interest receivable balance as of
December 31, 1995 and 1994, was $305,000 and $337,000, respectively, and was
repaid during the first quarter of 1996.
During the years ended December 31, 1996, 1995 and 1994, there were
numerous transactions with the original partners of the Partnership, parties
affiliated with the partners and other affiliates. These transactions included,
but are not limited to, payments for consulting fees, expense reimbursements,
various operating expenses and other items. The total amount of such
expenditures for the years ended December 31, 1996, 1995 and 1994, were
$736,000, $972,000 and $366,000, respectively.
At December 31, 1996 and 1995, the due to affiliates balance relates
primarily to costs and expenses of the Partnership paid for by Gaming.
8. EMPLOYEE COMPENSATION AND BENEFITS
Employment Agreements
During 1994, the Partnership entered into employment agreements with
certain key employees that provide certain benefits in the event such employees
are terminated. These employees also received ownership interests in the
Partnership, which were subsequently exchanged for membership interests in
Gaming, and vest over terms specified in the various employment agreements,
which is generally five years. These employment
F-41
<PAGE> 142
ROBINSON PROPERTY GROUP, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
agreements include a put/call provision which, if exercised by the employee,
would require Gaming to repurchase these ownership interests in the event of
termination at the then fair market value based on an independent appraisal.
Accordingly, these compensation arrangements are accounted for as variable stock
purchase plans. Compensation expense is recorded each period equal to the change
in the fair market value of ownership interests issued pursuant to these
agreements. The Partnership reimburses Gaming for the expense related to these
ownership interests; therefore, there is no deferred compensation reported in
the accompanying balance sheet as of December 31, 1996.
The amount of compensation expense recorded in the accompanying
consolidated statements of operations related to these ownership interests was
$2,620,000, $2,456,000 and $37,000 for the years ended December 31, 1996, 1995
and 1994, respectively.
401(k) Savings Plan
Effective January 1, 1995, a 401(k) savings plan was established by the
Partnership whereby eligible employees can contribute up to 15% of their salary.
RPG matches 50% of the employees' contributions up to a maximum of 6% of their
salary. Employees vest in the Partnership's matching contribution over six
years. Employees of the Partnership are eligible to participate in the plan on
the first day of the next calendar quarter following six months of service. The
Partnership's matching contributions were $299,000 and $158,000 for the years
ended December 31, 1996 and 1995, respectively.
9. COMMITMENTS AND CONTINGENCIES
Litigation
The Partnership, during the normal course of operating its business,
becomes engaged in various litigation. In the opinion of the Partnership's
management, the ultimate disposition of such litigation will not have a material
impact on the Partnership's operations.
Construction Commitments
The Partnership is currently expanding its casino and hotel facilities,
which are expected to be completed during the fourth quarter of 1997 at a total
estimated cost of $95,000,000. As of December 31, 1996, the total amount
incurred was $20,162,000.
F-42
<PAGE> 143
HORSESHOE GAMING, L.L.C. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1997 1996
-------- ------------
(UNAUDITED)
<S> <C> <C>
Current Assets:
Cash and cash equivalents.......................................... $130,102 $ 79,159
Accounts receivable, net........................................... 10,019 8,026
Inventories........................................................ 1,765 1,435
Prepaid expenses and other......................................... 2,961 1,639
-------- --------
Total current assets....................................... 144,847 90,259
-------- --------
Property and Equipment:
Land............................................................... 14,533 10,225
Buildings, boat, barge and improvements............................ 133,717 121,807
Furniture, fixtures and equipment.................................. 44,418 41,572
Less: accumulated depreciation..................................... (33,712) (26,493)
-------- --------
158,956 147,111
Construction in progress........................................... 104,920 38,644
-------- --------
Net property and equipment................................. 263,876 185,755
-------- --------
Other Assets:
Escrow funds....................................................... -- 42,235
Goodwill, net...................................................... 38,555 39,226
Other assets, net.................................................. 18,502 20,122
-------- --------
$465,780 $377,597
======== ========
LIABILITIES AND MEMBERS' EQUITY
Current Liabilities:
Current maturities of long-term debt............................... $ 1,199 $ 11,060
Accounts payable................................................... 3,063 3,184
Construction payables.............................................. 22,520 14,106
Accrued expenses and other......................................... 25,331 23,751
-------- --------
Total current liabilities.................................. 52,113 52,101
Long-term debt, less current maturities.............................. 296,440 221,648
Minority Interest.................................................... (946) (827)
Commitments and Contingencies
Redeemable Ownership Interests, net.................................. 26,861 24,893
Members' Equity...................................................... 91,312 79,782
-------- --------
$465,780 $377,597
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated condensed
financial statements.
F-43
<PAGE> 144
HORSESHOE GAMING, L.L.C. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------- ---------------------
1997 1996 1997 1996
------- ------- -------- --------
<S> <C> <C> <C> <C>
Revenues:
Casino..................................... $76,760 $80,221 $156,716 $163,893
Food and beverage.......................... 6,967 6,830 13,858 13,541
Hotel...................................... 1,679 2,057 3,328 4,028
Other...................................... 1,048 1,133 2,064 2,383
------- ------- -------- --------
86,454 90,241 175,966 183,845
Promotional allowances..................... (6,474) (6,309) (12,926) (12,563)
------- ------- -------- --------
Net revenues............................. 79,980 83,932 163,040 171,282
------- ------- -------- --------
Expenses:
Casino..................................... 41,093 42,019 83,452 84,071
Food and beverage.......................... 2,507 2,663 5,088 5,411
Hotel...................................... 2,498 2,051 3,669 3,692
Other...................................... 344 351 599 729
General and administrative................. 13,303 13,317 26,224 27,506
Development................................ 506 3,026 734 3,909
Depreciation and amortization.............. 4,442 4,009 8,741 7,732
------- ------- -------- --------
Total expenses........................... 64,693 67,436 128,507 133,050
------- ------- -------- --------
Operating Income................................ 15,287 16,496 34,533 38,232
Other Income (Expense):
Interest expense........................... (4,596) (7,639) (9,845) (14,254)
Interest and other income.................. 1,164 1,423 2,648 2,555
Other...................................... (347) 291 (411) 236
Minority interest in income of (201) (522) (583) (1,025)
subsidiaries.............................
------- ------- -------- --------
Income before extraordinary loss on early 11,307 10,049 26,342 25,744
retirement of debt............................
Extraordinary loss on early retirement of (5,243) -- (5,243) --
debt..........................................
------- ------- -------- --------
Net Income...................................... $ 6,064 $10,049 $ 21,099 $ 25,744
======= ======= ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated condensed
financial statements.
F-44
<PAGE> 145
HORSESHOE GAMING, L.L.C. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
---------------------
1997 1996
-------- --------
<S> <C> <C>
Cash provided by operating activities:
Net Income......................................................... $ 21,099 25,744
Adjustments to reconcile net income to net cash provided by
operating activities:
Minority interest in income of subsidiary....................... 583 1,025
Depreciation and amortization................................... 8,741 7,784
Amortization of debt discount, deferred finance charges and
other.......................................................... 1,347 1,829
Extraordinary loss on early retirement of debt.................. 5,243 --
Loss on disposal of land and other assets....................... -- 201
Provision for doubtful accounts................................. 3,127 2,753
Increase in redeemable ownership interests...................... 1,272 2,957
Net change in assets and liabilities............................ (5,315) (2,803)
-------- --------
Net cash provided by operating activities.................. 36,097 39,490
-------- --------
Cash flows from investing activities:
Purchases of property and equipment................................ (84,392) (16,575)
Proceeds from land held for sale................................... -- 1,400
Decrease (increase) in escrow funds................................ 42,235 (45,120)
Increase (decrease) in construction payable........................ 8,414 (2,409)
Increase in other assets........................................... (471) (3,629)
-------- --------
Net cash used in investing activities...................... (34,214) (66,333)
-------- --------
Cash flows from financing activities:
Proceeds from debt and warrants, net of debt issue costs of
$3,400.......................................................... 156,438 49,073
Payments on debt, including early retirement premium and
penalties....................................................... (97,627) (11,373)
Distributions to minority shareholders............................. (702) (735)
Capital distributions.............................................. (9,049) (11,150)
-------- --------
Net cash provided by financing activities.................. 49,060 25,815
-------- --------
Net change in cash and cash equivalents.............................. 50,943 (1,028)
Cash and cash equivalents, beginning of period....................... 79,159 65,541
-------- --------
Cash and cash equivalents, end of period............................. $130,102 $ 64,513
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated condensed
financial statements.
F-45
<PAGE> 146
HORSESHOE GAMING, L.L.C. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
1. INTRODUCTION:
The accompanying unaudited Consolidated Condensed Financial Statements of
Horseshoe Gaming, L.L.C. and Subsidiaries (the "Company"), a Delaware limited
liability company, have been prepared in accordance with the instructions to
Form 10-Q and therefore do not include all information and disclosures necessary
for complete financial statements in conformity with generally accepted
accounting principles. The consolidated condensed balance sheet at December 31,
1996 was derived from audited financial statements, but does not include all
disclosures required by generally accepted accounting principles. The results
for the interim periods indicated are unaudited, but reflect all adjustments
(consisting only of normal recurring adjustments) which management considers
necessary for a fair presentation of operating results. Results of operations
for interim periods are not necessarily indicative of a full year of operations.
2. CONTINGENCIES:
The Company and its subsidiaries, during the normal course of operating
their businesses, become engaged in various litigation and other legal disputes.
In the opinion of the Company's management, the ultimate disposition of such
disputes will not have a material impact on the Company's operations.
3. LONG-TERM DEBT:
In June 1997, the Company received proceeds of approximately $155.9
million, net of costs, from the sale of $160 million principal amount of 9 3/8%
Senior Subordinated Notes. The Notes were sold at a price of 99.899% of par
value, are due June 15, 2007 and require semi-annual interest payments. The net
proceeds from the notes received by the Company were used to repay approximately
$76 million outstanding (including prepayment penalty) under the Credit Facility
and to repurchase $13 million in aggregate principal amount of Senior Notes
which had a fair market value of $14.5 million together with accrued and unpaid
interest related thereto. The remainder will be loaned to HE and RPG to finance
a portion of the costs associated with the expansion of Horseshoe Bossier City
and Horseshoe Casino Center, respectively.
The Company is required to file a registration statement with the
Securities and Exchange Commission (the "SEC") for new notes with identical
terms (the "Registered Notes") and have such registration statement declared
effective by the SEC by December 8, 1997. The Company is required to exchange
the Senior Subordinated Notes for the Registered Notes within 30 days of the
registration statement being declared effective. If the Company does not meet
these deadlines, the Company will be obligated to pay liquidated damages equal
to $0.05 per week per $1,000 principal amount of the notes, increasing by $0.05
per week per $1,000 principal amount for each 90 day period the Company is in
default up to a maximum of $0.35 per week per $1,000 principal amount.
4. UNIT OPTION PLAN:
During 1997 the Company's manager, Horseshoe Gaming, Inc., approved the
Company's 1997 Unit Option Plan which provides for certain employees to be
granted options to purchase membership units in the Company at a fixed price of
$3.47 per unit. The options vest in three equal annual installments beginning
one year subsequent to the date of the option holder's employment and expire
after 10 years. At June 30, 1997, 631,225 units had been granted, 210,408 of
which had been vested. Management estimated that the minimum fair value of the
options (as prescribed by SFAS No. 123, Accounting for Stock-Based Compensation)
was immaterial on the date of grant and June 30, 1997.
Any units purchased by employees upon exercise of the options may be
repurchased by the Company at a price equal to the then fair market value of the
units. Accordingly, the unit option plan is accounted for as a variable plan
under APB Opinion No. 25, "Accounting for Stock Issued to Employees." On the
date of grant the exercise price of the options exceeded management's estimate
of the fair value of the units; therefore, no compensation expense was recorded.
Compensation expense will be recognized in future periods to the extent the fair
value of the units in the Company increases above the exercise price of the
options.
F-46
<PAGE> 147
NEW GAMING CAPITAL PARTNERSHIP AND SUBSIDIARY
CONSOLIDATED CONDENSED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1997 1996
----------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents........................................... $ 19,526 $ 14,913
Accounts receivable, net............................................ 1,870 1,901
Inventories......................................................... 1,256 957
Prepaid expenses and other.......................................... 1,860 1,102
----------- ------------
Total current assets........................................ 24,512 18,873
----------- ------------
Property and Equipment:
Land................................................................ 10,424 6,115
Buildings, boat and improvements.................................... 72,468 71,554
Furniture, fixtures and equipment................................... 25,445 24,125
Less: accumulated depreciation...................................... (19,101) (15,028)
----------- ------------
89,236 86,766
Construction in progress............................................ 70,558 18,482
----------- ------------
Net property and equipment.................................. 159,794 105,248
----------- ------------
Other Assets:
Goodwill, net....................................................... 18,453 18,788
Other, net.......................................................... 10,433 11,269
----------- ------------
$ 213,192 $154,178
========= ==========
LIABILITIES AND PARTNERS' CAPITAL
Current Liabilities:
Current maturities of long-term debt................................ $ 15,214 $ 11,854
Accounts payable.................................................... 1,601 1,882
Due to affiliates................................................... 5,140 2,536
Construction payables............................................... 16,232 7,161
Accrued expenses and other.......................................... 13,809 8,373
----------- ------------
Total current liabilities................................... 51,996 31,806
Long-term debt, less current maturities............................... 132,567 97,837
Minority Interest..................................................... (946) (827)
Commitments and Contingencies
Partners' Capital..................................................... 29,575 25,362
----------- ------------
$ 213,192 $154,178
========= ==========
</TABLE>
The accompanying notes are an integral part of these consolidated condensed
financial statements.
F-47
<PAGE> 148
NEW GAMING CAPITAL PARTNERSHIP AND SUBSIDIARY
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
----------------- -----------------
1997 1996 1997 1996
------- ------- ------- -------
<S> <C> <C> <C> <C>
Revenues:
Casino.................................................. $37,021 $42,683 $76,480 $86,208
Food and beverage....................................... 3,861 4,107 7,580 7,973
Hotel................................................... 850 1,164 1,677 2,239
Other................................................... 414 493 834 954
------- ------- ------- -------
42,146 48,447 86,571 97,374
Promotional allowances.................................. (3,340) (3,640) (6,368) (7,002)
------- ------- ------- -------
Net revenues.................................... 38,806 44,807 80,203 90,372
------- ------- ------- -------
Expenses:
Casino.................................................. 20,714 23,724 42,911 47,885
Food and beverage....................................... 1,562 1,485 3,334 3,320
Hotel................................................... 1,707 1,138 2,157 2,021
Other................................................... 112 156 224 347
General and administrative.............................. 6,769 6,730 13,934 14,978
Depreciation and amortization........................... 2,592 2,260 5,078 4,210
------- ------- ------- -------
Total........................................... 33,456 35,493 67,638 72,761
------- ------- ------- -------
Operating Income.......................................... 5,350 9,314 12,565 17,611
Other Income (Expense):
Interest expense........................................ (2,977) (2,844) (6,076) (5,465)
Interest income......................................... 220 144 467 409
Other, net.............................................. (4) 418 (9) 418
Minority interest in income of subsidiary............... (201) (522) (583) (1,025)
------- ------- ------- -------
Net Income................................................ $ 2,388 $ 6,510 $ 6,364 $11,948
======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated condensed
financial statements.
F-48
<PAGE> 149
NEW GAMING CAPITAL PARTNERSHIP AND SUBSIDIARY
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
---------------------
1997 1996
-------- --------
<S> <C> <C>
Cash provided by operating activities:
Net Income........................................................... $ 6,364 $ 11,948
Adjustments to reconcile net income to net cash provided by operating
activities:
Minority interest in income of subsidiary......................... 583 1,025
Depreciation and amortization..................................... 5,078 4,210
Amortization of debt discount, deferred finance charges and
other............................................................ 523 327
Loss on disposal of land and other assets......................... 217
Provision for doubtful accounts................................... 788 795
Net change in assets and liabilities.............................. 3,341 (4,302)
-------- --------
Net cash provided by operating activities.................... 16,677 14,220
-------- --------
Cash flows from investing activities:
Purchase of property and equipment................................... (57,626) (14,035)
Proceeds from land held for sale..................................... -- 1,400
Increase (decrease) in construction payable.......................... 9,071 (2,409)
Increase in other assets............................................. (1,235) (658)
-------- --------
Net cash used in investing activities........................ (49,790) (15,702)
-------- --------
Cash flows from financing activities:
Proceeds from debt................................................... 46,400 9,000
Payments on debt..................................................... (8,310) (4,022)
Capital distributions................................................ (2,226) (14,170)
Distributions to minority shareholders............................... (702) (735)
Changes in due to/from affiliates.................................... 2,564 (381)
-------- --------
Net cash provided by (used in) financing activities.......... 37,726 (10,308)
-------- --------
Net change in cash and cash equivalents................................ 4,613 (11,790)
Cash and cash equivalents, beginning of period......................... 14,913 27,025
-------- --------
Cash and cash equivalents, end of period............................... $ 19,526 $ 15,235
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated condensed
financial statements.
F-49
<PAGE> 150
NEW GAMING CAPITAL PARTNERSHIP AND SUBSIDIARY
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
1. INTRODUCTION:
The accompanying unaudited Consolidated Condensed Financial Statements of New
Gaming Capital Partnership and Subsidiary (the "Partnership") have been prepared
in accordance with the instructions to Form 10-Q and therefore do not include
all information and disclosures necessary for complete financial statements in
conformity with generally accepted accounting principles. The consolidated
condensed balance sheet at December 31, 1996 was derived from audited financial
statements, but does not include all disclosures required by generally accepted
accounting principles. The results for the interim periods indicated are
unaudited, but reflect all adjustments (consisting only of normal recurring
adjustments) which management considers necessary for a fair presentation of
operating results. Results of operations for interim periods are not necessarily
indicative of a full year of operations.
2. CONTINGENCIES:
The Partnership and its subsidiary, during the normal course of operating their
business, become engaged in various litigation and other legal disputes. In the
opinion of the Partnership's management, the ultimate disposition of such
disputes will not have a material impact on the Partnership's operations.
F-50
<PAGE> 151
ROBINSON PROPERTY GROUP, L.P.
CONDENSED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1997 1996
----------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents....................................... $ 19,338 $ 22,858
Accounts receivable, net........................................ 8,010 5,883
Inventories..................................................... 510 478
Prepaid expenses and other...................................... 744 275
----------- ------------
Total current assets......................................... 28,602 29,494
----------- ------------
Property and Equipment:
Land............................................................ 4,110 4,110
Buildings, barge and improvements............................... 61,249 50,253
Furniture, fixtures and equipment............................... 18,384 16,933
Less: accumulated depreciation.................................. (14,439) (11,370)
----------- ------------
69,304 59,926
Construction in progress........................................ 34,363 20,162
----------- ------------
Net property and equipment.............................. 103,667 80,088
----------- ------------
Other Assets:
Goodwill, net................................................... 20,102 20,438
Other, net...................................................... 4,347 3,857
----------- ------------
$ 156,718 $133,877
========= ==========
LIABILITIES AND PARTNERS' CAPITAL
Current Liabilities:
Accounts payable................................................ $ 1,409 $ 1,274
Due to affiliates............................................... 2,232 1,736
Construction payables........................................... 6,288 6,945
Accrued expenses and other...................................... 10,375 8,503
----------- ------------
Total current liabilities.................................... 20,304 18,458
----------- ------------
Long-term debt, less current maturities........................... 49,400 43,000
Commitments and Contingencies
Partners' Capital................................................. 87,014 72,419
----------- ------------
$ 156,718 $133,877
========= ==========
</TABLE>
The accompanying notes are an integral part of these condensed financial
statements.
F-51
<PAGE> 152
ROBINSON PROPERTY GROUP, L.P.
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
----------------- -----------------
1997 1996 1997 1996
------- ------- ------- -------
<S> <C> <C> <C> <C>
Revenues:
Casino.................................................. $39,739 $37,538 $80,236 $77,685
Food and beverage....................................... 3,106 2,723 6,278 5,568
Hotel................................................... 829 893 1,651 1,789
Other................................................... 634 640 1,230 1,429
------- ------- ------- -------
44,308 41,794 89,395 86,471
Promotional allowances.................................. (3,134) (2,669) (6,558) (5,561)
------- ------- ------- -------
Net revenues.................................... 41,174 39,125 82,837 80,910
------- ------- ------- -------
Expenses:
Casino.................................................. 20,379 18,295 40,541 36,186
Food and beverage....................................... 945 1,178 1,754 2,091
Hotel................................................... 791 913 1,512 1,671
Other................................................... 232 195 375 382
General and administrative.............................. 5,934 6,585 11,690 12,528
Depreciation and amortization........................... 1,845 1,764 3,653 3,512
------- ------- ------- -------
Total........................................... 30,126 28,930 59,525 56,370
------- ------- ------- -------
Operating Income.......................................... 11,048 10,195 23,312 24,540
Other Income (Expense):
Interest expense........................................ (936) (1,834) (1,538) (4,784)
Interest and other income............................... 160 141 360 442
Other, net.............................................. (342) -- (346) --
------- ------- ------- -------
Net Income................................................ $ 9,930 $ 8,502 $21,788 $20,198
======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these condensed financial
statements.
F-52
<PAGE> 153
ROBINSON PROPERTY GROUP, L.P.
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
---------------------
1997 1996
-------- --------
<S> <C> <C>
Cash provided by operating activities:
Net Income........................................................... $ 21,788 $ 20,198
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization..................................... 3,653 3,512
Amortization of debt discount, deferred finance charges and
other............................................................ 274 1,150
Provision for doubtful accounts................................... 2,339 1,958
Net change in assets and liabilities.............................. (2,960) (2,663)
-------- --------
Net cash provided by operating activities.................... 25,094 24,155
-------- --------
Cash flows from investing activities:
Purchases of property and equipment.................................. (26,692) (2,270)
Increase in construction payable..................................... (657) --
(Increase) decrease in other assets.................................. (827) 305
-------- --------
Net cash used in investing activities........................ (28,176) (1,965)
-------- --------
Cash flows from financing activities:
Proceeds from debt................................................... 6,400 --
Payments on debt..................................................... -- (32,000)
Capital distributions................................................ (7,294) --
Changes in due to/from affiliates.................................... 456 (4,519)
-------- --------
Net cash used in financing activities........................ (438) (36,519)
-------- --------
Net change in cash and cash equivalents................................ (3,520) (14,329)
Cash and cash equivalents, beginning of period......................... 22,858 32,706
-------- --------
Cash and cash equivalents, end of period............................... $ 19,338 $ 18,377
======== ========
</TABLE>
The accompanying notes are an integral part of these condensed financial
statements.
F-53
<PAGE> 154
ROBINSON PROPERTY GROUP, L.P.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
1. INTRODUCTION:
The accompanying unaudited Condensed Financial Statements of Robinson Property
Group, L.P. (the "Partnership"), have been prepared in accordance with the
instructions to Form 10-Q and therefore do not include all information and
disclosures for complete financial statements in conformity with generally
accepted accounting principles. The consolidated condensed balance sheet at
December 31, 1996 was derived from audited financial statements, but does not
include all disclosures required by generally accepted accounting principles.
The results for the interim periods indicated are unaudited, but reflect all
adjustments (consisting only of normal recurring adjustments) which management
considers necessary for a fair presentation of operating results. Results of
operations for interim periods are not necessarily indicative of a full year of
operations.
2. CONTINGENCIES:
The Partnership, during the normal course of operating its business, becomes
engaged in various litigation and other legal disputes. In the opinion of the
Partnership's management, the ultimate disposition of such disputes will not
have a material impact on the Partnership's operations.
F-54
<PAGE> 155
======================================================
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS. IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO
SELL, OR A SOLICITATION OF AN OFFER TO BUY, IN ANY JURISDICTION WHERE, OR TO ANY
PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS NOT BEEN A CHANGE IN THE
FACTS SET FORTH IN THIS PROSPECTUS OR IN THE AFFAIRS OF THE COMPANY SINCE THE
DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Summary............................... 5
Summary Consolidated Financial Data... 12
Risk Factors.......................... 13
Use of Proceeds....................... 20
Capitalization........................ 21
The Exchange Offer.................... 22
Selected Consolidated Financial
Data................................ 29
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 31
Business.............................. 37
Management............................ 46
Executive Compensation................ 48
Ownership of Units.................... 52
Related Party Transactions............ 53
Description of Certain Other
Indebtedness........................ 54
Description of Notes.................. 61
Certain Federal Income Tax
Considerations...................... 92
Plan of Distribution.................. 96
Legal Matters......................... 96
Experts............................... 96
Available Information................. 97
Index of Defined Terms................ 98
Indices to Financial Statements....... F-1
=============================================
</TABLE>
======================================================
$160,000,000
HORSESHOE GAMING, L.L.C.
9 3/8% SENIOR SUBORDINATED NOTES
DUE JUNE 15, 2007
---------------------
PROSPECTUS
---------------------
OCTOBER 9, 1997
======================================================
<PAGE> 156
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Horseshoe Gaming, L.L.C. (the "Company") is a Delaware limited liability
company. Under Section 18-108 of the Delaware Limited Liability Company Act, a
Delaware limited liability company may, and has the power to, indemnify and hold
harmless any member or manager or other person from and against any and all
claims and demands whatsoever, subject to such standards and restrictions, if
any, as are set forth in its limited liability company agreement.
Section 6.4 of the Limited Liability Agreement of the Company provides as
follows:
No Liability; Indemnification of the Manager. For the purposes of this
Section 6.4, Affiliates shall mean only those Affiliates performing services for
or on behalf of the Company.
(a) The Manager and its Affiliates shall not be liable to the Company
or any Member for any action or inaction of the Manager and/or its
Affiliates in connection with the business or affairs of the Company or the
Subsidiaries, so long as the person against whom liability is asserted
acted in good faith on behalf of the Company and in a manner reasonably
believed by such person to be in the best interests of the Company or the
Subsidiaries, but only if the course of conduct does not constitute gross
negligence or willful misconduct. The Company shall indemnify, defend,
protect and hold harmless the Manager and its respective directors,
officers, employees and agents, against any claim, liability, damage, loss
or expense (including, without limitation, investigating and defending any
claims and lawsuits and settlement thereof, and legal and accounting costs
in connection therewith) incurred by them by virtue of the performance by
any of them of the duties of the Manager acting as the manager in
connection with the Businesses, so long as the indemnified person acted in
good faith on behalf of the Company and in the manner reasonably believed
by the person to be in the best interest of the Company or the
Subsidiaries, but only if the course of conduct does not constitute gross
negligence or willful misconduct; provided that such indemnification or
agreement to hold harmless shall be recoverable only out of assets of, or
distributions from, the Company or the Subsidiaries.
(b) Advances from Company funds to the Manager or its Affiliates for
legal expenses and other costs incurred as a result of a legal action or
arbitration may be made if the following conditions are satisfied: (1) the
legal action or arbitration relates to the performance of duties or
services by the Manager or its Affiliates on behalf of the Company or the
Subsidiaries; and (2) the Manager or its Affiliates agree to repay the
advanced funds to the Company or the Subsidiaries in cases in which they
are ultimately determined not to be entitled to indemnification.
The sole Manager of the Company is Horseshoe Gaming, Inc., a Nevada
corporation ("HGI"). Article Sixth of HGI's Articles of Incorporation provides
that the personal liability of the directors and officers of HGI to HGI and its
stockholders for damages for breach of fiduciary duty as a director or officer
of HGI shall be eliminated to the fullest extent permissible under Nevada law.
Section 78.751 of the Nevada Revised Statutes ("NRS") provides that a
Nevada corporation has the power to indemnify its officers and directors in
certain circumstances.
Subsection (1) of NRS Section 78.751 empowers a corporation to indemnify
any person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, except an action by or in the right
of the corporation, by reason of the fact that he is or was a director, officer,
employee or agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses,
including attorneys' fees, judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with the action, suit or
proceeding if he acted in good faith and in a manner which he reasonably
believed to be in or not opposed to the best interests of the corporation, and,
with respect to any criminal action or proceeding, had no
II-1
<PAGE> 157
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon a
plea of nolo contendere or its equivalent, does not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
corporation, and that, with respect to any criminal action or proceeding, he had
reasonable cause to believe that his conduct was unlawful.
Subsection (2) of NRS Section 78.751 empowers a corporation to indemnify
any person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that he is
or was a director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise against expenses, including amounts paid in settlement and attorneys'
fees actually and reasonably incurred by him in connection with the defense or
settlement of the action or suit if he acted in good faith and in a manner which
he reasonably believed to be in or not opposed to the best interests of the
corporation. Indemnification may not be made for any claim, issue or matter as
to which such a person has been adjudged by a court of competent jurisdiction,
after exhaustion of all appeals therefrom, to be liable to the corporation or
for amounts paid in settlement to the corporation, unless and only to the extent
that the court in which the action or suit was brought or other court of
competent jurisdiction determines upon application that in view of all the
circumstances of the case, the person is fairly and reasonably entitled to
indemnity for such expenses as the court deems proper.
Subsection (3) of NRS Section 78.751 provides that to the extent that a
director, officer, employee or agent of a corporation has been successful on the
merits or otherwise in defense of any action, suit or proceeding referred to in
subsections 1 and 2, or in defense of any claim, issue or matter therein, he
must be indemnified by the corporation against expenses, including attorneys'
fees, actually and reasonably incurred by him in connection with the defense.
Subsection (4) of NRS Section 78.751 provides that any indemnification
under subsections 1 and 2, unless ordered by a court or advanced pursuant to
subsection 5, must be made by the corporation only as authorized in the specific
case upon a determination that indemnification of the director, officer,
employee or agent is proper in the circumstances. The determination must be
made:
(a) By the stockholders;
(b) By the board of directors by majority vote of a quorum consisting
of directors who were not parties to the act, suit or proceeding;
(c) If a majority vote of a quorum consisting of directors who were
not parties to the act, suit or proceeding so orders, by independent legal
counsel in a written opinion; or
(d) If a quorum consisting of directors who were not parties to the
act, suit or proceeding cannot be obtained, by independent legal counsel in
a written opinion.
Subsection (5) of NRS Section 78.751 provides that the articles of
incorporation, the bylaws or an agreement made by the corporation may provide
that the expenses of officers and directors incurred in defending a civil or
criminal action, suit or proceeding must be paid by the corporation as they are
incurred and in advance of the final disposition of the action suit or
proceeding, upon receipt of an undertaking by or on behalf of the director or
officer to repay the amount if it is ultimately determined by a court of
competent jurisdiction that he is not entitled to be indemnified by the
corporation.
Subsection (6) of NRS Section 78.751 provides that the indemnification and
advancement of expenses authorized in or ordered by a court pursuant to NRS
Section 78.751:
(a) Does not exclude any other rights to which a person seeking
indemnification or advancement of expenses may be entitled under the
articles of incorporation or any bylaw, agreement, vote of stockholders or
disinterested directors or otherwise, for either an action in his official
capacity or an action in another capacity while holding his office, except
that indemnification, unless ordered by a court pursuant to subsection 2 or
for the advancement of expenses made pursuant to subsection 5, may not be
made to or
II-2
<PAGE> 158
on behalf of any director or officer if a final adjudication establishes
that his acts or omissions involved intentional misconduct, fraud or a
knowing violation of the law and was material to the cause of action.
(b) Continues for a person who has ceased to be a director, officer,
employee or agent and inures to the benefit of the heirs, executors and
administrators of such a person.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- --------- --------------------------------------------------------------------------------
<S> <C>
3.1* Certificate of Formation of Horseshoe Gaming, L.L.C.
3.2** Limited Liability Company Agreement of Horseshoe Gaming, L.L.C., as amended to
date.
3.3* Articles of Incorporation of Horseshoe Gaming, Inc. (formerly New Gaming Capital
Corporation), as amended to date.
3.4* Bylaws of Horseshoe Gaming, Inc. (formerly New Gaming Capital Corporation).
3.5* Certificate of Limited Partnership of Robinson Property Group Limited
Partnership, as amended to date.
3.6* Second Amended and Restated Limited Partnership Agreement of Robinson Property
Group Limited Partnership, as amended to date.
3.7* Articles of Incorporation of Horseshoe GP, Inc., as amended to date.
3.8* Bylaws of Horseshoe GP, Inc.
4.1* Senior Secured Credit Facility Note Purchase Agreement, dated as of October 10,
1995, by and among Horseshoe Gaming, L.L.C., Robinson Property Group Limited
Partnership and the Purchasers as defined therein.
4.2* Form of Promissory Note for Senior Secured Credit Facility.
4.3* Exchange Offer Letters dated October 10, 1995 by and between Horseshoe Gaming,
L.L.C., Horseshoe Riverboat Casinos, LLC, Horseshoe Entertainment and Robinson
Property Group Limited Partnership, on the one hand, and each of the holders of
14.00% Senior Secured Notes due April 15, 2000 and/or 14.00% Subordinated Notes
due April 15, 2001 issued by Horseshoe Riverboat Casinos, LLC on the other hand.
4.4* Guarantee and Security Agreement, dated as of October 10, 1995, from Robinson
Property Group Limited Partnership, as Note Guarantor, in favor of the holders
of Senior Secured Credit Facility Notes due September 30, 1999.
4.5* Pledge Agreement, dated as of October 10, 1995, from Jack Binion, B&O
Development Limited Partnership and JBB Gaming Investments, L.L.C. (formerly
Worldwide Gaming Investments, L.L.C.) in favor of the holders of Senior Secured
Credit Facility Notes due September 30, 1999.
4.6* Pledge Agreement, dated as of October 10, 1995, from Horseshoe Gaming, L.L.C. in
favor of the holders of Senior Secured Credit Facility Notes due September 30,
1999.
4.7* Mortgage, Security Agreement and Assignment of Leases and Rents executed by
Horseshoe Entertainment, as Mortgagor, in favor of Horseshoe Gaming, L.L.C., as
Mortgagee.
4.8* First Preferred Ship Mortgage on the whole of the Queen of the Red executed by
Horseshoe Entertainment, as Owner and Mortgagor, in favor of Horseshoe Gaming,
L.L.C., as Mortgagee.
4.9* Bossier City Security Agreement and Assignment thereof.
</TABLE>
II-3
<PAGE> 159
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- --------- --------------------------------------------------------------------------------
<S> <C>
4.10* Deed of Trust Security Agreement and Assignment of Leases and Rents from
Robinson Property Group Limited Partnership, as Grantor, to Rowan H. Taylor,
Jr., an individual, as Trustee for the benefit of Horseshoe Gaming, L.L.C., and
Hanwa American Corp., Yewdale Holdings Limited and debis Financial Services,
Inc., as Beneficiaries.
4.11* First Preferred Ship Mortgage on the whole of the Horseshoe Casino and Hotel,
Tunica executed by Robinson Property Group Limited Partnership, as Owner and
Mortgagor, in favor of Horseshoe Gaming, L.L.C. and Chemical Trust Company of
California, as Mortgagee.
4.12* Tunica County Security Agreement and Assignment thereof.
4.13* Master Vessel Trust Agreement, dated as of October 10, 1995, between debis
Financial Services, Inc., Hanwa American Corp., and Yewdale Holdings Limited, as
Lenders, and Chemical Trust Company of California, as Trustee.
4.14* Note Assignment, dated as of October 10, 1995, from Horseshoe Gaming, L.L.C., in
favor of the Holders of Senior Secured Credit Facility Notes due September 30,
1999, issued by Horseshoe Gaming, L.L.C. and United States Trust Company of New
York for the ratable benefit of the Holders of 12.75% Senior Notes due September
30, 2000 issued by Horseshoe Gaming, L.L.C.
4.15* Intercompany Senior Secured Note due September 30, 2000, executed by Horseshoe
Entertainment in favor of Horseshoe Gaming, L.L.C.
4.16* Intercompany Senior Secured Note due September 30, 2000, executed by Robinson
Property Group Limited Partnership in favor of Horseshoe Gaming, L.L.C.
4.17* Binion Partners Escrow Agreement, dated as of October 10, 1995, by and among
Horseshoe Gaming, L.L.C., Robinson Property Group Limited Partnership, Jack
Binion, B&O Development Limited Partnership, JBB Gaming Investments, L.L.C.
(formerly Worldwide Gaming Investments, L.L.C.), the Purchasers named in the
Senior Secured Credit Facility Note Purchase Agreement, U.S. Trust Company of
California, N.A., as Trustee, and Bank of America Nevada, as Escrow Agent.
4.18++ Excess Proceeds Escrow Agreement, dated as of October 10, 1995, by and among
Horseshoe Gaming, L.L.C., Robinson Property Group Limited Partnership, the
Purchasers named in the Senior Secured Credit Facility Note Purchase Agreement,
U.S. Trust Company of California, N.A., as Trustee under the Indenture, and Bank
of America Nevada, as Escrow Agent.
4.19* Intercreditor Agreement, dated as of October 10, 1995, among debis Financial
Services, Inc., Yewdale Holdings Limited and Hanwa American Corp.
4.20* 12.75% Senior Notes due 2000 Senior Note Purchase Agreement by and among
Horseshoe Gaming, L.L.C., Robinson Property Group Limited Partnership, as
Guarantor, and the Purchasers thereof.
4.21* Form of Senior Note of Horseshoe Gaming, L.L.C. 12.75% Senior Notes due 2000.
4.22* Indenture, dated as of October 10, 1995, by and among Horseshoe Gaming, L.L.C.,
U.S. Trust Company of California, N.A., as Trustee, and Robinson Property Group
Limited Partnership, as Guarantor, with respect to the 12.75% Senior Notes due
2000.
4.23* Collateral Agency Agreement, dated as of October 6, 1995, by and among Horseshoe
Gaming, L.L.C., Robinson Property Group Limited Partnership, B&O Development
Limited Partnership, JBB Gaming Investments, L.L.C. (formerly Worldwide Gaming
Investments, L.L.C.), and Jack Binion, as Grantors, the Purchasers of the 12.75%
Senior Notes due 2000, and United States Trust Company of New York, as
Collateral Agent.
</TABLE>
II-4
<PAGE> 160
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- --------- --------------------------------------------------------------------------------
<S> <C>
4.24* Exchange and Registration Rights Agreement, dated as of October 10, 1995, by and
among Horseshoe Gaming, L.L.C., Robinson Property Group Limited Partnership, as
Guarantor, and the Purchasers of the 12.75% Notes due 2000 issued under the
Indenture.
4.25* Second Pledge Agreement, dated as of October 10, 1995, from Jack Binion, B&O
Development Limited Partnership, and JBB Gaming Investments, L.L.C. (formerly
Worldwide Gaming Investments, L.L.C.) in favor of United States Trust Company of
New York, as Collateral Agent for the benefit of the Holders of 12.75% Senior
Notes due September 30, 2100 issued by Horseshoe Gaming, L.L.C.
4.26* Second Pledge Agreement, dated as of October 10, 1995, from Horseshoe Gaming,
L.L.C. in favor of United States Trust Company of New York, for the ratable
benefit of the Holders of 12.75% Senior Notes due September 30, 2000 issued by
Horseshoe Gaming, L.L.C.
4.27* Second Ship Mortgage on the whole of the Queen of the Red by Horseshoe
Entertainment owner and mortgagor in favor of Horseshoe Gaming, L.L.C., as
Mortgagee.
4.28* Bossier City Second Security Agreement and Assignment thereof.
4.29* Second Deed of Trust, Security Agreement and Assignment of Leases and Rents from
Robinson Property Group Limited Partnership, as Grantor, to Rowan H. Taylor,
Jr., an individual, as Trustee for the benefit of Horseshoe Gaming, L.L.C. and
United States Trust Company of New York, as Collateral Agent for the Senior Note
Holders, as beneficiaries.
4.30* Second Ship Mortgage on the whole of the Horseshoe Casino and Hotel, Tunica
executed by Robinson Property Group Limited Partnership, as Owner and Mortgagor,
in favor of Horseshoe Gaming, L.L.C. and United States Trust Company of New
York, as Collateral Agent for the ratable benefit of the Senior Note Holders.
4.31* Tunica County Second Security Agreement and Assignment thereof.
4.32* Intercreditor Agreement, dated as of October 10, 1995, among debis Financial
Services, Inc., Yewdale Holdings Limited, Hanwa American Corp. and Chemical
Trust Company of California, as Trustee, as Lien Holders, and U.S. Trust Company
of California, N.A., as Trustee for the Holders of Horseshoe Gaming, L.L.C.
12.75% Senior Notes due 2000 and Horseshoe Gaming, L.L.C. 12.75% Exchange Senior
Notes due 2000, and United States Trust Company of New York, as Collateral
Agent, as Junior Lien Holders.
4.33* Limited Guaranty by Jack B. Binion in favor of debis Financial Services, Inc.,
as amended to date. 4.34* Intercompany Senior Secured Note Due September 30,
2000 dated October 20, 1995 by Horseshoe Ventures, L.L.C. in favor of Horseshoe
Gaming, L.L.C.
4.36** Amendment to Excess Proceeds Agreement, dated as of February 9, 1996, by and
among Horseshoe Gaming, L.L.C., Robinson Property Group Limited Partnership, the
Purchasers named in the Senior Secured Credit Facility Note Purchase Agreement,
U.S. Trust Company of California, N.A., as Trustee under the Indenture, and Bank
of America Nevada, as Escrow Agent.
4.37+ Amendment No. 1 to Indenture, dated as of July 19, 1996, by and among Horseshoe
Gaming, L.L.C., Robinson Property Group Limited Partnership and U.S. Trust
Company of California, N.A., as Trustee under the Indenture.
4.38++ Amendment to Senior Secured Credit Facility Note Purchase Agreement dated as of
October 1, 1996 by and among Horseshoe Gaming, L.L.C., Robinson Property Group
Limited Partnership, Yewdale Holdings Limited, Hanwa American Corp. and debis
Financial Services, Inc.
</TABLE>
II-5
<PAGE> 161
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- --------- --------------------------------------------------------------------------------
<S> <C>
4.39++ Second Amendment to Excess Proceeds Escrow Agreement dated as of October 1,
1996, by and among Horseshoe Gaming, L.L.C., Robinson Property Group Limited
Partnership, Yewdale Holdings Limited, Hanwa American Corp., debis Financial
Services, Inc., U.S. Trust Company of California, N.A. as trustee under the
Indenture and Bank of America Nevada.
4.40+++ Intercompany Senior Secured Note due September 30, 2000 executed by Robinson
Property Group Limited Partnership in favor of Horseshoe Gaming, L.L.C.
4.41+++ Intercompany Senior Secured Note due September 30, 2000 executed by Horseshoe
Entertainment in favor of Horseshoe Gaming, L.L.C.
4.42# Purchase Agreement for 9-3/8% Series A Senior Subordinated Notes by and among
Horseshoe Gaming, L.L.C., Robinson Property Group Limited Partnership, as
Guarantor, and Wasserstein Perella Securities, Inc., as Initial Purchaser
4.43# Form of 9 3/8% Senior Subordinated Note due 2007 of Horseshoe Gaming, L.L.C.
4.44# Indenture, dated as of June 15, 1997, by and among Horseshoe Gaming, L.L.C.,
U.S. Trust Company of Texas, N.A., as Trustee, and Robinson Property Group
Limited Partnership, as Guarantor, with respect to the 9-3/8% Senior
Subordinated Notes due 2007.
4.45# Exchange and Registration Rights Agreement, dated as of June 25, 1997, by and
among Horseshoe Gaming, L.L.C., Robinson Property Group Limited Partnership and
Wasserstein Perella Securities, Inc.
4.46# Intercompany Senior Secured Note due June 15, 2007, executed by Robinson
Property Group Limited Partnership in favor of Horseshoe Gaming, L.L.C.
4.47# Intercompany Senior Secured Note due June 15, 2007, executed by Horseshoe
Entertainment in favor of Horseshoe Gaming, L.L.C.
5.2# Opinion of Riordan & McKinzie regarding legality.
10.1* Employment Agreement dated January 1, 1996 by and between Horseshoe Gaming, Inc.
and Paul Alanis.
10.2** Employment Agreement dated as of October 1, 1995 by and between Horseshoe
Gaming, Inc. and Walter J. Haybert.
10.3** Assignment Agreement dated as of October 1, 1995 by and between Horseshoe
Gaming, L.L.C. and Walter J. Haybert.
10.4** Employment Agreement dated as of October 1, 1995 by and between Horseshoe
Gaming, Inc. and John J. Schreiber.
10.5** Assignment Agreement dated as of October 1, 1995 by and between Horseshoe
Gaming, L.L.C. and John J. Schreiber.
10.6** Employment Agreement dated as of October 1, 1995 by and between Horseshoe
Gaming, Inc. and John Michael Allen.
10.7** Assignment Agreement dated as of October 1, 1995 by and between Horseshoe
Gaming, L.L.C. and John Michael Allen.
10.8* Consulting Agreement dated March 10, 1993 by and between Jack Binion and Koar
International, Inc. (ultimately assigned to Horseshoe Gaming, Inc. and
KII-Pasadena, Inc.)
10.9* Warrant to purchase 1,941,981 Horseshoe Gaming Units, dated as of October 10,
1995, issued to Hanwa American Corp.
10.10* Warrant to purchase 1,941,980 Horseshoe Gaming Units, dated as of October 10,
1995, issued to Yewdale Holdings Limited.
10.11* Warrant to purchase 1,566,629 Horseshoe Gaming Units, dated as of October 10,
1995, issued to Hanwa American Corp.
</TABLE>
II-6
<PAGE> 162
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- --------- --------------------------------------------------------------------------------
<S> <C>
10.12* Warrant to purchase 1,566,630 Horseshoe Gaming Units, dated as of October 10,
1995, issued to Yewdale Holdings Limited.
10.13** Registration Rights Agreement dated as of October 10, 1995 by and between
Horseshoe Gaming, L.L.C., on the one hand, and Yewdale Holdings Limited, Post
Balanced Fund, L.P., Capital Fund Foundation, Raymond Zimmerman, as Trustee for
the Charles N. Mathewson Charitable Remainder Uni Trust, Hanwa American Corp.,
Onyx Partners, Inc., Alpine Associates, Janless Corp., Andrew Astrachan, and
Donald Schupak, on the other hand.
10.14* Assignment and Purchase Agreement dated as of October 1, 1995 between Jack
Binion and Horseshoe Gaming, L.L.C.
10.15* Promissory Note dated October 10, 1995 by Horseshoe Gaming, L.L.C. in favor of
Jack B. Binion in the principal amount of $500,000.
10.16* Purchase Agreement dated as of October 1, 1995 between B&O Development Limited
Partnership and Horseshoe Gaming, L.L.C.
10.17* Assignment Agreement dated as of October 1, 1995 between KR, Inc. and Horseshoe
Ventures, L.L.C.
10.18* Promissory Note dated October 10, 1995 by Horseshoe Ventures, L.L.C., in favor
of KR, Inc. in the principal amount of $4,769,016.47.
10.19* Option Agreement dated as of October 10, 1995 between Horseshoe Gaming, L.L.C.,
on the one hand, and Hanwa American Corp. and Yewdale Holdings Limited, on the
other hand.
10.20* Letter Agreement dated as of October 10, 1995 between Horseshoe Gaming, L.L.C.
and Hanwa American Corp.
10.21* Letter Agreement dated as of October 10, 1995 between Horseshoe Gaming, L.L.C.
and Yewdale Holdings Limited.
10.22** Purchase and Sale Agreement dated as of November 15, 1995 by and between Frank
Pernici and New Gaming Capital Partnership, with Horseshoe Gaming, L.L.C., as
Guarantor.
10.23* Employment Agreement dated January 1, 1996 by and between Horseshoe Gaming,
L.L.C. and Loren S. Ostrow.
10.24* 401(k) Plan of Robinson Property Group Limited Partnership.
10.25** Limited Partnership Agreement of Horseshoe Entertainment, a Louisiana limited
partnership, dated April 20th, 1993.
10.26** Second and Amended and Restated Limited Partnership Agreement of New Gaming
Capital Partnership, a Nevada limited partnership, dated as of October 1, 1995.
10.27** Limited Liability Company Agreement of Horseshoe Ventures, L.L.C., a Delaware
limited liability company, dated as of October 1, 1995.
10.28*** Second Amended and Restated Operating Agreement of Horseshoe Casinos (Indiana),
LLC, an Indiana limited liability company, dated as of April 26, 1996.
10.29** Hanwa Co., Ltd. Commitment Letter, dated April 18, 1996, for Senior Secured
Financing for the Proposed Horseshoe Indiana Riverboat Gaming Facility.
10.30** Amendment No. 1 to Option Agreement, dated as of April 15, 1996, between
Horseshoe Gaming, L.L.C., on the one hand, and Hanwa American Corp. and Yewdale
Holdings Limited, on the other hand.
10.31** Purchase Agreement, dated March 26, 1996, by and between Kehl River Boats, Inc.
and Horseshoe Gaming, L.L.C. 10.32** Agreement to Purchase and Sell Real Estate,
dated March 13, 1996, by and between Le Bossier, L.L.C., as Seller, and
Horseshoe Entertainment, as Buyer.
</TABLE>
II-7
<PAGE> 163
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- --------- --------------------------------------------------------------------------------
<S> <C>
10.32** Agreement to Purchase and Sell Real Estate, dated March 31, 1996, by and between
Le Bossier, L.L.C., as Seller, and Horseshoe Entertainment, as Buyer.
10.33++ Amended Employment Agreement dated October 1, 1995 by and between Horseshoe
Gaming, Inc. and John Michael Allen.
10.34++ Employment Agreement dated July 1, 1996 by and between Horseshoe Gaming, Inc.
and Gary Border.
10.35++ Amended Employment Agreement dated October 1, 1995 by and between Horseshoe
Gaming, Inc. and Walter J. Haybert.
10.36++ Amended Employment Agreement dated October 1, 1995 by and between Horseshoe
Gaming, Inc. and John J. Schreiber.
10.37# Second Amended and Restated Employment Agreement dated as of October 1, 1995 by
and between Horseshoe Gaming, Inc. and John Michael Allen.
10.38# Second Amended and Restated Employment Agreement dated as of October 1, 1995 by
and between Horseshoe Gaming, Inc. and Walter J. Haybert.
10.39# Second Amended and Restated Employment Agreement dated as of October 1, 1995, by
and between Horseshoe Gaming, Inc. and John J. Schreiber.
10.40# 1997 Unit Option Plan of Horseshoe Gaming, L.L.C.
10.41# Unit Option Agreement dated as of February 1, 1997 by and between Horseshoe
Gaming, L.L.C. and Larry Lepinski.
10.42# Agreement between Owner and Contractor for the Construction of a Hotel between
Horseshoe Entertainment and Manhattan Construction Company and Whitaker
Construction Company d.b.a. Manhattan/Whitaker, a Joint Venture.
10.43# Vessel Construction Agreement dated as of March 6, 1997 between Levac Shipyards,
Inc. and Horseshoe Entertainment.
10.44# Contract for Construction dated as of August 6, 1996 between Robinson Property
Group Limited Partnership and Charles . White Construction Company, together
with Change Orders Numbered 1 through 6.
10.45## Contribution and Sale Agreement dated as of August 26, 1997 by and between Lady
Luck Vicksburg, Inc. and Horseshoe Gaming, L.L.C.
12.2## Computation of ratio of earnings to fixed charges.
21.2# Subsidiaries of Horseshoe Gaming, L.L.C.
23.3# Consent of Riordan & McKinzie (contained in Exhibit 5.2).
23.4## Consent of Arthur Andersen, LLP.
24.1# Powers of Attorney (set forth on signature pages, at II-11 and II-12).
25.2# Form T-1 Statement of Eligibility and Qualification under the Trust Indenture
Act of 1939 of U.S. Trust Company of Texas, N.A.
27.1++ Financial Data Schedule -- Horseshoe Gaming L.L.C. and Subsidiaries.
99.3# Form of Letter of Transmittal with respect to the Exchange Offer.
99.4# Form of Notice of Guaranteed Delivery.
</TABLE>
II-8
<PAGE> 164
- ---------------
* Filed as an Exhibit to Registration Statement on Form S-4 (No. 333-0214)
filed on January 8, 1996.
** Filed as an Exhibit to Amendment No. 1 filed on April 26, 1996.
*** Filed as an Exhibit to Amendment No. 2 filed on May 9, 1996.
+ Filed as an Exhibit to Form 10-Q for the Quarter Ended June 30, 1996, filed
on August 13, 1996.
++ Filed as an Exhibit to Form 10-K for the Year Ended December 31, 1996, filed
on March 31, 1997.
+++ Filed as an Exhibit to Form 10-Q for the Quarter Ended March 31, 1997, filed
on May 7, 1997.
# Filed as an Exhibit to Registration Statement on Form S-4 (No. 333-33145)
filed on August 7, 1997.
## Filed herewith.
(b) Financial Statement Schedules
All schedules are omitted as the required information is inapplicable or not
present in amounts sufficient to require submission of the schedule, or because
the information is presented in the consolidated financial statements or related
notes.
II-9
<PAGE> 165
ITEM 22. UNDERTAKINGS
1. The undersigned Registrants hereby undertake as follows:
(a) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement: (i) to
include any prospectus required by Section 10(a)(3) of the Securities Act;
(ii) to reflect in the prospectus any facts or events arising after the
effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
Registration Statement; (iii) to include any material information with
respect to the plan of distribution not previously disclosed in the
Registration Statement or any material change to such information in the
Registration Statement.
(b) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(c) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
2. Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrants pursuant to the provisions described in Item 20,
"Indemnification of Directors and Officers," above, or otherwise, the
Registrants have been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by a Registrant of expenses
incurred or paid by a director, officer or controlling person of such Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant against which such claim is asserted will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by them is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
3. The undersigned Registrants hereby undertake to file an application for
the purpose of determining the eligibility under subsection (a) of section 310
of the Trust Indenture Act ("Act") in accordance with the rules and regulations
prescribed by the Commission under section 305(b)(2) of the Act.
4. The undersigned Registrants hereby undertake to respond to requests for
information that is incorporated by reference into the prospectus that is a part
of this Registration Statement pursuant to Items 4, 10(b), 11 or 13 of Form S-4
promulgated by the Securities and Exchange Commission, within one business day
of receipt of such request, and to send the incorporated documents by first
class mail or other equally prompt means. This includes information contained in
documents filed subsequent to the effective date of the Registration Statement
through the date of responding to the request.
5. The undersigned Registrants hereby undertake to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in this Registration Statement when it became effective.
II-10
<PAGE> 166
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Las Vegas,
State of Nevada, on October 7, 1997.
Horseshoe Gaming, L.L.C.,
a Delaware limited liability company
By: Horseshoe Gaming, Inc.,
a Nevada corporation
Its: Manager
By: /s/ JACK B. BINION
------------------------------------
Jack B. Binion
Its: Chief Executive Officer and
Chairman of the Board of Directors
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ----------------------------------------------- ---------------------------- ----------------
<S> <C> <C>
/s/ JACK B. BINION Chief Executive Officer and October 7, 1997
- ----------------------------------------------- Chairman of the Board of
Jack B. Binion Directors (Principal
Executive Officer) of
Horseshoe Gaming, Inc.
/s/ WALTER J. HAYBERT Chief Financial Officer and October 7, 1997
- ----------------------------------------------- Treasurer (Principal
Walter J. Haybert Financial and Accounting
Officer) of Horseshoe
Gaming, Inc.
/s/ PHYLLIS M. COPE* Director October 7, 1997
- -----------------------------------------------
Phyllis M. Cope
/s/ PERI HOWARD* Director October 7, 1997
- -----------------------------------------------
Peri Howard
</TABLE>
*By: /s/ JACK B. BINION
- --------------------------------------
Jack B. Binion
(Attorney-in-fact)
II-11
<PAGE> 167
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Las Vegas,
State of Nevada, on October 7, 1997.
Robinson Property Group Limited
Partnership
a Mississippi limited partnership
By: Horseshoe GP, Inc.,
a Nevada corporation
Its: Manager
By: /s/ JACK B. BINION
------------------------------------
Jack B. Binion
Its: Chief Executive Officer and
Chairman of the Board of Directors
POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ----------------------------------------------- ---------------------------- ----------------
<C> <S> <C>
/s/ JACK B. BINION Chief Executive Officer and October 7, 1997
- ----------------------------------------------- Chairman of the Board of
Jack B. Binion Directors (Principal
Executive Officer) of
Horseshoe GP, Inc.
/s/ WALTER J. HAYBERT Chief Financial Officer and October 7, 1997
- ----------------------------------------------- Treasurer (Principal
Walter J. Haybert Financial and Accounting
Officer) of Horseshoe GP,
Inc.
/s/ PHYLLIS M. COPE* Director October 7, 1997
- -----------------------------------------------
Phyllis M. Cope
/s/ PERI HOWARD* Director October 7, 1997
- -----------------------------------------------
Peri Howard
</TABLE>
*By: /s/ JACK B. BINION
- --------------------------------------
Jack B. Binion
(Attorney-in-fact)
II-12
<PAGE> 168
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
-------- ------------------------------------------------------------------ ------------
<S> <C> <C>
3.1* Certificate of Formation of Horseshoe Gaming, L.L.C...............
3.2** Limited Liability Company Agreement of Horseshoe Gaming, L.L.C.,
as amended to date................................................
3.3* Articles of Incorporation of Horseshoe Gaming, Inc. (formerly New
Gaming Capital Corporation), as amended to date...................
3.4* Bylaws of Horseshoe Gaming, Inc. (formerly New Gaming Capital
Corporation)......................................................
3.5* Certificate of Limited Partnership of Robinson Property Group
Limited Partnership, as amended to date...........................
3.6* Second Amended and Restated Limited Partnership Agreement of
Robinson Property Group Limited Partnership, as amended to date...
3.7* Articles of Incorporation of Horseshoe GP, Inc., as amended to
date..............................................................
3.8* Bylaws of Horseshoe GP, Inc. .....................................
4.1* Senior Secured Credit Facility Note Purchase Agreement, dated as
of October 10, 1995, by and among Horseshoe Gaming, L.L.C.,
Robinson Property Group Limited Partnership and the Purchasers as
defined therein...................................................
4.2* Form of Promissory Note for Senior Secured Credit Facility........
4.3* Exchange Offer Letters dated October 10, 1995 by and between
Horseshoe Gaming, L.L.C., Horseshoe Riverboat Casinos, LLC,
Horseshoe Entertainment and Robinson Property Group Limited
Partnership, on the one hand, and each of the holders of 14.00%
Senior Secured Notes due April 15, 2000 and/or 14.00% Subordinated
Notes due April 15, 2001 issued by Horseshoe Riverboat Casinos,
LLC on the other hand.............................................
4.4* Guarantee and Security Agreement, dated as of October 10, 1995,
from Robinson Property Group Limited Partnership, as Note
Guarantor, in favor of the holders of Senior Secured Credit
Facility Notes due September 30, 1999.............................
4.5* Pledge Agreement, dated as of October 10, 1995, from Jack Binion,
B&O Development Limited Partnership and JBB Gaming Investments,
L.L.C. (formerly Worldwide Gaming Investments, L.L.C.) in favor of
the holders of Senior Secured Credit Facility Notes due September
30, 1999..........................................................
4.6* Pledge Agreement, dated as of October 10, 1995, from Horseshoe
Gaming, L.L.C. in favor of the holders of Senior Secured Credit
Facility Notes due September 30, 1999.............................
4.7* Mortgage, Security Agreement and Assignment of Leases and Rents
executed by Horseshoe Entertainment, as Mortgagor, in favor of
Horseshoe Gaming, L.L.C., as Mortgagee............................
4.8* First Preferred Ship Mortgage on the whole of the Queen of the Red
executed by Horseshoe Entertainment, as Owner and Mortgagor, in
favor of Horseshoe Gaming, L.L.C., as Mortgagee...................
4.9* Bossier City Security Agreement and Assignment thereof............
</TABLE>
<PAGE> 169
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
-------- ------------------------------------------------------------------ ------------
<S> <C> <C>
4.10* Deed of Trust Security Agreement and Assignment of Leases and
Rents from Robinson Property Group Limited Partnership, as
Grantor, to Rowan H. Taylor, Jr., an individual, as Trustee for
the benefit of Horseshoe Gaming, L.L.C., and Hanwa American Corp.,
Yewdale Holdings Limited and debis Financial Services, Inc., as
Beneficiaries.....................................................
4.11* First Preferred Ship Mortgage on the whole of the Horseshoe Casino
and Hotel, Tunica executed by Robinson Property Group Limited
Partnership, as Owner and Mortgagor, in favor of Horseshoe Gaming,
L.L.C. and Chemical Trust Company of California, as Mortgagee.....
4.12* Tunica County Security Agreement and Assignment thereof...........
4.13* Master Vessel Trust Agreement, dated as of October 10, 1995,
between debis Financial Services, Inc., Hanwa American Corp., and
Yewdale Holdings Limited, as Lenders, and Chemical Trust Company
of California, as Trustee.........................................
4.14* Note Assignment, dated as of October 10, 1995, from Horseshoe
Gaming, L.L.C., in favor of the Holders of Senior Secured Credit
Facility Notes due September 30, 1999, issued by Horseshoe Gaming,
L.L.C. and United States Trust Company of New York for the ratable
benefit of the Holders of 12.75% Senior Notes due September 30,
2000 issued by Horseshoe Gaming, L.L.C. ..........................
4.15* Intercompany Senior Secured Note due September 30, 2000, executed
by Horseshoe Entertainment in favor of Horseshoe Gaming,
L.L.C. ...........................................................
4.16* Intercompany Senior Secured Note due September 30, 2000, executed
by Robinson Property Group Limited Partnership in favor of
Horseshoe Gaming, L.L.C. .........................................
4.17* Binion Partners Escrow Agreement, dated as of October 10, 1995, by
and among Horseshoe Gaming, L.L.C., Robinson Property Group
Limited Partnership, Jack Binion, B&O Development Limited
Partnership, JBB Gaming Investments, L.L.C. (formerly Worldwide
Gaming Investments, L.L.C.), the Purchasers named in the Senior
Secured Credit Facility Note Purchase Agreement, U.S. Trust
Company of California, N.A., as Trustee, and Bank of America
Nevada, as Escrow Agent...........................................
4.18* Excess Proceeds Escrow Agreement, dated as of October 10, 1995, by
and among Horseshoe Gaming, L.L.C., Robinson Property Group
Limited Partnership, the Purchasers named in the Senior Secured
Credit Facility Note Purchase Agreement, U.S. Trust Company of
California, N.A., as Trustee under the Indenture, and Bank of
America Nevada, as Escrow Agent...................................
4.19* Intercreditor Agreement, dated as of October 10, 1995, among debis
Financial Services, Inc., Yewdale Holdings Limited and Hanwa
American Corp. ...................................................
4.20* 12.75% Senior Notes due 2000 Senior Note Purchase Agreement by and
among Horseshoe Gaming, L.L.C., Robinson Property Group Limited
Partnership, as Guarantor, and the Purchasers thereof.............
4.21* Form of Senior Note of Horseshoe Gaming, L.L.C. 12.75% Senior
Notes due 2000....................................................
4.22* Indenture, dated as of October 10, 1995, by and among Horseshoe
Gaming, L.L.C., U.S. Trust Company of California, N.A., as
Trustee, and Robinson Property Group Limited Partnership, as
Guarantor, with respect to the 12.75% Senior Notes due 2000.......
</TABLE>
<PAGE> 170
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
-------- ------------------------------------------------------------------ ------------
<S> <C> <C>
4.23* Collateral Agency Agreement, dated as of October 6, 1995, by and
among Horseshoe Gaming, L.L.C., Robinson Property Group Limited
Partnership, B&O Development Limited Partnership, JBB Gaming
Investments, L.L.C. (formerly Worldwide Gaming Investments,
L.L.C.), and Jack Binion, as Grantors, the Purchasers of the
12.75% Senior Notes due 2000, and United States Trust Company of
New York, as Collateral Agent.....................................
4.24* Exchange and Registration Rights Agreement, dated as of October
10, 1995, by and among Horseshoe Gaming, L.L.C., Robinson Property
Group Limited Partnership, as Guarantor, and the Purchasers of the
12.75% Notes due 2000 issued under the Indenture..................
4.25* Second Pledge Agreement, dated as of October 10, 1995, from Jack
Binion, B&O Development Limited Partnership, and JBB Gaming
Investments, L.L.C. (formerly Worldwide Gaming Investments,
L.L.C.) in favor of United States Trust Company of New York, as
Collateral Agent for the benefit of the Holders of 12.75% Senior
Notes due September 30, 2100 issued by Horseshoe Gaming,
L.L.C. ...........................................................
4.26* Second Pledge Agreement, dated as of October 10, 1995, from
Horseshoe Gaming, L.L.C. in favor of United States Trust Company
of New York, for the ratable benefit of the Holders of 12.75%
Senior Notes due September 30, 2000 issued by Horseshoe Gaming,
L.L.C. ...........................................................
4.27* Second Ship Mortgage on the whole of the Queen of the Red by
Horseshoe Entertainment owner and mortgagor in favor of Horseshoe
Gaming, L.L.C., as Mortgagee......................................
4.28* Bossier City Second Security Agreement and Assignment thereof.....
4.29* Second Deed of Trust, Security Agreement and Assignment of Leases
and Rents from Robinson Property Group Limited Partnership, as
Grantor, to Rowan H. Taylor, Jr., an individual, as Trustee for
the benefit of Horseshoe Gaming, L.L.C. and United States Trust
Company of New York, as Collateral Agent for the Senior Note
Holders, as beneficiaries.........................................
4.30* Second Ship Mortgage on the whole of the Horseshoe Casino and
Hotel, Tunica executed by Robinson Property Group Limited
Partnership, as Owner and Mortgagor, in favor of Horseshoe Gaming,
L.L.C. and United States Trust Company of New York, as Collateral
Agent for the ratable benefit of the Senior Note Holders..........
4.31* Tunica County Second Security Agreement and Assignment thereof....
4.32* Intercreditor Agreement, dated as of October 10, 1995, among debis
Financial Services, Inc., Yewdale Holdings Limited, Hanwa American
Corp. and Chemical Trust Company of California, as Trustee, as
Lien Holders, and U.S. Trust Company of California, N.A., as
Trustee for the Holders of Horseshoe Gaming, L.L.C. 12.75% Senior
Notes due 2000 and Horseshoe Gaming, L.L.C. 12.75% Exchange Senior
Notes due 2000, and United States Trust Company of New York, as
Collateral Agent, as Junior Lien Holders..........................
4.33* Limited Guaranty by Jack B. Binion in favor of debis Financial
Services, Inc., as amended to date................................
4.34* Intercompany Senior Secured Note Due September 30, 2000 dated
October 20, 1995 by Horseshoe Ventures, L.L.C. in favor of
Horseshoe Gaming, L.L.C. .........................................
</TABLE>
<PAGE> 171
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
-------- ------------------------------------------------------------------ ------------
<S> <C> <C>
4.36** Amendment to Excess Proceeds Agreement, dated as of February 9,
1996, by and among Horseshoe Gaming, L.L.C., Robinson Property
Group Limited Partnership, the Purchasers named in the Senior
Secured Credit Facility Note Purchase Agreement, U.S. Trust
Company of California, N.A., as Trustee under the Indenture, and
Bank of America Nevada, as Escrow Agent...........................
4.37+ Amendment No. 1 to Indenture, dated as of July 19, 1996, by and
among Horseshoe Gaming, L.L.C., Robinson Property Group Limited
Partnership and U.S. Trust Company of California, N.A., as Trustee
under the Indenture...............................................
4.38++ Amendment to Senior Secured Credit Facility Note Purchase
Agreement dated as of October 1, 1996 by and among Horseshoe
Gaming, L.L.C., Robinson Property Group Limited Partnership,
Yewdale Holdings Limited, Hanwa American Corp. and debis Financial
Services, Inc. ...................................................
4.39++ Second Amendment to Excess Proceeds Escrow Agreement dated as of
October 1, 1996, by and among Horseshoe Gaming, L.L.C., Robinson
Property Group Limited Partnership, Yewdale Holdings Limited,
Hanwa American Corp., debis Financial Services, Inc., U.S. Trust
Company of California, N.A. as trustee under the Indenture and
Bank of America Nevada............................................
4.40+++ Intercompany Senior Secured Note due September 30, 2000 executed
by Robinson Property Group Limited Partnership in favor of
Horseshoe Gaming, L.L.C...........................................
4.41+++ Intercompany Senior Secured Note due September 30, 2000 executed
by Horseshoe Entertainment in favor of Horseshoe Gaming, L.L.C....
4.42# Purchase Agreement for 9-3/8% Series A Senior Subordinated Notes
by and among Horseshoe Gaming, L.L.C., Robinson Property Group
Limited Partnership, as Guarantor, and Wasserstein Perella
Securities, Inc., as Initial Purchaser............................
4.43# Form of 9-3/8% Senior Subordinated Note due 2007 of Horseshoe
Gaming, L.L.C.....................................................
4.44# Indenture, dated as of June 15, 1997, by and among Horseshoe
Gaming, L.L.C., U.S. Trust Company of Texas, N.A., as Trustee, and
Robinson Property Group Limited Partnership, as Guarantor, with
respect to the 9-3/8% Senior Subordinated Notes due 2007..........
4.45# Exchange and Registration Rights Agreement, dated as of June 25,
1997, by and among Horseshoe Gaming, L.L.C., Robinson Property
Group Limited Partnership and Wasserstein Perella Securities,
Inc...............................................................
4.46# Intercompany Senior Secured Note due June 15, 2007, executed by
Robinson Property Group Limited Partnership in favor of Horseshoe
Gaming, L.L.C.....................................................
4.47# Intercompany Senior Secured Note due June 15, 2007, executed by
Horseshoe Entertainment in favor of Horseshoe Gaming, L.L.C.......
5.2# Opinion of Riordan & McKinzie regarding legality..................
10.1* Employment Agreement dated January 1, 1996 by and between
Horseshoe Gaming, Inc. and Paul Alanis............................
10.2** Employment Agreement dated as of October 1, 1995 by and between
Horseshoe Gaming, Inc. and Walter J. Haybert......................
10.3** Assignment Agreement dated as of October 1, 1995 by and between
Horseshoe Gaming, L.L.C. and Walter J. Haybert....................
</TABLE>
<PAGE> 172
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
-------- ------------------------------------------------------------------ ------------
<S> <C> <C>
10.4** Employment Agreement dated as of October 1, 1995 by and between
Horseshoe Gaming, Inc. and John J. Schreiber......................
10.5** Assignment Agreement dated as of October 1, 1995 by and between
Horseshoe Gaming, L.L.C. and John J. Schreiber....................
10.6** Employment Agreement dated as of October 1, 1995 by and between
Horseshoe Gaming, Inc. and John Michael Allen.....................
10.7** Assignment Agreement dated as of October 1, 1995 by and between
Horseshoe Gaming, L.L.C. and John Michael Allen...................
10.8* Consulting Agreement dated March 10, 1993 by and between Jack
Binion and Koar International, Inc. (ultimately assigned to
Horseshoe Gaming, Inc. and KII-Pasadena, Inc.)....................
10.9* Warrant to purchase 1,941,981 Horseshoe Gaming Units, dated as of
October 10, 1995, issued to Hanwa American Corp...................
10.10* Warrant to purchase 1,941,980 Horseshoe Gaming Units, dated as of
October 10, 1995, issued to Yewdale Holdings Limited..............
10.11* Warrant to purchase 1,566,629 Horseshoe Gaming Units, dated as of
October 10, 1995, issued to Hanwa American Corp...................
10.12* Warrant to purchase 1,566,630 Horseshoe Gaming Units, dated as of
October 10, 1995, issued to Yewdale Holdings Limited..............
10.13** Registration Rights Agreement dated as of October 10, 1995 by and
between Horseshoe Gaming, L.L.C., on the one hand, and Yewdale
Holdings Limited, Post Balanced Fund, L.P., Capital Fund
Foundation, Raymond Zimmerman, as Trustee for the Charles N.
Mathewson Charitable Remainder Uni Trust, Hanwa American Corp.,
Onyx Partners, Inc., Alpine Associates, Janless Corp., Andrew
Astrachan, and Donald Schupak, on the other hand..................
10.14* Assignment and Purchase Agreement dated as of October 1, 1995
between Jack Binion and Horseshoe Gaming, L.L.C...................
10.15* Promissory Note dated October 10, 1995 by Horseshoe Gaming, L.L.C.
in favor of Jack B. Binion in the principal amount of $500,000....
10.16* Purchase Agreement dated as of October 1, 1995 between B&O
Development Limited Partnership and Horseshoe Gaming, L.L.C.......
10.17* Assignment Agreement dated as of October 1, 1995 between KR, Inc.
and Horseshoe Ventures, L.L.C.....................................
10.18* Promissory Note dated October 10, 1995 by Horseshoe Ventures,
L.L.C., in favor of KR, Inc. in the principal amount of
$4,769,016.47.....................................................
10.19* Option Agreement dated as of October 10, 1995 between Horseshoe
Gaming, L.L.C., on the one hand, and Hanwa American Corp. and
Yewdale Holdings Limited, on the other hand.......................
10.20* Letter Agreement dated as of October 10, 1995 between Horseshoe
Gaming, L.L.C. and Hanwa American Corp............................
10.21* Letter Agreement dated as of October 10, 1995 between Horseshoe
Gaming, L.L.C. and Yewdale Holdings Limited.......................
</TABLE>
<PAGE> 173
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
-------- ------------------------------------------------------------------ ------------
<S> <C> <C>
10.22** Purchase and Sale Agreement dated as of November 15, 1995 by and
between Frank Pernici and New Gaming Capital Partnership, with
Horseshoe Gaming, L.L.C., as Guarantor............................
10.23* Employment Agreement dated January 1, 1996 by and between
Horseshoe Gaming, L.L.C. and Loren S. Ostrow......................
10.24* 401(k) Plan of Robinson Property Group Limited Partnership........
10.25** Limited Partnership Agreement of Horseshoe Entertainment, a
Louisiana limited partnership, dated April 20th, 1993.............
10.26** Second and Amended and Restated Limited Partnership Agreement of
New Gaming Capital Partnership, a Nevada limited partnership,
dated as of October 1, 1995.......................................
10.27** Limited Liability Company Agreement of Horseshoe Ventures, L.L.C.,
a Delaware limited liability company, dated as of October 1,
1995..............................................................
10.28*** Second Amended and Restated Operating Agreement of Horseshoe
Casinos (Indiana), LLC, an Indiana limited liability company,
dated as of April 26, 1996........................................
10.29** Hanwa Co., Ltd. Commitment Letter, dated April 18, 1996, for
Senior Secured Financing for the Proposed Horseshoe Indiana
Riverboat Gaming Facility.........................................
10.30** Amendment No. 1 to Option Agreement, dated as of April 15, 1996,
between Horseshoe Gaming, L.L.C., on the one hand, and Hanwa
American Corp. and Yewdale Holdings Limited, on the other hand....
10.31** Purchase Agreement, dated March 26, 1996, by and between Kehl
River Boats, Inc. and Horseshoe Gaming, L.L.C.....................
10.32** Agreement to Purchase and Sell Real Estate, dated March 13, 1996,
by and between Le Bossier, L.L.C., as Seller, and Horseshoe
Entertainment, as Buyer...........................................
10.33++ Amended Employment Agreement dated October 1, 1995 by and between
Horseshoe Gaming, Inc. and John Michael Allen.....................
10.34++ Employment Agreement dated July 1, 1996 by and between Horseshoe
Gaming, Inc. and Gary Border......................................
10.35++ Amended Employment Agreement dated October 1, 1995 by and between
Horseshoe Gaming, Inc. and Walter J. Haybert......................
10.36++ Amended Employment Agreement dated October 1, 1995 by and between
Horseshoe Gaming, Inc. and John J. Schreiber......................
10.37# Second Amended and Restated Employment Agreement dated as of
October 1, 1995 by and between Horseshoe Gaming, Inc. and John
Michael Allen.....................................................
10.38# Second Amended and Restated Employment Agreement dated as of
October 1, 1995 by and between Horseshoe Gaming, Inc. and Walter
J. Haybert........................................................
10.39# Second Amended and Restated Employment Agreement dated as of
October 1, 1995, by and between Horseshoe Gaming, Inc. and John J.
Schreiber.........................................................
10.40# 1997 Unit Option Plan of Horseshoe Gaming, L.L.C..................
</TABLE>
<PAGE> 174
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
-------- ------------------------------------------------------------------ ------------
<S> <C> <C>
10.41# Unit Option Agreement dated as of February 1, 1997 by and between
Horseshoe Gaming, L.L.C. and Larry Lepinski.......................
10.42# Agreement between Owner and Contractor for the Construction of a
Hotel between Horseshoe Entertainment and Manhattan Construction
Company and Whitaker Construction Company d.b.a.
Manhattan/Whitaker, a Joint Venture...............................
10.43# Vessel Construction Agreement dated as of March 6, 1997 between
Levac Shipyards, Inc. and Horseshoe Entertainment.................
10.44# Contract for Construction dated as of August 6, 1996 between
Robinson Property Group Limited Partnership and Charles N. White
Construction Company, together with Change Orders Numbered 1
through 6.........................................................
10.45## Contribution and Sale Agreement dated as of August 26, 1997 by and
between Lady Luck Vicksburg, Inc. and Horseshoe Gaming, L.L.C.....
12.2## Computation of ratio of earnings to fixed charges.................
21.2# Subsidiaries of Horseshoe Gaming, L.L.C...........................
23.3# Consent of Riordan & McKinzie (contained in Exhibit 5.2)..........
23.4## Consent of Arthur Andersen, LLP...................................
24.1# Powers of Attorney (set forth on signature pages, at II-11 and
II-12)............................................................
25.2# Form T-1 Statement of Eligibility and Qualification under the
Trust Indenture Act of 1939 of U.S. Trust Company of Texas,
N.A...............................................................
27.1++ Financial Data Schedule-Horseshoe Gaming L.L.C. and
Subsidiaries......................................................
99.3# Form of Letter of Transmittal with respect to the Exchange
Offer.............................................................
99.4# Form of Notice of Guaranteed Delivery.............................
</TABLE>
- ---------------
* Filed as an Exhibit to Registration Statement on Form S-4 (No. 333-0214)
filed on January 8, 1996.
** Filed as an Exhibit to Amendment No. 1 filed on April 26, 1996.
*** Filed as an Exhibit to Amendment No. 2 filed on May 9, 1996.
+ Filed as an Exhibit to Form 10-Q for the Quarter Ended June 30, 1996, filed
on August 13, 1996.
++ Filed as an Exhibit to Form 10-K for the Year Ended December 31, 1996, filed
on March 31, 1997.
+++ Filed as an Exhibit to Form 10-Q for the Quarter Ended March 31, 1997, filed
on May 7, 1997.
# Filed as an Exhibit to Registration Statement on Form S-4 (No. 333-33145)
filed on August 7, 1997.
## Filed herewith.
(b) Financial Statement Schedules
All schedules are omitted as the required information is inapplicable or
not present in amounts sufficient to require submission of the schedule, or
because the information is presented in the consolidated financial statements or
related notes.
<PAGE> 1
EXHIBIT 10.45
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
ARTICLE I
<S> <C>
FORMATION OF THE COMPANY AND CONVEYANCE OF ASSETS.............................. 1
Section 1.1 Contribution of Assets.................................... 1
Section 1.2 Certificate of Formation of the Company................... 2
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF LADY LUCK.................................... 2
Section 2.1 Representations of Lady Luck.............................. 2
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF HORSESHOE.................................... 6
Section 3.1 Representations of Horseshoe.............................. 6
ARTICLE IV
PRE-CLOSING COVENANTS.......................................................... 10
Section 4.1 Consents and Approvals.................................... 10
Section 4.2 Financing................................................. 10
Section 4.3 Confidentiality........................................... 10
Section 4.4 Total Development Cost Budget............................. 12
Section 4.5 Company Plan.............................................. 12
Section 4.6 Annual Budget............................................. 12
Section 4.7 Satisfaction of Conditions................................ 12
Section 4.8 Consents.................................................. 12
Section 4.9 Disclosure Supplements.................................... 12
Section 4.10 Preservation of Contributed Assets........................ 13
ARTICLE V
THE CLOSING.................................................................... 13
Section 5.1 The Closing............................................... 13
Section 5.2 Deliveries by Lady Luck................................... 13
Section 5.3 Deliveries by Horseshoe................................... 14
Section 5.4 Deliveries to Company..................................... 14
</TABLE>
2
<PAGE> 3
<TABLE>
<CAPTION>
Page
ARTICLE I
<S> <C>
ARTICLE VI
CONDITIONS PRECEDENT TO THE CLOSING OBLIGATIONS OF
LADY LUCK...................................................................... 16
Section 6.1 Conditions to Closing..................................... 16
ARTICLE VII
CONDITIONS PRECEDENT TO THE CLOSING OBLIGATIONS
OF HORSESHOE................................................................... 18
Section 7.1 Conditions to Closing..................................... 18
ARTICLE VIII
TERMINATION AND ABANDONMENT.................................................... 19
Section 8.1 Termination............................................... 19
Section 8.2 Procedure and Effect of Termination....................... 20
ARTICLE IX
INDEMNITY...................................................................... 21
Section 9.1 Indemnification........................................... 21
Section 9.2 Indemnification Procedure for Third Party Claims.......... 21
Section 9.3 Direct Claims............................................. 23
Section 9.4 Failure to Give Timely Notice............................. 23
Section 9.5 Reduction of Loss......................................... 23
Section 9.6 Subrogation............................................... 23
Section 9.7 Limitation on Indemnities................................. 24
Section 9.8 Limitation on Claims...................................... 24
ARTICLE X
DEFINITIONS.................................................................... 24
</TABLE>
3
<PAGE> 4
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE XI
MISCELLANEOUS.................................................................. 27
Section 11.1 Notices................................................... 27
Section 11.2 GOVERNING LAW............................................. 28
Section 11.3 Entire Agreement and Amendments........................... 28
Section 11.4 Terms..................................................... 28
Section 11.5 Unenforceability.......................................... 28
Section 11.6 Successors and Assigns.................................... 28
Section 11.7 Payment of Fees........................................... 28
Section 11.8 No Third Party Rights..................................... 28
Section 11.9 No Waiver of Default...................................... 28
Section 11.10 Tradenames and Trademarks................................. 29
Section 11.11 Counterparts.............................................. 29
Section 11.12 Future Deliveries......................................... 29
Section 11.13 Computation of Time....................................... 29
Section 11.14 Consent to Jurisdiction................................... 29
Section 11.15 Investigation; Survival of Representations,
Warranties and Agreements................................. 30
Section 11.16 Closing Costs............................................. 30
Section 11.16 Closing Costs............................................. 29
</TABLE>
4
<PAGE> 5
LIST OF EXHIBITS
<TABLE>
<S> <C> <C> <C>
Exhibit 1.1 - Form of Company Agreement/Units & Other Consideration
Exhibit 1.1(a) - Lady Luck Contributed Assets
Exhibit 1.1(b) - Horseshoe Contributed Assets
Exhibit 1.2 - Certificate of Formation of the Company
Exhibit 5.4(a)(i) - Form of Assignment of Real Property/Barges approvals
Exhibit 5.4(a)(iii) - Bill of Sale - Lady Luck Contributed Assets
Exhibit 5.4(a)(iv) - Lady Luck Non-Foreign Certificate
Exhibit 5.4(b)(i) - Horseshoe Contributed Assets - Bill of Sale
Exhibit 5.4(b)(ii) - Form of Assignment of Vessel contracts and approvals
</TABLE>
<PAGE> 6
5
LIST OF SCHEDULES
<TABLE>
<S> <C> <C>
Schedule 2.1(d)(i) - Permitted Liens and Permitted Liabilities - Lady Luck
Schedule 2.1(d)(ii) - Barges/Exceptions to Good Condition - Lady Luck
Schedule 2.1(d)(v) - Leases - Lady Luck
Schedule 2.1(d)(vi) - Mechanic's Liens - Lady Luck
Schedule 2.1(g) - Litigation - Lady Luck
Schedule 3.1(d)-1 - Excluded Assets - Horseshoe
Schedule 3.1(d)-2 - Permitted Liens and Permitted Liabilities - Horseshoe
Schedule 3.1(d)(iii) Permits - Horseshoe
Schedule 3.1(d)(v) - Mechanic's Liens - Horseshoe
Schedule 3.1(h) - Litigation - Horseshoe
</TABLE>
<PAGE> 7
CONTRIBUTION AND SALE AGREEMENT
This CONTRIBUTION AND SALE AGREEMENT ("Agreement"), dated as of August
26, 1997, is by and between Lady Luck Vicksburg, Inc., a Mississippi corporation
("Lady Luck"), and Horseshoe Gaming, LLC, a Delaware limited liability company
("Horseshoe"). For purposes hereof, Lady Luck and Horseshoe may sometimes be
hereinafter referred to collectively as the "Members".
RECITALS:
WHEREAS, Lady Luck and Horseshoe each desire to form Horseshoe
Vicksburg Casino, LLC, a limited liability company formed under the laws of
Mississippi to acquire, develop, operate, manage, finance and maintain a
dockside casino gaming facility (the "Company") pursuant to the Limited
Liability Company Agreement in the form set forth on Exhibit 1.1 and to be
entered into on the Closing Date (as defined below) by and between Lady Luck and
Horseshoe (the "Company Agreement"); and
WHEREAS, Lady Luck and Horseshoe wish to contribute or sell, directly
or indirectly, certain of their assets described herein to the Company to form a
joint venture, all on the terms and subject to the conditions set forth herein;
and
WHEREAS, the parties wish to provide for the terms and conditions upon
which the Company will be formed and made effective;
NOW THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE I
FORMATION OF THE COMPANY AND CONVEYANCE OF ASSETS
SECTION I.1 Contribution of Assets. Each Member agrees, upon the terms
and subject to the conditions of this Agreement to contribute to the Company the
below-described assets in exchange for the Units of the Company (as defined
below) and other considerations recited herein and in the Company Agreement
attached as Exhibit 1.1.
a. The Lady Luck Contributed Assets. On the Closing Date, Lady Luck
shall transfer and assign to the Company, through a contribution, all of Lady
Luck's right, title and interest in and to the real property and barges as set
forth on Exhibit 1.1(a) free and clear of all liens, encumbrances and other
restrictions not approved by Horseshoe or set forth on Schedule 2.1(d)(i) (the
"Lady Luck Contributed Assets") in exchange for a capital contribution credit of
Fourteen
<PAGE> 8
Million Dollars ($14,000,000). For its capital contribution, Lady Luck
shall receive the units ascribed to it on Exhibit 1.1, subject to the
adjustments which may be made from time to time pursuant to the Company
Agreement (the "Lady Luck Units"). Lady Luck shall execute and deliver to the
Company any and all documents that are required to transfer or assign such
assets.
b. The Horseshoe Contributed Assets. On the Closing Date, Horseshoe
shall transfer and assign to the Company, through a contribution, all of
Horseshoe's right, title and interest in and to the Vessel, together with all
gaming equipment and personal property, as set forth on Exhibit 1.1(b) free and
clear of all liens and encumbrances and other restrictions not approved by Lady
Luck (the "Horseshoe Contributed Assets") in exchange for a capital contribution
credit of Twenty-Eight Million Dollars ($28,000,000). For its capital
contribution, Horseshoe shall receive the units ascribed to it on Exhibit 1.1,
subject to the adjustments which may be made from time to time pursuant to the
Company Agreement (the "Horseshoe Units"). Horseshoe shall execute and deliver
to the Company any and all documents that are required to transfer or assign
such assets.
SECTION I.2 Certificate of Formation of the Company. On or prior to the
Closing Date, Lady Luck and Horseshoe acknowledge that Horseshoe will cause the
taking of all such actions as are necessary to cause the Certificate of
Formation of the Company, a form of which is attached hereto as Exhibit 1.2, to
be executed and filed with the Secretary of State of Mississippi pursuant to
Miss. Code Ann. Section 79-14-902.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF LADY LUCK
SECTION 2.1 Representations of Lady Luck. As an inducement to Horseshoe
to enter into and perform its obligations under this Agreement, the Company
Agreement and any and all other documents, agreements and instruments to be
executed pursuant hereto, Lady Luck hereby represents and warrants to Horseshoe
that, as of the date hereof:
(a) Organization. Lady Luck is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Mississippi.
(b) Authorization and Consents. Lady Luck has full corporate
power and authority to execute, deliver and perform its obligations
under this Agreement, and the Company Agreement, and the consummation
by Lady Luck of the transactions contemplated hereby and thereby have
been duly and properly authorized by all requisite corporate action on
the part of Lady Luck. This Agreement is, and the Company Agreement
when duly executed and delivered by Lady Luck will be, a valid and
binding obligation of Lady Luck enforceable in accordance with their
respective terms. No approval, authorization, consent, notice or other
order or action of or filing by Lady Luck with any Governmental
Authority or any other entity or person is required for the execution
and delivery by Lady Luck of this Agreement or the Company Agreement
and the
2
<PAGE> 9
consummation of the transactions contemplated hereby and thereby, of
which the failure to obtain may have a material adverse effect upon the
Lady Luck Contributed Assets, the benefits of the transactions
contemplated hereby to be realized by the Company or the Members or the
likelihood of the consummation of the transactions contemplated hereby.
(c) No Breach or Default. Neither the execution or delivery of
this Agreement, or the Company Agreement nor the consummation by Lady
Luck of the transactions contemplated by this Agreement or the Company
Agreement to which it is a party will:
(i) result in the breach of any of the terms or
conditions of, or constitute a default under or an event that
would, with notice or lapse of time, or both, constitute a
default under, or in any manner release any party thereto from
any obligation under, any mortgage, note, bond, indenture,
contract, agreement, license, commitment or other instrument
or obligation to which Lady Luck is a party;
(ii) constitute an event that would permit any party
to terminate any agreement with, or accelerate the maturity of
any indebtedness or other material obligation of, Lady Luck;
(iii) create or impose any lien, charge or
encumbrance on any of the Lady Luck Contributed Assets other
than liens created pursuant to the terms hereof;
(iv) violate any regulation or statute, or any order,
writ, injunction or decree of any court, administrative
agency, or governmental body, or require the approval, consent
or permission of any governmental or regulatory body, agency
or authority; or
(v) conflict with or violate any provision of the
Certificate of Incorporation or By-Laws of Lady Luck;
except, in the case of clauses (i) through (iv), where the consequences of such
breach, violation, conflict, default, creation or imposition will not have a
material adverse effect on the Lady Luck Contributed Assets, the benefits of the
transactions contemplated hereby to be realized by the Company or the Members or
the likelihood of the consummation of the transactions contemplated hereby.
(d) Real Property and Barges.
(i) Lady Luck has the right to convey, and upon the
consummation of the transactions contemplated by this
Agreement, Lady Luck will have conveyed and the Company will
be vested with, good and marketable title and interest in and
to the Lady Luck Contributed Assets, free and clear of all
liens (including maritime and preferred ship mortgage liens),
claims, charges, options, preemptive rights,
3
<PAGE> 10
encumbrances and other restrictions ("Liens"), other than the
permitted liens and the permitted liabilities set forth on
Schedule 2.1(d)(i) (the "Lady Luck Permitted Liens" and the "
Lady Luck Permitted Liabilities"). Lady Luck has not entered
into any other agreement, option, right or contract for the
sale, transfer or assignment of all, or any portion, of the
Lady Luck Contributed Assets.
(ii) The Barges and all of the other Lady Luck
Contributed Assets are in good operating condition and repair
(ordinary wear and tear excepted) and are substantially fit
for the purposes for which they are being utilized except as
set forth on Schedule 2.1(d)(ii), (i) are not in violation of
any maritime, federal, state, subdivision, health, safety,
environmental or other ordinances, laws, codes or regulations
or any covenants, restrictions or other documents of record;
nor (ii) has any notice of any claimed violation of any such
ordinances, laws, codes or regulations or any covenants,
restrictions or other documents of record been served on Lady
Luck or any other entity having an interest in the Lady Luck
Contributed Assets, excluding in the cases of (i) and (ii)
violations which will not have a material adverse effect on
the Lady Luck Contributed Assets or the benefits of the
transactions contemplated hereby to be realized by the Company
or the Members or the likelihood of the consummation of the
transactions contemplated hereby. The Barges do not require
any material repair or replacement except for maintenance in
the ordinary course of business.
(iii) None of the Lady Luck Contributed Assets is
subject to any pending condemnation proceeding or proceeding
by any public or quasi-public authority materially adverse to
the Lady Luck Contributed Assets and, to Lady Luck's
knowledge, there is no threatened condemnation or proceeding
with respect thereto.
(iv) Lady Luck has no contractual obligation to
purchase, sell, or offer a right of first refusal or right of
first offer with respect of the Real Property or Barges. Lady
Luck has not granted any option to purchase the Real Property
or Barges.
(v) Except as disclosed on Schedule 2.1(d)(v) hereto,
there are no leases, subleases, licenses, occupancy agreements
or other agreements, oral or written, under which Lady Luck is
the lessor of any portion of the Real Property or Barges.
(vi) Except as disclosed on Schedule 2.1(d)(vi)
hereto, payment for all work that has been performed in, on or
about the Real Property and Barges and all materials furnished
in connection therewith that might in any circumstance give
rise to a mechanic's, materialmen's or similar lien against
the Real Property and Barges, or any portion thereof, will, as
of the Closing Date, (1) have been paid and all necessary lien
waivers will, as of the Closing Date, have been obtained,
except for claims which are being contested diligently and in
good faith and (2) will be sufficiently covered by a
performance bond or other security for payment furnished by
Lady Luck.
4
<PAGE> 11
(vii) Lady Luck is not a "foreign person" within the
meaning of Section 1335(f)(3) of the Internal Revenue Code of
1986, as amended (the "Code"). On the Closing Date, Lady Luck
shall deliver to the Company an affidavit, in form and
substance satisfactory to the Company, certifying as to the
accuracy of the preceding sentence.
(e) Investment. Lady Luck is acquiring the Lady Luck Units in
the Company for investment purposes only and not with a view toward the
sale thereof in connection with a distribution.
(f) Notices from Governmental Entities. Lady Luck has not
received notice from any Governmental Authority of any violation of any
law, regulation or other legal requirement applicable to the Lady Luck
Contributed Assets.
(g) Litigation. Except as set forth in Schedule 2.1(g), there
is no action, proceeding, or investigation pending or, to the knowledge
of Lady Luck, threatened against the Lady Luck Contributed Assets or to
which Lady Luck is otherwise a party, before any court, governmental
department, commission, board, agency, or instrumentality; nor does
Lady Luck know of any basis for any such action, proceeding, or
investigation.
(h) No Broker. As of the Closing Date, Lady Luck has not had
any dealings, negotiations, or consultations with any broker,
representative, employee, agent or other intermediary in connection
with this Agreement or Company which is owed any fee or other
compensation in connection therewith.
(i) No Legal Bar. Lady Luck is not prohibited by any order,
writ, injunction or decree of any body of competent jurisdiction from
consummating the transactions contemplated by this Agreement, and no
action or proceeding is pending or, to the best of Lady Luck's
knowledge, threatened against Lady Luck which questions the validity of
this Agreement or any of the actions which the parties hereto have
taken in connection herewith or which it is contemplated they shall
take in connection herewith.
(j) Tax Liens. There are no tax liens upon any of the Lady
Luck Contributed Assets or any other properties or assets of Lady Luck,
and there are not now, and on the Closing Date there will not be, any
claims for Taxes asserted against Lady Luck in respect to the Lady Luck
Contributed Assets (except for real property taxes), and there is no
basis for any such claim.
5
<PAGE> 12
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF HORSESHOE
SECTION III.1 Representations of Horseshoe. As an inducement to Lady
Luck to enter into and perform its respective obligations under this Agreement,
the Company Agreement and all other documents, agreements and instruments to be
executed pursuant thereto, Horseshoe hereby represents and warrants to Lady Luck
that, as of the date hereof:
(a) Organization. Horseshoe is a limited liability company
duly organized, existing and in good standing under the laws of the
State of Delaware.
(b) Authorization and Consents. Horseshoe has full company
power and authority to execute, deliver and perform its obligations
under this Agreement and the Company Agreement and the consummation by
Horseshoe of the transactions contemplated hereby and thereby have been
duly and properly authorized by all requisite corporate action on
behalf of Horseshoe. This Agreement is, and the Company Agreement, when
duly executed and delivered by Horseshoe will be, a valid and binding
obligation of Horseshoe, enforceable in accordance with their
respective terms. No approval, authorization, consent, notice or other
order or action of or filing by Horseshoe with any Governmental
Authority or any other entity or person is required for the execution
and delivery by Horseshoe of this Agreement or the Company Agreement
and the consummation of the transactions contemplated hereby and
thereby, of which the failure to obtain may have a material adverse
effect upon the Horseshoe Contributed Assets, the benefits of the
transactions contemplated hereby to be realized by the Company or the
Members or the likelihood of the consummation of the transactions
contemplated hereby.
(c) No Breach or Default. Neither the execution or delivery of
this Agreement or the Company Agreement, nor the consummation by
Horseshoe of the transactions contemplated by this Agreement or the
Company Agreement to which it is a party will:
(i) result in the breach of any of the terms or
conditions of, or constitute a default under, or an event that
would, with notice or lapse of time, or both, constitute a
default under, or in any manner release any party thereto from
any obligation under any mortgage, note, bond, indenture,
contract, agreement, license, commitment or other instrument
or obligation to which Horseshoe is a party;
(ii) constitute an event that would permit any party
to terminate any agreement with, or accelerate the maturity of
any indebtedness or other material obligation of, Horseshoe;
(iii) create or impose any lien, charge or
encumbrance on any of the Horseshoe Contributed Assets other
than liens created pursuant to the terms hereof;
6
<PAGE> 13
(iv) violate any regulation or statute, or any order,
writ, injunction or decree of any court, administrative
agency, or governmental body, or require the approval, consent
or permission of any governmental or regulatory body, agency
or authority; or
(v) conflict with or violate any provision of the
Certificate of Formation or Operating Agreement of Horseshoe;
except, in the case of clauses (i) through (iv), where the consequences of such
breach, violation, conflict, default, creation or imposition will not have a
material adverse effect on the Horseshoe Contributed Assets, the benefits of the
transactions contemplated hereby to be realized by the Company or the Members or
the likelihood of the consummation of the transactions contemplated hereby.
(d) Vessel.
(i) Horseshoe has the right to convey, and upon the
consummation of the transactions contemplated by this
Agreement, Horseshoe will have conveyed and the Company will
be vested with, good and marketable title and interest in and
to the Horseshoe Contributed Assets, including without
limitation, the Vessel commonly known as Queen of the Red
(Official No. 1000320) (the "Vessel"), and all personal
property belonging to her on board and on shore, including
spare parts and spare equipment, whether on board or not
(exclusive of the assets listed on Schedule 3.1(d)-1 (the
"Horseshoe Excluded Assets")), free and clear of all Liens,
other than the permitted liens, subject only to the permitted
liabilities and such other exceptions to title as set forth on
Schedule 3.1(d)-2 (the "Horseshoe Permitted Liens" and
"Horseshoe Permitted Liabilities"). Horseshoe has not entered
into any other agreement, option, right or contract for the
sale, transfer or assignment of all, or any portion, of the
Horseshoe Contributed Assets.
(ii) The Vessel and all of the other Horseshoe
Contributed Assets are in good operating condition and repair
(ordinary wear and tear excepted) and are substantially fit
for the purposes for which they are being utilized, (i) are
not in violation of any maritime, federal, state, subdivision,
health, safety, environmental or other ordinances, laws, codes
or regulations or any covenants, restrictions or other
documents of record; nor (ii) has any notice of any claimed
violation of any such ordinances, laws, codes or regulations
or any covenants, restrictions or other documents of record
been served on Horseshoe or any other entity having an
interest in the Horseshoe Contributed Assets, excluding in the
cases of (i) and (ii) violations which will not have a
material adverse effect on the Horseshoe Contributed Assets or
the benefits of the transactions contemplated hereby to be
realized by the Company or the Members or the likelihood of
the consummation of the transactions contemplated hereby. The
Vessel does not require any material repair or replacement
except for maintenance in the ordinary course of business.
7
<PAGE> 14
(iii) Except as disclosed on Schedule 3.1(d)(iii),
Horseshoe possesses all Permits necessary to conduct the
business of the Vessel, as it is currently being conducted,
and to own, use and operate the Vessel for the purpose of
dockside gaming and related operations, as it is currently
being conducted, except for such Permits of which the failure
to possess will not have a material adverse effect on the
Horseshoe Contributed Assets or the benefits of the
transactions contemplated hereby to be realized by the Company
or the Members.
(iv) None of the Horseshoe Contributed Assets is
subject to any pending condemnation proceeding or proceeding
by any public or quasi-public authority materially adverse to
the Horseshoe Contributed Assets and, to Horseshoe's
knowledge, there is no threatened condemnation or proceeding
with respect thereto.
(v) Except as disclosed on Schedule 3.1(d)(v), all
work that has been performed in, on or about the Vessel and
all materials furnished in connection therewith that might in
any circumstance give rise to a maritime or mechanic's,
materialmen's or similar lien against the Vessel, or any
portion thereof, will, as of the Closing Date, have been paid
for and all necessary lien waivers will, as of the Closing
Date, have been obtained, except for claims which are being
contested diligently and in good faith.
(e) Investment. Horseshoe is acquiring the Horseshoe Units for
investment purposes only and not with a view toward the sale thereof in
connection with a distribution.
(f) Vessel Contracts. True and correct copies of all Vessel
Contracts have been delivered to the Lady Luck. Horseshoe has
substantially performed all obligations required to be performed by it
and is not in default under any of the Vessel Contracts.
(g) Necessary Assets. The Horseshoe Contributed Assets are
adequate for the conduct of the business of the Vessel as it is
conducted on the date of this Agreement and will be as of the Closing
Date.
(h) Litigation. Except as set forth in Schedule 3.1(h), there
is no action, proceeding, or investigation pending or, to the knowledge
of Horseshoe, threatened against Horseshoe or the Horseshoe Contributed
Assets, or to which Horseshoe is otherwise a party, before any court,
governmental department, commission, board, agency, or instrumentality
which would have a material adverse effect on the Horseshoe Contributed
Assets or upon the consummation of the transactions contemplated
hereby; nor does Horseshoe know of any basis for any such action,
proceeding, or investigation.
(i) U.S. Citizen. Horseshoe is a United States citizen within
the meaning of Section 2 of the Shipping Act, 1916, and under the
Merchant Marine Act of 1920, as amended, the Merchant Marine Act of
1936.
8
<PAGE> 15
(j) Inventories. None of the inventories of Horseshoe included
in the Horseshoe Contributed Assets, existing on the date hereof are
obsolete or damaged and such inventories are marketable, useable and
saleable in the ordinary course of business of Horseshoe.
(k) No Broker. As of the Closing Date, Horseshoe has had no
dealings, negotiations, or consultations with any broker,
representative, employee, agent or other intermediary which is owed any
fee or other compensation in connection therewith.
(l) No Legal Bar. Horseshoe is not prohibited by any order,
writ, injunction or decree of any body of competent jurisdiction from
consummating the transactions contemplated by this Agreement, and no
action or proceeding is pending or, to the best of Horseshoe's
knowledge, threatened against Horseshoe which questions the validity of
this Agreement or any of the actions which the parties hereto have
taken in connection herewith or which it is contemplated they shall
take in connection herewith.
(m) Tax Liens. There are no tax liens upon any of the
Horseshoe Contributed Assets or any other properties or assets of
Horseshoe, and there are not now, and on the Closing Date there will
not be, any claims for Taxes asserted against Horseshoe in respect to
the Horseshoe Contributed Assets (except for real property taxes), and
there is no basis for any such claim.
ARTICLE IV
PRE-CLOSING COVENANTS
SECTION IV.1 Consents and Approvals. Promptly following the execution
and delivery of this Agreement, the parties hereto and their respective
Affiliates shall undertake commercially reasonable and diligent efforts to
obtain all requisite or useful consents and approvals to, and shall make all
applications and provide all notices required in connection with, the
transactions contemplated hereby. Horseshoe shall promptly make all necessary
applications to the Gaming Commission for approval of the transactions
contemplated hereby including without limitation, the establishment of the
Company.
SECTION IV.2 Financing. The parties hereto agree and acknowledge that
Horseshoe will be required (i) to use commercially reasonable best efforts to
secure bank or institutional financing (which shall be deemed "Senior Debt" for
purposes of this Agreement) in an amount sufficient to meet the Total
Development Cost Budget in principal amount in order to develop, operate and
maintain the Company, such financing to be secured as promptly as possible, (ii)
in connection with such efforts to secure such financing, to offer any
prospective bank or institution which may provide such financing (the "Lenders")
a guarantee to be issued by Horseshoe in favor of the Lenders and the Company of
the completion of all work contemplated by
9
<PAGE> 16
the Company Plan, as defined below, (a "Completion Guarantee") and (iii) if such
guarantee is a condition to obtaining such financing, to provide a Completion
Guarantee reasonably acceptable to Horseshoe, and in an amount reasonably
acceptable to Horseshoe, and in form and substance satisfactory to the Lenders
providing such financing.
SECTION IV.3 Confidentiality.
(a) The parties to this Agreement (the "Parties") have shared
and will share with each other certain information which is either
non-public or proprietary in nature. (This information shall be
referred to collectively as the "Proprietary Information".)
(b) In consideration for and as a condition to the Parties'
furnishing to each other the Proprietary Information, the Parties agree
to treat any Proprietary Information in accordance with the provisions
set forth below, acknowledging the confidential and proprietary nature
of such Proprietary Information. As used herein, the term "Proprietary
Information" shall mean any and all financial, technical, commercial or
other information concerning the business and affairs of the Parties
and their affiliates that has been or may hereafter be provided or
shown to the Parties or any of the Parties' employees, officers,
directors, representatives or agents, or those representatives of any
of the Parties' advisors (collectively, "Representatives"),
irrespective of the form of the communication, by the Parties or by any
of the Parties' representatives or agents, and also includes all notes,
analyses, compilations, studies or other material prepared by
Representatives containing or based, in whole or in part, on any
information provided or shown by the Parties or by any of the Parties'
representatives or agents.
(c) The term "Proprietary Information" does not include
information provided by a Party which (i) was or becomes generally
available to the public other than as a result of a disclosure by such
Party or its Representatives, (ii) was available on a nonconfidential
basis prior to its disclosure by any Party or any of the Parties'
Representatives, provided that the source of such information is not
known by any Party to be bound by a confidentiality agreement or
otherwise prohibited from transmitting the information by a
contractual, legal or fiduciary obligation, or (iii) becomes available
to any Party on a non-confidential basis from a source other than the
Parties or the Parties' Representatives, provided that such source is
not known by any Party to be bound by a confidentiality agreement or
otherwise prohibited from transmitting the information by a
contractual, legal or fiduciary obligation.
(d) It is understood that any Party may disclose any of the
Proprietary Information relating to the transactions contemplated by
this Agreement to its Representatives who require such material for the
purpose of evaluating the transactions contemplated by this Agreement
and during their participation in such transactions (provided that such
Representatives shall be informed by the disclosing Party of the
confidential nature of the Proprietary Information and shall be
provided with a copy of this
10
<PAGE> 17
Agreement and be bound by the terms and conditions hereof as if they
were a party hereto). In any event, the Parties will be responsible for
any breach of this Agreement by their respective Representatives. The
Parties agree that the Proprietary Information will be kept
confidential by the Parties and their Representatives and, except with
the specific prior written consent of both Parties or as expressly
otherwise permitted by the terms hereof, will not be disclosed by the
Parties or their Representatives. The Parties further agree that the
Parties and their Representatives will not use any of the Proprietary
Information for any reason or purpose other than the evaluation of this
Agreement.
(e) In the event this Agreement is terminated pursuant to its
terms or upon dissolution of the Company in accordance with the terms
of the Company Agreement, upon the written request of any Party (the
"Requesting Party"), each of the other Parties shall promptly deliver
to the Requesting Party all documents or other matter furnished by the
Requesting Party or its Representatives to the other Parties or their
Representatives constituting Proprietary Information, together with all
copies thereof in the possession of the other Parties or their
Representatives without retaining any copies of any such material. In
the event of such request, all other documents or other matter
constituting Proprietary Information in the possession of the other
Parties or their Representatives shall be destroyed, with any such
destruction confirmed by the other Parties in writing to the Requesting
Party. Each Party shall have the right to seek injunctive relief to
enforce the provisions of this Section 4.3.
SECTION IV.4 Total Development Cost Budget. Lady Luck and Horseshoe
shall negotiate in good faith to agree on a budget within 15 days after
submission of a proposed budget by Horseshoe regarding all costs of the
acquisition of the development and construction of the Company's casino
facility, and the pre-opening costs and initial working capital needs of the
Company and the casino facility (the "Total Development Cost Budget"). Such
Total Development Cost Budget shall become Exhibit C to the Company Agreement.
SECTION IV.5 Company Plan. Lady Luck and Horseshoe shall negotiate in
good faith to agree on a design for the Company's casino, hotel and any and all
other ancillary facilities (the "Company Plan") within 15 days after submission
of a proposed Company Plan by Horseshoe. Such Company Plan shall become Exhibit
E to the Company Agreement.
SECTION IV.6 Annual Budget. Lady Luck and Horseshoe shall negotiate in
good faith to agree on the initial annual budget for the Company Plan (the
"Annual Budget"), within 15 days after submission of a proposed Annual Budget by
Horseshoe. Such Annual Budget shall become Exhibit F to the Company Agreement.
SECTION IV.7 Satisfaction of Conditions. Each of Lady Luck and
Horseshoe will use its respective reasonable best efforts to insure that the
conditions set forth in Sections 4.4, 4.5 and 4.6 are satisfied, insofar as such
matters are within the control of each of them.
11
<PAGE> 18
SECTION IV.8 Consents. Each of the parties hereto will use its
reasonable best efforts to obtain consents of all persons and governmental
authorities necessary to the consummation of the transactions contemplated by
this Agreement and the Company Agreement. All such consents and approvals will
be in writing and in form and substance reasonably satisfactory to Lady Luck and
Horseshoe.
SECTION IV.9 Disclosure Supplements. From time to time after the date
of this Agreement and at or prior to the Closing Date, Lady Luck and Horseshoe
will promptly supplement or amend the schedules referred to in this Agreement
with respect to any matter hereafter arising which, if existing or occurring at
or prior to the date of this Agreement, would have been required to be set forth
or described in a schedule or which is necessary to correct any information in a
schedule or in any representation and warranty to Lady Luck and Horseshoe, as
the case may be, which has been rendered inaccurate thereby. For purposes of
determining the accuracy of the representations and warranties of Horseshoe
contained in this Agreement, and the accuracy of the representations and
warranties of Lady Luck contained in this Agreement, the schedules delivered by
Horseshoe and by Lady Luck shall be deemed to include only that information
contained therein on the date of this Agreement and shall be deemed to exclude
any information contained in any subsequent supplement or amendment thereto.
SECTION IV.10 Preservation of Contributed Assets. Horseshoe and Lady
Luck shall take all actions reasonable and necessary to preserve the condition
of their respective contributed assets up to the Closing Date.
ARTICLE V
THE CLOSING
SECTION V.1 The Closing. The closing of the transactions that are the
subject of this Agreement (the "Closing") shall take place on the fifth day
following the satisfaction or waiver of the conditions to closing set forth in
Article VI and VII hereof or such other date as the parties shall agree, at the
offices of Lady Luck Gaming Corporation, 206 N. Third Street, Las Vegas, Nevada,
or such other location as the parties shall agree which date may be sometimes
hereinafter referred to as the "Closing Date".
SECTION V.2 Deliveries by Lady Luck. To the extent not previously
delivered, at the Closing, Lady Luck, will deliver or cause to be delivered to
Horseshoe, as is appropriate, the following, each dated the Closing Date:
(a) Company Agreement. The Company Agreement, with all
Schedules and Exhibits (including Exhibits determined pursuant to
Sections 4.4, 4.5 and 4.6) attached thereto, duly executed by Lady
Luck.
(b) Officer's Certificate. Officer's Certificate of Lady Luck
executed by the President and/or any Vice President of Lady Luck
certifying (i) that the resolutions attached
12
<PAGE> 19
thereto are true and correct copies of the resolutions duly adopted by
the Board of Directors of Lady Luck, authorizing the execution and
delivery of this Agreement and the Company Agreement and the
consummation of the transactions contemplated hereby and thereby, (ii)
that the Certificate of Incorporation and By-laws of Lady Luck attached
thereto are true and correct copies thereof as amended to date (which
copies shall be certified by the Secretary of State of Mississippi with
respect to the Certificate of Incorporation), (iii) the representations
and warranties of Lady Luck hereunder are true and correct in all
material respects on the Closing Date, (iv) that Lady Luck shall have
complied in all material respects with all agreements and conditions
required by this Agreement to be performed or complied with by them
prior to or at Closing, and (v) as to the incumbency and signature
exemplars of the officers executing this Agreement and the Company
Agreement.
(c) Searches. All lien and judgement searches as may be
reasonably requested by Horseshoe, as of a date not earlier than ten
(10) days before the Closing, and a certification from the Lady Luck
that no financing statements have been filed against any of them
through the time of the Closing which affects any of the Lady Luck
Contributed Assets.
(d) Other Documents. Such other documents or instruments as
may be reasonably required by Horseshoe.
SECTION V.3 Deliveries by Horseshoe. To the extent not previously
delivered, at the Closing, Horseshoe will deliver, or cause to be delivered, to
Lady Luck, as is appropriate, the following, each dated as of the Closing Date:
(a) Company Agreement. The Company Agreement, with all
Schedules and Exhibits (including Exhibits determined pursuant to
Sections 4.4, 4.5 and 4.6) attached thereto, duly executed by
Horseshoe.
(b) Officer's Certificate. Officer's Certificate of Horseshoe
Gaming, Inc., a Nevada corporation and the Manager of Horseshoe,
executed by the President and/or any Vice-President of Horseshoe
Gaming, Inc. certifying (i) that the resolutions attached thereto are
true and correct copies of the resolutions duly adopted by Horseshoe
Gaming, Inc. authorizing the execution and delivery of this Agreement
and the Company Agreement and the consummation of the transactions
contemplated hereby and thereby, (ii) that the Certificate of Formation
and Operating Agreement of Horseshoe attached thereto are true and
correct copies thereof as amended to date (which copies of the
Certificate of Formation shall be certified by the Secretary of State
of Delaware), (iii) that the representations and warranties of
Horseshoe hereunder are true and correct in all material respects on
the Closing Date, (iv) that Horseshoe has complied in all material
respects with all agreements and conditions required by this Agreement
to be performed or complied with by it prior to or at Closing, and (v)
as to the incumbency and signature exemplars of the officers executing
each of this Agreement and the Company Agreement.
13
<PAGE> 20
(c) Searches. All lien and judgement searches as may be
reasonably requested by the Lady Luck, as of a date not earlier than
ten (10) days before the Closing, and a certification from Horseshoe
that no financing statements have been filed against any of them
through the time of the Closing which affects any of the Horseshoe
Contributed Assets.
(d) Other Documents. Such other documents or instruments as
may be reasonably required by the Lady Luck.
SECTION V.4 Deliveries to Company. To the extent not previously
delivered, at the Closing, the following parties will deliver or cause to be
delivered to the Company, the following, each dated the Closing Date:
(a) Lady Luck.
(i) Property Approvals. (a) The originals (to the
extent in the possession or control of Lady Luck or if not in
Lady Luck's possession or control, copies) of all Lady Luck
Approvals and other documents evidencing and/or pertaining to
all personal property included as part of the Real Property
and Barges, and (b) an assignment of all Property Approvals,
intangible and personal property including all transferable
warranties and guarantees then in effect, if any, with respect
to the Real Property and Barges or any repairs or renovations
to the Real Property and Barges, which assignment is in the
form attached hereto as Exhibit 5.4(a)(i) (with respect to
nontransferable warranties and guaranties, Lady Luck agrees,
following Closing, to cooperate with Horseshoe and the Company
and to enforce, at Lady Luck's sole cost and expense, such
warranties and guaranties for the benefit of the Company).
(ii) Real Property and Barges Certificate. The
Certificate of Title for the Real Property and Barges.
(iii) Bill of Sale. A Bill of Sale, in the form
attached hereto as Exhibit 5.4(a)(iii), conveying all tangible
personal property included within the Lady Luck Contributed
Assets.
(iv) Non-Foreign Certificate. A non-foreign status
certificate executed by Lady Luck in the form of Exhibit
5.4(a)(iv) attached hereto.
(v) Other Documents. Such other documents or
instruments as may be reasonably required by Horseshoe.
(b) Horseshoe.
(i) Bill of Sale. A Bill of Sale, in the form
attached hereto as Exhibit 5.4(b)(i), conveying all tangible
personal property included within the Horseshoe Contributed
Assets.
14
<PAGE> 21
(ii) Vessel Contracts. (a) The originals (to the
extent in the possession or control of the Company or if not
in the Company's possession or control, copies) of all Vessel
Contracts relating to the Horseshoe Contributed Assets that
the Company shall assume, (b) all consents required to assign
the Vessel Contracts, (c) evidence of termination of all
Vessel Contracts which the Company is obligated to terminate,
and (d) an assignment of such Vessel Contracts by way of the
assignment and assumption agreement in the form attached
hereto as Exhibit 5.4(b)(ii).
(iii) Vessel Approvals. (a) The originals (to the
extent in the possession or control of the Company or if not
in the Company's possession or control, copies) of all Vessel
Approvals and other documents evidencing or pertaining to all
personal property included as part of the Horseshoe
Contributed Assets, and (b) an assignment of all Vessel
Approvals, intangibles and personal property including all
transferable warranties and guaranties then in effect, if any,
with respect to the Horseshoe Contributed Assets or any
repairs or renovations to the Horseshoe Contributed Assets,
which assignment is in the form attached hereto as Exhibit
5.4(b)(ii) (with respect to nontransferable warranties and
guaranties, the Company agrees, following Closing, to
cooperate with the Lady Luck and to enforce, at Horseshoe's
sole cost and expense, such warranties and guaranties for the
benefit of the Company).
(iv) Certificates of Title. Endorsed certificates of
title for all of the personal property included as part of the
Horseshoe Contributed Assets and registered under any
so-called certificates of title.
(v) Other Documents. Such other documents or
instruments as may be reasonably required by Lady Luck.
ARTICLE VI
CONDITIONS PRECEDENT TO THE CLOSING OBLIGATIONS OF LADY LUCK
SECTION VI.1 Conditions to Closing. The obligations of Lady Luck to
consummate the transactions contemplated by this Agreement are subject to the
fulfillment of each of the following conditions, any one or more of which may be
waived by Lady Luck in its sole discretion:
(a) Representations and Warranties on the Closing Date. Each
and every representation and warranty of Horseshoe contained in this
Agreement shall be true and correct in all material respects on the
Closing Date as though such representations and warranties were made on
the Closing Date.
15
<PAGE> 22
(b) Compliance with Agreement. Horseshoe shall have performed
in all material respects all agreements and satisfied all conditions
required by this Agreement to be performed or satisfied by it prior to
or on the Closing Date.
(c) Required Consents. All Governmental Approvals for the
creation of the Company, ownership thereof as contemplated hereby and
consummation of the transactions contemplated hereby shall have been
obtained, including without limitation, all necessary approvals,
licenses and consents from the Gaming Commission.
(d) Approval of Total Development Cost Budget. The Total
Development Cost Budget shall have been approved by Lady Luck in the
manner set forth in Section 4.4 of this Agreement.
(e) Company Financing. Horseshoe shall have obtained the
Senior Debt for the Company's initial funding and financing upon the
terms set forth in Section 4.2 of this Agreement.
(f) Company Plan. Horseshoe and Lady Luck shall have agreed on
the Company Plan upon the terms set forth in Section 4.5 herein.
(g) Annual Budget. Horseshoe and Lady Luck shall have agreed
on the Annual Budget upon the terms set forth in Section 4.6 herein.
(h) No Litigation. No suit or action by any party nor any
investigation, inquiry, request for information or proceeding by any
governmental body, nor any legal or administrative proceeding shall
have been instituted or threatened on or before the Closing which
challenges the validity or legality of any transaction contemplated
hereby, threatens to enjoin any such transaction or seeks damages on
account of consummation thereof or would otherwise have a material
adverse effect upon the Horseshoe Contributed Assets or the benefits of
the transactions contemplated hereby to be realized by the Company or
the Members.
(i) Deliveries of Horseshoe. Horseshoe shall have made all of
its closing deliveries as required by this Agreement.
(j) Release of Lady Luck Liens. The Trustee shall have
released its liens on the Lady Luck Contributed Assets in accordance
with the Indenture. In connection therewith, Lady Luck shall use
commercially reasonable best efforts to ensure that the Trustee shall
have released its liens on the Lady Luck Contributed Assets.
(k) Release of Horseshoe Liens. The holders of liens on the
Horseshoe Contributed Assets shall have released such liens. In
connection therewith, Horseshoe shall use commercially reasonable best
efforts to ensure that the holder of such liens shall have released its
liens on the Horseshoe Contributed Assets.
16
<PAGE> 23
(l) Market. Lady Luck shall have reasonably determined that
the Vicksburg gaming market has not materially deteriorated since the
date hereof. It is expressly agreed that only matters impacting the
Vicksburg market, such as the material increase of the per machine tax
currently imposed by the City of Vicksburg or a decision by the
Mississippi Gaming Commission that gaming shall be permitted on the Big
Black River, shall be considered and not matters more generally related
to Mississippi gaming markets in general, such as an increase in the
gaming tax rate imposed by the State of Mississippi on all gaming
facilities in the State of Mississippi.
ARTICLE VII
CONDITIONS PRECEDENT TO THE CLOSING OBLIGATIONS OF HORSESHOE
SECTION VII.1 Conditions to Closing. The obligations of Horseshoe to
consummate the transactions contemplated by this Agreement are subject to the
fulfillment of each of the following conditions, any one or more of which may be
waived by Horseshoe in its sole discretion:
(a) Representations and Warranties on the Closing Date. Each
and every representation and warranty of Lady Luck contained in this
Agreement shall be true and correct in all material respects on the
Closing Date as though such representations and warranties were made on
the Closing Date.
(b) Compliance with Agreement. Lady Luck shall have performed
in all material respects all agreements and satisfied all conditions
required by this Agreement to be performed or satisfied by each or any
of them prior to or on the Closing Date.
(c) Required Consents. All Governmental Approvals for the
creation of the Company, ownership thereof as contemplated hereby and
consummation of the transactions contemplated hereby shall have been
obtained, including without limitation, all necessary approvals,
licenses and consents from the Gaming Commission.
(d) Approval of Total Development Cost Budget. The Total
Development Cost Budget shall have been approved by Horseshoe in the
manner set forth in Section 4.4 of this Agreement.
(e) Company Financing. Horseshoe shall have obtained the
Senior Debt for the Company's initial funding and financing upon the
terms set forth in Section 4.2 of this Agreement.
17
<PAGE> 24
(f) Company Plan. Horseshoe and Lady Luck shall have agreed on
the Company Plan upon the terms set forth in Section 4.5 herein.
(g) Annual Budget. Horseshoe and Lady Luck shall have agreed
on the Annual Budget on the terms set forth in Section 4.6 herein.
(h) No Litigation. No suit or action by any party nor any
investigation, inquiry, request for information or proceeding by any
governmental body, nor any legal or administrative proceeding shall
have been instituted or threatened on or before the Closing which
challenges the validity or legality of any transaction contemplated
hereby, threatens to enjoin any such transaction or seeks damages on
account of consummation thereof or would otherwise have a material
adverse effect upon the Horseshoe Contributed Assets or the benefits of
the transactions contemplated hereby to be realized by the Company or
the Members.
(i) Deliveries of Lady Luck. Lady Luck shall have made all of
its closing deliveries as required by this Agreement.
(j) Release of Lady Luck Liens. The Trustee shall have
released its liens on the Lady Luck Contributed Assets in accordance
with the Indenture. In connection therewith, Lady Luck shall use
commercially reasonable best efforts to ensure that the Trustee shall
have released its liens on the Lady Luck Contributed Assets.
(k) Release of Horseshoe Liens. The holders of liens on the
Horseshoe Contributed Assets shall have released such liens. In
connection therewith, Horseshoe shall use commercially reasonable best
efforts to ensure that the holder of such liens shall have released its
liens on the Horseshoe Contributed Assets.
(l) Market. Horseshoe shall have reasonably determined that
the Vicksburg gaming market has not materially deteriorated since the
date hereof. It is expressly agreed that only matters impacting the
Vicksburg market, such as the material increase of the per machine tax
currently imposed by the City of Vicksburg or a decision by the
Mississippi Gaming Commission that gaming shall be permitted on the Big
Black River, shall be considered and not matters more generally related
to Mississippi gaming markets in general, such as an increase in the
gaming tax rate imposed by the State of Mississippi on all gaming
facilities in the State of Mississippi.
18
<PAGE> 25
ARTICLE VIII
TERMINATION AND ABANDONMENT
SECTION VIII.1 Termination. This Agreement may be terminated at any
time prior to the Closing Date:
(a) by mutual consent of Lady Luck and Horseshoe;
(b) by Horseshoe, on the one hand, or Lady Luck, on the other
hand, at any time after April 1, 1998 unless the failure of the Closing
Date to occur on or before April 1, 1998 is the result of the breach of
any covenant contained herein by the party wishing to exercise its
right to terminate under this Section 8.1(b).
(c) by Lady Luck, if there has been a material violation or
breach by Horseshoe of any agreement, representation or warranty
contained in this Agreement which has rendered the satisfaction of any
condition to the obligations of Lady Luck impossible and such violation
or breach has not been waived by Lady Luck; or
(d) by Horseshoe, if there has been a material violation or
breach by Lady Luck of any agreement, representation or warranty
contained in this Agreement which has rendered the satisfaction of any
condition to the obligations of Horseshoe impossible and such violation
or breach has not been waived by Horseshoe.
(e) by (i) Horseshoe, if one or more of the conditions of Lady
Luck under this Agreement shall have become impossible to satisfy and
Lady Luck shall have failed, within ten business days after receiving
written notice of such impossibility from Horseshoe, to waive such
condition or conditions or (ii) by Lady Luck, if one or more of the
conditions of Horseshoe under this Agreement shall have become
impossible to satisfy and Horseshoe shall have failed, within ten
business days after receiving written notice of such impossibility from
Lady Luck, to waive such condition or conditions.
SECTION VIII.2 Procedure and Effect of Termination. In the event of
termination of this Agreement and abandonment of the transactions contemplated
by any or all of the parties pursuant to Section 8.1, written notice thereof
shall forthwith be given to the other party and this Agreement shall terminate
and the transactions contemplated hereby shall be abandoned, without further
action by any of the parties hereto. If this Agreement is terminated as provided
herein:
(a) upon request therefor, each party will redeliver all
documents, work papers and other material of any other party relating
to the transactions contemplated hereby, whether obtained before or
after the execution hereof, to the party furnishing the same;
(b) each party hereto will use its best efforts to prevent
disclosure to third persons of all information received by any party
with respect to the business of any other
19
<PAGE> 26
party or its subsidiaries (other than information which is a matter of
public knowledge or which has heretofore been or is hereafter published
in any publication for public distribution or filed as public
information with any governmental authority) except (i) as may be
required by law; and (ii) as is permitted by this Agreement, and no
party shall use such information for any purpose not related to the
transactions contemplated by this Agreement; and
(c) no party hereto shall have any liability or further
obligation to the other party to this Agreement pursuant to this
Agreement except as stated in this Section 8.2 or as otherwise provided
in this Agreement.
ARTICLE IX
INDEMNITY
SECTION IX.1 Indemnification. From and after the Closing, each party
hereto (each, an "Indemnifying Party") agrees to indemnify and defend and save
each other party hereto and each of their respective officers, directors,
employees and agents (each, an "Indemnified Party"), forever harmless from and
against, and to promptly pay to an Indemnified Party or reimburse an Indemnified
Party for, any and all liabilities (whether contingent, fixed or unfixed,
liquidated or unliquidated, or otherwise), obligations, deficiencies, demands,
claims, suits, actions, or causes of action, assessments, losses, costs,
expenses, interest, fines, penalties, actual or punitive damages or costs or
expenses of any and all investigations, proceedings, judgments, environmental
analyses, remediations, settlements and compromises (including nominal fees and
expenses of attorneys, accountants and other experts) (individually and
collectively, the "Losses") sustained or incurred by any Indemnified Party
relating to, resulting from, arising out of or otherwise by virtue of any of the
following:
(a) any misrepresentation or breach of a representation or
warranty made herein by an Indemnifying Party, or non-compliance with
or breach by an Indemnifying Party of any of the covenants or
agreements contained in this Agreement or the Company Agreement to be
performed by such Indemnifying Party (unless waived by the Indemnified
Party);
(b) any Losses relating to, resulting from or arising out of
liabilities or claims against the assets, or the ownership, use,
operation, occupancy or possession thereof, contributed by the
Indemnifying Party to the Company (excluding Permitted Liabilities) and
relating to, or arising out of operations, events, circumstances or
acts or omissions occurring or existing in periods prior to the Closing
Date, including, without limitation, those relating, directly or
indirectly, to all laws, ordinances, requirements and regulations
(including consent decrees and administrative orders) relating to
public health and safety and protection of the environment, all as
amended and modified.
20
<PAGE> 27
SECTION IX.2 Indemnification Procedure for Third Party Claims. In the
event that subsequent to the Closing any person or entity entitled to
indemnification under this Agreement (an "Indemnified Party") asserts a claim
for indemnification or receives notice of the assertion of any claim or of the
commencement of any action or proceeding by any entity who is not a party to
this Agreement or an Affiliate of such a party (including, but not limited to
any domestic or foreign court, government, or Governmental Authority or
instrumentality, federal, state or local) (a "Third Party Claim") against such
Indemnified Party, against which a party to this Agreement is required to
provide indemnification under this Agreement (an "Indemnifying Party"), the
Indemnified Party shall give written notice together with a statement of any
available information regarding such claim to the Indemnifying Party within
sixty (60) days after learning of such claim (or within such shorter time as may
be necessary to give the Indemnifying Party a reasonable opportunity to respond
to such claim). The Indemnifying Party shall have the right, upon written notice
to the Indemnified Party (the "Defense Notice") within thirty (30) days after
receipt from the Indemnified Party of notice of such claim, which notice by the
Indemnifying Party shall specify the counsel it will appoint to defend such
claim ("Defense Counsel"), to conduct at its expense the defense against such
claim in its own name, or if necessary in the name of the Indemnified Party;
provided, however, that the Indemnified Party shall have the right to approve
the Defense Counsel, which approval shall not be unreasonably withheld, and in
the event the Indemnifying Party and the Indemnified Party cannot agree upon
such counsel within ten days after the Defense Notice is provided, then the
Indemnifying Party shall propose an alternate Defense Counsel, which shall be
subject again to the Indemnified Party's approval.
(a) In the event that the Indemnifying Party shall fail to
give such notice, it shall be deemed to have elected not to conduct the
defense of the subject claim, and in such event the Indemnified Party
shall have the right to conduct such defense in good faith and to
compromise and settle the claim without prior consent of the
Indemnifying Party and the Indemnifying Party will be liable for all
costs, expenses, settlement amounts or other Losses paid or incurred in
connection therewith.
(b) In the event that the Indemnifying Party does elect to
conduct the defense of the subject claim, the Indemnified Party shall
cooperate with and make available to the Indemnifying Party such
assistance and materials as may be reasonably requested by it, all at
the expense of the Indemnifying Party, and the Indemnified Party shall
have the right at its expense to participate in the defense assisted by
counsel of its own choosing, provided that the Indemnified Party shall
have the right to compromise and settle the claim only with the prior
written consent of the Indemnifying Party, which consent shall not be
unreasonably withheld or delayed. Without the prior written consent of
the Indemnified Party, the Indemnifying Party will not enter into any
settlement of any Third Party Claim or cease to defend against such
claim, if pursuant to or as a result of such settlement or cessation,
(i) injunctive or other equitable relief would be imposed against the
Indemnified Party, or (ii) such settlement or cessation would lead to
liability or create any financial or other obligation on the part of
the Indemnified Party for which the Indemnified Party is not entitled
to indemnification hereunder. The Indemnifying Party shall not be
entitled to control, and the Indemnified Party shall be entitled to
have sole control over, the defense or
21
<PAGE> 28
settlement of any claim to the extent that claim seeks an order,
injunction or other equitable relief against the Indemnified Party
which, if successful, could materially interfere with the business,
operations, assets, condition (financial or otherwise) or prospects of
the Indemnified Party (and the cost of such defense shall constitute a
Loss for which the Indemnified Party is entitled to indemnification
hereunder). If a firm decision is made to settle a Third Party Claim,
which offer the Indemnifying Party is permitted to settle under this
Section 9.2(b), and the Indemnifying Party desires to accept and agree
to such offer, the Indemnifying Party will give written notice to the
Indemnified Party to that effect. If the Indemnified Party fails to
consent to such firm offer within 30 calendar days after its receipt of
such notice, the Indemnified Party may continue to contest or defend
such Third Party Claim and, in such event, the maximum liability of the
Indemnifying Party as to such Third Party Claim will not exceed the
amount of such settlement offer, plus costs and expenses paid or
incurred by the Indemnified Party through the end of such 30 day
period.
(c) Any judgment entered or settlement agreed upon in the
manner provided herein shall be binding upon the Indemnifying Party,
and shall conclusively be deemed to be an obligation with respect to
which the Indemnified Party is entitled to prompt indemnification
hereunder.
SECTION IX.3 Direct Claims. It is the intent of the parties hereto that
all direct claims by an Indemnified Party against a party hereto not arising out
of Third Party Claims shall be subject to and benefit from the terms of this
Article IX. Any claim under this Article IX by an Indemnified Party for
indemnification other than indemnification against a Third Party Claim, (a
"Direct Claim") will be asserted by giving the Indemnifying Party reasonably
prompt written notice thereof, and the Indemnifying Party will have a period of
30 calendar days within which to satisfy such Direct Claim. If the Indemnifying
Party does not so respond within such 30 calendar day period, the Indemnifying
Party will be deemed to have rejected such claim, in which event the Indemnitee
will be free to pursue such remedies as may be available to the Indemnitee under
this Article IX or otherwise.
SECTION IX.4 Failure to Give Timely Notice. A failure by an Indemnified
Party to give timely, complete or accurate notice as provided in Sections 9.2 or
9.3 will not affect the rights or obligations of any party hereunder except and
only to the extent that, as a result of such failure, any party entitled to
receive such notice was deprived of its right to recover any payment under its
applicable insurance coverage or was otherwise directly and materially damaged
as a result of such failure to give timely notice.
SECTION IX.5 Reduction of Loss. To the extent any Loss of an
Indemnified Party is reduced by receipt of payment (i) under insurance policies
which are not subject to retroactive adjustment or other reimbursement to the
insurer in respect of such payment, or (ii) from third parties not affiliated
with the Indemnified Party, such payments (net of the expenses of the recovery
thereof) (such net payment being referred to herein as a "Reimbursement") shall
be credited against such Loss; provided, however, (x) the pendency of such
payments shall not delay or reduce the obligation of the Indemnifying Party to
make payment to the Indemnified Party in respect of such
22
<PAGE> 29
Loss, and (y) the Indemnified Party shall have no obligation, hereunder or
otherwise, to pursue payment under or from any insurer or third party in respect
of such loss. If any Reimbursement is obtained subsequent to payment by an
Indemnifying Party in respect of a Loss, such Reimbursement shall be promptly
paid over to the Indemnifying Party.
SECTION IX.6 Subrogation. The Indemnifying Party shall be subrogated to
the Indemnified Party's rights of recovery to the extent of any Loss satisfied
by the Indemnifying Party. The Indemnified Party shall execute and deliver such
instruments and papers as are necessary to assign such rights and assist in the
exercise thereof, including access to books and records.
SECTION IX.7 Limitation on Indemnities.
(a) Threshold for Lady Luck. Lady Luck shall not have any
liability under Section 9.1 unless and until the aggregate amount of
the Losses accrued for which they are responsible under Article IX is
greater than or equal to $250,000. Once such Losses accrued equal or
exceed $250,000 in the aggregate, all such accrued Losses shall be
subject to indemnification by Lady Luck.
(b) Threshold for Horseshoe. Horseshoe shall not have any
liability under Section 9.1 unless and until the aggregate amount of
Losses accrued for which they are responsible under Article IX is
greater than or equal to $250,000. Once such Losses accrued equal or
exceed $250,000 in the aggregate, all such accrued Losses shall be
subject to indemnification by Horseshoe.
SECTION IX.8 Limitation on Claims.
(a) Lady Luck. Lady Luck's aggregate liability for the
aggregate Losses of the Company or Horseshoe's Losses subject to
indemnification under this Article IX shall be limited to $5,000,000;
provided, however, there shall be no such limitation to the extent the
Company or Horseshoe's Losses arise out of fraud or Lady Luck
Contributed Assets being subject to or burdened by liabilities or
encumbrances other than the Permitted Liabilities and Permitted Liens
at the time of their contribution.
(b) Horseshoe. Horseshoe's aggregate liability for the
aggregate Losses of the Company or Lady Luck's Losses subject to
indemnification under this Article IX shall be limited to $5,000,000;
provided, however, there shall be no such limitation to the extent the
Company or Lady Luck's Losses arise out of fraud or the Horseshoe
Contributed Assets being subject to or burdened by liabilities or
encumbrances other than the Permitted Liabilities and Permitted Liens
at the time of their contribution.
23
<PAGE> 30
ARTICLE X
DEFINITIONS
Capitalized terms not otherwise defined herein shall be defined as set
forth in the Company Agreement.
Act means the Mississippi Gaming Control Act and the regulations
promulgated pursuant thereto.
Affiliate means (1) any Person who directly or indirectly through one
or more intermediaries controls or is controlled by or is under common control
with the specified Person; and (2) any Person who is an officer, director,
employee, partner, member, manager, agent or trustee of, or who serves in a
similar capacity with respect to, the specified Person or of which the specified
Person is an officer, director, employee, partner, member, manager, agent or
trustee, or with respect to which the specified Person serves in a similar
capacity.
Approval means any license, finding of suitability, qualification,
approval or permit by or from any Gaming Authority or Governmental Authority.
Barges means the barges currently owned by Lady Luck and situated on
the Real Property and as described on Exhibit 1.1(a).
Gaming Authorities means all agencies, authorities and
instrumentalities of any state, nation, or other governmental entity, or any
subdivision thereof, regulating gaming or related activities in the United
States, including, without limitation, the Gaming Commission.
Gaming Commission means the Mississippi Gaming Commission.
General Laws means any statute, ordinance, promulgation, law, treaty,
rule, regulation, code, judicial or administrative precedent or order of any
court or other body of the United States and any state law or subdivision
thereof, any foreign countries or subdivisions thereof, and shall include all
Laws.
Governmental Authority means all agencies, authorities and
instrumentalities of any state, nation, or other governmental entity, or any
subdivision thereof, including, without limitation, the Gaming Commission.
Horseshoe Liens mean the liens held by Chemical Trust Company of
California under a first preferred mortgage in the amount of $82,000,000, dated
September 29, 1995, and United States Trust Company of New York under a second
preferred ship mortgage in the amount of $82,000,000, dated October 3, 1995.
24
<PAGE> 31
Indenture means the indenture dated as of February 17, 1994 (as
amended, supplemented or modified from time to time) by and among Lady Luck
Gaming Finance Corporation, the Guarantors party thereto and First Trust
National Association, as Trustee.
Trustee means First Trust National Association as trustee under the
Indenture.
Law means any statute, ordinance, promulgation, law, treaty, rule,
regulation, code, judicial or administrative precedent or order of any court or
any other Governmental Authority, as well as the orders or requirements of any
local board of fire underwriters or any other body which may exercise similar
functions.
Permits means all rights, licenses, permits, various exemptions, orders
and approvals.
Person means any individual, partnership, corporation, association or
other entity, including, but not limited to, any government or agency or
subdivision thereof, and the heirs, executors, administrators, legal
representatives, successors and assigns of such Person where the context so
admits.
Property Approvals means all transferable consents, authorizations,
variances or waivers, licenses, permits and approvals from any Governmental
Authority in respect of the Real Property and Barges, including, without
limitation, those with respect to the use, utilities, fire and life safety and
zoning heretofore or hereafter held by or granted to Lady Luck with respect to
the Real Property and Barges.
Property Licenses means all necessary consents, authorizations,
variances or waivers, licenses, permits and approvals from any Person in respect
of the Real Property and Barges, including, without limitation, those with
respect to the use, utilities, fire, health, life safety, and zoning heretofore
or hereafter held by or granted to Lady Luck with respect to the Real Property
and Barges.
Real Property means the real property owned by Lady Luck as described
on Exhibit 1.1(a).
Vessel means the 298' x 78' riverboat, commonly known as Queen of the
Red, as further described on Exhibit 1.1(b).
Vessel Approvals means all consents, authorizations, variances or
waivers, licenses, permits and approvals from any Governmental Authority in
respect of the Vessel, including, without limitation, those with respect to the
foundation, use, utilities, fire and life safety heretofore or hereafter held by
or granted to Horseshoe with respect to the Vessel.
Vessel Contracts means all material contracts and other agreements
relating to the ownership, use, operation or maintenance of the Vessel. For
purposes of this definition, a contract is material if (i) the contract
represents payments in excess of Twenty-Five Thousand Dollars
25
<PAGE> 32
($25,000) in aggregate payments over the life of such contract, or (ii) the
contract has a duration of longer than one (1) year.
Vessel Licenses means all necessary consents, authorizations, variances
or waivers, licenses, permits and approvals from any Person in respect of the
Horseshoe Contributed Assets, including, without limitation, those with respect
to the use, utilities, fire, health, life safety, heretofore or hereafter held
by or granted to the Company with respect to the Horseshoe Contributed Assets,
and including the alcoholic beverage licenses.
ARTICLE XI
MISCELLANEOUS
As used in this Agreement, the following terms shall have the
respective meanings indicated.
SECTION XI.1 Notices. All notices, demands, consents, requests,
approvals, and other communications required or permitted hereunder shall be in
writing and shall be deemed to have been properly given if hand delivered
(effective upon receipt or, if refused, upon date of refusal), if mailed by
United States registered or certified mail, with postage prepaid, return receipt
requested (effective three (3) days after deposit with the U.S. Postal Service),
or if sent by a nationally recognized private courier postage prepaid, return
receipt requested (effective one (1) day after deposit with such courier), or if
sent by telecopier (effective upon receipt), to the parties at the following
addressed (or at such other addresses within the United States of America shall
be given in writing by any party to the others in accordance with this Section
11.1):
If to Lady Luck: Lady Luck Gaming Corporation
206 North Third Street
Las Vegas, Nevada 89101
Attention: Rory Reid, Esq.
with a copy to: McDermott, Will & Emery
50 Rockefeller Plaza
New York, New York 10020
Attention: Brian Hoffmann, Esq.
If to Horseshoe: Horseshoe Gaming LLC
4024 Industrial Road
Las Vegas, Nevada 89103
Attention: Paul R. Alanis
26
<PAGE> 33
with a copy to: Horseshoe Gaming LLC
150 South Los Robles, Suite 880
Pasadena, California 91101
Attention: Loren Ostrow, Esq.
SECTION XI.2 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF MISSISSIPPI.
SECTION XI.3 Entire Agreement and Amendments. This Agreement
constitutes the entire understanding of the parties hereto with respect to the
subject matter hereof and no amendment, waiver, modification or alteration of
the terms hereof shall be effective or binding unless the same is in writing and
signed by all of the parties hereto.
SECTION XI.4 Terms. All personal pronouns used in this Agreement,
whether used in the masculine, feminine or neuter gender, shall include all
other genders; the singular shall include the plural and vice versa and shall
refer solely to the parties signatory thereto except where otherwise
specifically provided. Titles of Articles and Sections are for convenience only,
and neither limit nor amplify the provisions of the Agreement itself.
SECTION XI.5 Unenforceability. If any provision herein shall be held
invalid or unenforceable, such provision shall not affect the validity or
enforceability of any other provisions hereof, all of which other provisions
shall, in such case, remain in full force and effect.
SECTION XI.6 Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit or the parties hereto and their respective
successors and assigns. This Agreement shall not be assignable by any party
hereto, whether by operation of law or otherwise, and any attempted or purported
assignment shall be null and void, whether by law or otherwise.
SECTION XI.7 Payment of Fees. In the event of litigation of any dispute
or controversy arising from, in, under or concerning this Agreement and any
amendments hereof, including, without limiting the generality of the foregoing,
any claimed breach hereof, the prevailing party(ies) in such action shall be
entitled to recover from the other party(ies) in such action, such sum as the
court shall fix as reasonable attorneys' fees and expenses incurred by such
prevailing party(ies).
SECTION XI.8 No Third Party Rights. Nothing contained in this Agreement
is intended to and nothing contained herein shall be interpreted to confer on
any party the rights of a third party beneficiary and this Agreement shall be
for the sole benefit of the parties hereto.
SECTION XI.9 No Waiver of Default. No consent or waiver, express or
implied, by any party to or of any breach or default by any other party in the
performance by the other of its obligations hereunder shall be deemed or
construed to be a consent or waiver to or of any other
27
<PAGE> 34
breach or default in the performance by any other party of the same or any other
obligations of such party hereunder. Failure on the part of any party to
complain of any act or failure to act of any of the other parties or to declare
any of the other parties in default, irrespective of how long such failure
continues, shall not constitute a waiver by any such party of its rights
hereunder.
SECTION XI.10 Tradenames and Trademarks. Nothing contained herein
shall grant, license or otherwise convey to the parties hereto any interest or
right of use of the tradenames and trademarks of or used by Lady Luck or
Horseshoe or their respective affiliates. All such rights shall be only as set
forth in a duly executed license agreement.
SECTION XI.11 Counterparts. This Agreement may be executed in any
number or counterparts, all of which, when taken together, shall constitute one
and the same instrument.
SECTION XI.12 Future Deliveries. Each party will, from time to time,
execute and deliver such further instruments and do such further acts and things
as may be reasonably requested by any other party to carry out the intent and
purposes of this Agreement, provided that the same are fully consistent with the
terms and provisions hereof.
SECTION XI.13 Computation of Time. In the computation of any period
of time provided for in this Agreement, the day of the act or event from which
said period of time runs shall be excluded, and the last day of such period
shall be included unless it is a Saturday, Sunday, or national United States
holiday, in which case the period shall be deemed to run until the end of the
next day which is not a Saturday, Sunday, or national United States holiday. As
used in this Agreement "business day" for any party shall be a day which is not
a Saturday, Sunday or national United States holiday.
SECTION XI.14 Consent to Jurisdiction. EACH OF THE PARTIES HERETO
IRREVOCABLY AGREE THAT ALL ACTIONS OR PROCEEDINGS IN ANY WAY, MANNER OR RESPECT
ARISING OUT OF OR FROM OR RELATED TO THIS AGREEMENT OR ANY OTHER AGREEMENT
DELIVERED PURSUANT HERETO SHALL BE DECIDED BY ARBITRATION TO BE CONDUCTED IN
JACKSON, MISSISSIPPI, IN ACCORDANCE WITH THE COMMERCIAL RULES OF THE AMERICAN
ARBITRATION ASSOCIATION THEN IN EFFECT, UNLESS THE MEMBERS INVOLVED IN THE
DISPUTE MUTUALLY AGREE OTHERWISE. THE DISPUTING MEMBERS EACH SHALL SELECT THEIR
OWN ARBITRATOR, BOTH OF WHOM SHALL SELECT A THIRD ARBITRATOR WITHIN FIFTEEN (15)
DAYS OF THEIR OWN APPOINTMENT. THIS AGREEMENT TO ARBITRATE, TOGETHER WITH EVERY
OTHER PROVISION OF THIS AGREEMENT, SHALL BE SPECIFICALLY ENFORCEABLE UNDER THE
PREVAILING ARBITRATION LAW. THE AWARD RENDERED BY THE ARBITRATORS SHALL BE FINAL
AND JUDGMENT MAY BE ENTERED UPON IT IN ACCORDANCE WITH APPLICABLE LAW IN ANY
COURT HAVING JURISDICTION THEREOF. NOTICE OF THE DEMAND FOR ARBITRATION SHALL BE
FILED IN WRITING WITH THE OTHER PARTIES
28
<PAGE> 35
TO THIS AGREEMENT AND WITH THE AMERICAN ARBITRATION ASSOCIATION. THE DEMAND FOR
ARBITRATION SHALL BE MADE WITHIN A REASONABLE TIME AFTER THE CLAIM, DISPUTE OR
OTHER MATTER IN QUESTION HAS ARISEN, AND IN NO EVENT SHALL IT BE MADE AFTER THE
DATE WHEN INSTITUTION OF LEGAL OR EQUITABLE PROCEEDINGS BASED ON SUCH CLAIM,
DISPUTE OR OTHER MATTER IN QUESTION WOULD BE BARRED BY THE APPLICABLE STATUTE OF
LIMITATIONS.
SECTION XI.15 Investigation: Survival of Representations, Warranties
and Agreements. The respective representations, warranties and agreements
of Horseshoe and Lady Luck contained herein or in any certificates or other
documents delivered prior to or at the Closing shall not be deemed waived or
otherwise affected by any investigation made by any party hereto. Each and every
such representation, warranty and agreement shall expire, and be terminated and
extinguished, on the first anniversary of the Closing Date and thereafter,
neither Horseshoe, nor Lady Luck nor any officer, director or principal thereof
shall be under any liability whatsoever with respect to any such representation,
warranty or agreement; provided, however, that this Section 11.15 shall have no
effect upon the obligations of any of the parties under the Company Agreement.
SECTION XI.16 Closing Costs. Each party shall be responsible to pay
its own expenses incurred in connection with this Agreement and the Company
Agreement.
29
<PAGE> 36
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
LADY LUCK VICKSBURG, INC.,
a Mississippi corporation
By: __________________________________________
Its: __________________________________________
HORSESHOE GAMING, L.L.C.,
a Delaware limited liability company
By: Horseshoe Gaming, Inc.,
a Nevada corporation
Manager
By: _________________________________
Its: _________________________________
30
<PAGE> 37
EXHIBIT 1.1(A)
1. Real Property -- see Legal Description attached as Exhibit A.
2. Barge C-202, Barge GT-114, and Barge GT-220.
31
<PAGE> 38
PARCEL ONE
A TRACT OF LAND LYING AND BEING SITUATE WITHIN LOTS 1 AND 2 OF
THE JETT SURVEY, AS RECORDED IN DEED BOOK 61 AT PAGE 288 OF
THE LAND RECORDS OF WARREN COUNTY, MISSISSIPPI, AND IN PART OF
SECTIONS 4 AND 5, TOWNSHIP 15 NORTH, RANGE 3 EAST, VICKSBURG,
WARREN COUNTY, MISSISSIPPI.
Beginning at a 2-inch galvanized pipe on the South line of Lot
2 of the Jett Survey, said point being further described as
the Northeast corner of Lot 3 and further described as the
Northwest corner of Lot 4 said Jett Survey and from said POINT
OF BEGINNING run thence along the South line of said Lot 2
(also the North line of Lot 3) North 89 degrees 00 minitues 00
degrees West, 208.34 feet, more or less, to a found rebar on
the east top bank of the Mississippi River thence run along
the East top bank of said Mississippi River with the following
courses and distances viz: North 36 degrees 47 minutes 37
seconds East, 191.29 feet; North 33 degrees 53 minutes 26
seconds East, 44.74 feet; North 28 degrees 31 minutes 49
seconds East,105.72 feet; North 36 degrees 18 minutes 07
seconds East,; 110.71 feet; North 33 degrees 09 minutes 51
seconds East, 100.00 feet; North 36 degrees 33 minutes 59
seconds East, 88.68 feet; North 60 degrees 01 minutes 27
seconds East, 202.95 feet; North 52 degrees 57 minutes 24
seconds East, 200.23 feet; 42 degrees 41 minutes 22 seconds
east, 201.75 feet; North 44 degrees 57 minutes 08 seconds
East, 166.30 feet, more or less, to a point where the East top
bank of the Mississippi River intersects the South line of
that certain parcel conveyed to the Mississippi State Highway
Commission by Deed recorded in Deed Book 464 at Page 365 of
the Land Records of Warren County, Mississippi (the "Highway
Commission Bridge Parcel"), said South line being further
described as the South right-of-way of Interstate Highway
I-20; thence leaving the East top bank of said Mississippi
River and running along the South line of the highway
Commission Bridge Parcel with the following bearings and
distances, viz: South 57 degrees 16 minutes 00 seconds East,
124.10 to an iron pin at an angle point in said South line;
thence continuing South 65 degrees 05 minutes 00 seconds East,
183.20 feet to another iron pin at an angle point in said
South line; thence continuing South 88
32
<PAGE> 39
degrees 05 minutes 00 seconds East 85.10 feet to another iron
pin at an angle point in said South line; thence continuing
North 68 degrees 26 minutes 00 seconds East, 207.70 feet to
another iron pin at an angle point in said South line, said
iron pin being further described as also lying on the South
line of that certain parcel conveyed to the Mississippi State
Highway Commission as recorded in Deed Book 438 at Page 312 of
aforesaid Land Records ("the Highway Commission Approached
Parcel"); thence along the South line of the Highway
Commission Approached Parcel (same constituting a continuation
of the South line of Interstate Highway I-20) South 42 degrees
34 minutes 00 seconds East, 275.10 feet, more or less, to an
iron pin at a point where said South line of the Highway
commission Approached Parcel intersects the East line of Old
U.S. Highway 61 South, said iron pin being further described
as the Northwest corner of the parcel conveyed to Vicksburg
Terminal Company, Inc. by the State Highway Commission of
Mississippi, recorded in Deed Book 506 at Page 166 of the
aforesaid Land Records of said Warren County, Mississippi (the
"VTE Highway Parcel"); thence leaving the South line of the
Commission Approach Parcel and run along the East line of the
said VTE Highway Parcel, which line is also the East line of
Old U.S. Highway 61 South; thence run thence along the East
line of the VTE Highway Parcel, same having a course of South
07 degrees 27 minutes West, and a distance as published in
said VTE Highway Parcel Deed of 154.2 feet, but having a
actual distance thought to be 159.64 feet, but, nevertheless,
in either instance, more or less, to a point marking the
Southeast corner of lands into which Vicksburg Terminal went
into possession by virtue of said VTE Highway Parcel deed
recorded in said Deed Book 506 at Page 166; run thence along
the South line of the VTE Highway Parcel, North 89 degrees 00
minutes West, a distance of 60.4 feet, more or less, to a
point where the West line of said VTE Highway Parcel
intersects the South line of said Lot 1 of the aforementioned
Jett Survey (also the North line of said Lot 2 of the Jett
Survey), said point being further described as the Northeast
corner of Parcel 1 of the SARKAR CORPORATION, et al, parcel as
recorded in Deed Book 670 at page 203 of the aforesaid Land
Records (the SARKAR Parcel"); thence leaving the West of OLD
U.S. Highway 61 South and running along the North line of
Parcel 1 of the SARKAR parcel North 89 degrees 00 minutes 00
seconds West, 525.60, more or less, to an iron
33
<PAGE> 40
pin at the Northwest corner of the SARKAR parcel; thence along
the West line of said SARKAR parcel South 01 degrees 00
minutes 00 seconds West, 175.00 to an iron pin at the
Southwest corner of said SARKAR CORPORATION parcel said point
being further described as lying on the North line of the
Warren County School District parcel as recorded in Deed Book
362 at Page 64 of the aforesaid Land Records ( the "First
School Parcel") thence along the North line of the aforesaid
School parcel as recorded in DED Book 362 at Page 64 and along
the North line of a second Warren County School District
parcel as recorded in deed Book 362 at page 110 (the "Second
School Parcel"), North 89 degrees 00 minutes 00 seconds West,
316.73 feet, more or less, to an iron pin at the Northwest
corner of the Second School District parcel as recorded in
Deed Book 362 at Page 110, said iron pin being further
described as lying on the East side of the Old Lower Warrenton
Road (now abandoned); thence along the East side of road is
further described as the West line of the Second School
District parcel as recorded in Deed Book 362 at page 110 and
the West line of the Holly Grove Union Society parcel as
recorded in Deed Book 88 at (Page 450) South 45 degrees 08
minutes 49 seconds West, 312.19 feet to an iron pin at the
Northeast corner of the Rodney E. Bounds, et ux, parcel (the
"Bounds Parcel") as recorded in Deed Book 886 at Page 787 of
the land Records of Warren County, Mississippi (said iron pin
is further described as lying at an angle point in the West
line of the first School District parcel as recorded in Deed
book 362 at Page 64); thence leaving the East side of Old
Lower Warrenton Road which is now abandoned and running along
the North and West line of the Bounds Parcel the following
calls: North 87 degrees 41 minutes 00 seconds West, 66.00 feet
to an iron pin at an angle point in said Bounds Parcel; thence
continuing South 71 degrees 32 minutes 00 seconds West 59.60
feet to an iron pin at another angle point in said Bounds
Parcel; thence continuing South 66 degrees 40 minutes 00
seconds West, 81.60 feet to an iron pin at another angle point
in said Bounds Parcel; thence continuing South 38 degrees 56
minutes 00 seconds West, 79.20 to an iron pin at another angle
point in said Bounds Parcel; thence continuing South 05
degrees 04 minutes 00 seconds East, 79.90 feet to the POINT OF
BEGINNING and being situated in part of Lots 1 and 2 of Jett
Survey as recorded in Deed Book 61 at Page 288 of the
aforesaid Land Records and located in part of Sections 4 and
5,
34
<PAGE> 41
Township 15 North, range 3 East, Vicksburg, Warren County,
Mississippi, together with all right, title and interest owned
or claimed by the Grantor herein, whether legal or equitable,
in and to all accretions, alluvions, batture, banks, beds,
waters and other property rights of Grantor herein in and to
the Mississippi River , including, but not limited to, all
deed in favor of the State Highway Commission of Mississippi,
together with all land owned or claimed by said Vicksburg
Terminal Company, Inc. immediately preceding the execution and
delivery of said deed and extending to the thalweg of said
Mississippi River, which said lands were not conveyed to the
said State Highway Commission of Mississippi by that said
deed, but were reserved unto the said Vicksburg Terminal
Company, Inc., its successors and assigns, and which lands and
all riparian rights and all other rights to moor, dock and use
all property West of the lands described and conveyed by said
deed recorded in said Deed Book 464 at Page 365 are conveyed
hereby.
EXHIBIT "A"
PART OF LOTS 2 AND 4 OF THE JETT SURVEY LOCATED IN VICKSBURG, WARREN
COUNTY, MISSISSIPPI
Commencing at 2-inch galvanized pipe on the South line of Lot 2 of the
Jett Survey, said iron pipe also marking the Northeast corner of Lot 3
and the Northwest corner of Lot 4 of said Jett Survey and run thence
along the South line of said Lot 2 (also the North line of Lot 4) S 89
degrees 00' 00" E, 329.00 feet" to an iron pin marking the Point of
Beginning of the following described as an angle point in the West line
of the Warren County School District property ad recorded in Deed Book
362 at page 64 of the Land Records of Warren County, Mississippi, which
said West Line of Said Warren County, Mississippi, which said West line
of said Warren County School District property is also the East line of
the Rodney E. Bounds tract as recorded in Deed Book 362 at Page 33 of
the aforesaid Land Records of Warren County, Mississippi. From said
Point of beginning run thence along the West line of said Warren County
School District property (also the East line of said Bounds tract) N 01
degrees 05 minutes 08 seconds East, 212.72 feet to an iron pin at an
angle point in said iron pin being further described as the Northeast
corner of the Bounds tract and also the Southwest corner of the Holly
Grove Union Society property as recorded Deed Book 88 at page 450 of
the aforesaid Land Records; thence continuing along the West line of
said Warren County School District tract (also the South line of said
Holly Grove Union Society tract) S 89 degrees 00 minutes 00 seconds E,
353.00 feet to an iron pin at Southeast corner of
35
<PAGE> 42
said Holly Grove Union Society tract; thence continuing along the West
line of said Warren County School District property (also the East line
of said Holly Grove tract) N 01 degrees 00" 00" E, 200.00' to an iron
pin at the Northeast corner of said Holly Grove Union Society tract,
said point being further described as lying on the South line of the
Warren County School District property as recorded in Deed Book 362 at
Page 110 of said aforesaid Land Records; thence along the South line of
said Warren County School District tract as recorded in Deed Book 362
at page 110 (also the North line of Holly Grove Union Society Tract) N
89 degrees 00' 00" W, 158.86 feet to an iron pin at the Southwest
corner of said Warren County School District tract as recorded in Deed
Book 362 at Page 110 said iron pin being further described as the
Northeast corner of Holly Grove Union Society tract, said iron pin
being further described as lying on the Southeast line of Old Warrenton
Road )now abandoned); thence along the West line of said Warren County
School District property as recorded in Deed Book 362 at page 110 (also
along the East line of said Old Warrenton Road, now abandoned) N 45
degrees 08' 49" E, 33.46 feet to an iron pin at the Northwest corner of
said Warren County School District property as recorded in Deed Book
362 at Page 110, said point being further described as lying on the
South line in Deed Book 512 at page 499 of the aforesaid Land records;
thence along the North line of said Warren County School District
property as recorded in Deed Book 362 at page 110 and along the North
line of said Warren County School District property as recorded in Deed
Book 362 at Page 64 (said line also being along the South line of said
Vicksburg Terminal Company, Inc. property as recorded in deed Book 512
at Page 499 and then along the South line of the Sarkar Corporation, et
al., parcel 1 as recorded in Deed book 670 at page 64) S 89 degrees 00
minutes 00 seconds E, 824.66 feet to an iron pin marking the Northeast
corner of said Warren County School District property as recorded in
Deed Book 362 at Page 64, said iron pin being further described as
lying on the West right-of-way of Old Highway 61; thence along the West
right-of-way of said Old Highway 61 the following chords: S 10 degrees
56' 00" W, 80.00" to an iron pin; thence continuing S 13 degrees 00'
00' W, 92.07' to an iron pin; thence continuing S 20 degrees 02 minutes
00 seconds W, 97.61 to an iron pin; thence continuing S 25 degrees 16
minutes 53 seconds W, 35.43', more or less, to an iron pin marking the
intersection of the North line of that parcel conveyed to the State
Highway Commission as recorded to Deed Book 404 at Page 407 with the
West line of Old Highway 61; thence leaving the West line of Old
Highway 61 and run along the North line of said State Highway
Commission property on a curve to the right a chord of S 39 degrees 39'
42" W, 150.00' to an iron pin; thence continuing along a curve to the
right a chord of S 46 degrees 53' 41" W, 195.00' to a point where the
West line of said State Highway Commission property intersects the
South line of the Warren County School District property as recorded in
Deed Book 362 at Page 64; thence leaving the
36
<PAGE> 43
West line of said State Highway Commission property and running along
the South line of the Warren County School District property as
recorded in Deed Book 362 at page 64, N 88 degrees 00' 00" W, 193.46'
to an iron pin on the South line of said Warren County School District
property ass recorded in Deed Book 362 at page 64; thence continuing
along the South line of said Warren County School District property as
recorded in deed Book 362 at page 64 N 88 degrees 45' 00" W, 482.50' to
an iron pin at the Southwest corner of said Warren County School
District property as recorded in Deed Book 362 at Page 64; thence along
the West line of said Warren County School District property as
recorded in Deed Book 362 at Page 64, N 01 degrees 00' 00 " E, 130.00'
an iron pin at an angle point in the West line of said Warren County
School District property as recorded in Deed Book 362 at Page 64;
thence continuing along the West line of said warren County School
District property as recorded in Deed Book 362 at page 64, West 6.00'
to the Point of Beginning and being situated in part of Lots 2 and 4 of
the Jett Survey, all located in Vicksburg, Warren County, Mississippi.
37
<PAGE> 44
EXHIBIT 1.1(B)
Horseshoe Contributed Assets
Please see attached as follows:
<TABLE>
<S> <C>
1. M/V Queen of the Red #D1000320
2. Table Games Inventory (1 page)
3. Queen of the Red Machine Breakdown (22 pages)
4. Queen of the Red Warranty Items (1 page)
5. Additional Equipment Inventory (3 pages)
6. All Additional Equipment and Signage now
located on and used in connection with the
operation of the Queen of the Red, including
without limitation, security cameras, counting
equipment, and coin wrappers.
</TABLE>
38
<PAGE> 45
TABLE GAMES
Inventory
*updated 8/5/97
<TABLE>
<CAPTION>
NO. OF TABLES TYPE OF TABLE
- -------------------------------
<S> <C>
33 Black Jack tables
3 Caribbean Stud
8 Craps Table
3 Let It Ride
1 Big 6
4 Roulette tables
1 Mini Bacc
53= Total Number of Tables
</TABLE>
39
<PAGE> 46
<TABLE>
<CAPTION>
MANUFACTURER CABINET STYLE DENOM. DESCRIPTION SERIAL NUMBER
- ------------ ------------- ------ ----------- -------------
<S> <C> <C> <C> <C>
Anchor Gaming Round Top 1 CLEAR WINNER(Dbl Jackpot) 282076
Anchor Gaming Round Top 1 CLEAR WINNER(Double Frenzy) 265349
Anchor Gaming Round Top 1 CLEAR WINNER(Fireworks) 234770
Anchor Gaming Round Top 1 CLEAR WINNER(Triple Jackpot) 226328
IGT 16" Upright Reel 0.05 LOUISIANA NICKELS 467392
IGT 16" Upright Reel 0.05 LOUISIANA NICKELS 467393
IGT 16" Upright Reel 0.05 LOUISIANA NICKELS 467388
IGT 16" Upright Reel 0.05 LOUISIANA NICKELS 467390
IGT 16" Upright Reel 0.05 LOUISIANA NICKELS 467389
IGT 16" Upright Reel 0.05 LOUISIANA NICKELS 467391
IGT 16" Upright Reel 0.05 LOUISIANA NICKELS 467387
IGT 16" Upright Reel 0.25 CATS AND DOGS 441473
IGT 16" Upright Reel 0.25 FIVE TIMES PAY 442034
IGT 16" Upright Reel 0.25 QUARTERMANIA DBL BLKJACK 467402
IGT 16" Upright Reel 0.25 QUARTERMANIA DBL DIA DLX 467405
IGT 16" Upright Reel 0.25 QUARTERMANIA DBL DIA DLX 467401
IGT 16" Upright Reel 0.25 QUARTERMANIA RW&B 467404
IGT 16" Upright Reel 0.25 QUARTERMANIA RW&B 467400
IGT 16" Upright Reel 0.25 QUARTERMANIA TRIPLE DIA 467403
IGT 16" Upright Reel 0.25 RED, WHITE & BLUE 450999
IGT 16" Upright Reel 0.25 SUPER 7 450880
IGT 16" Upright Reel 0.25 SUPER 7 450889
IGT 16" Upright Reel 0.25 SUPER 7 450886
IGT 16" Upright Reel 0.25 SUPER 7 450890
IGT 16" Upright Reel 0.25 SUPER 7 450888
IGT 16" Upright Reel 0.25 SUPER 7 450883
IGT 16" Upright Reel 0.25 SUPER 7 450884
IGT 16" Upright Reel 0.25 SUPER 7 450882
IGT 16" Upright Reel 0.25 SUPER 7 450891
IGT 16" Upright Reel 0.25 SUPER 7 450892
IGT 16" Upright Reel 0.25 SUPER 7 450887
</TABLE>
40
<PAGE> 47
<TABLE>
<CAPTION>
MANUFACTURER CABINET STYLE DENOM. DESCRIPTION SERIAL NUMBER
- ------------ ------------- ------ ----------- -------------
<S> <C> <C> <C> <C>
IGT 16" Upright Reel 0.25 SUPER 7 450885
IGT 16" Upright Reel 0.25 SUPER 7 450881
IGT 16" Upright Reel 0.5 BLACKJACK 441540
IGT 16" Upright Reel 0.5 FAB 50'S WILDSTAR 467394
R, W & B
IGT 16" Upright Reel 0.5 FAB 50'S DD DELUXE 467398
IGT 16" Upright Reel 0.5 FAB 50'S DD DELUXE 467396
IGT 16" Upright Reel 0.5 FAB 50'S DD DELUXE 467399
IGT 16" Upright Reel 0.5 FAB 50'S WILDSTAR R,W,&B 467395
IGT 16" Upright Reel 0.5 FAB 50'S WILDSTAR R,W,&B 467397
IGT 16" Upright Reel 0.5 JACKPOT JEWELS 441536
IGT 16" Upright Reel 0.5 SEVEN SEAS 441538
IGT 16" Upright Reel 0.5 WILD CHERRY 441542
IGT 16" Upright Reel 1 BALLOON BARS 442035
IGT 16" Upright Reel 1 BLACKJACK 441539
IGT 16" Upright Reel 1 CATS AND DOGS 441472
IGT 16" Upright Reel 1 CATS AND DOGS 442026
IGT 16" Upright Reel 1 CATS AND DOGS 442021
IGT 16" Upright Reel 1 DBL DIAMOND DELUXE 441476
IGT 16" Upright Reel 1 DBL DIAMOND DELUXE 442014
IGT 16" Upright Reel 1 DBL DIAMOND DELUXE 442015
IGT 16" Upright Reel 1 DBL DIAMOND DELUXE 451001
IGT 16" Upright Reel 1 DBL DIAMOND DELUXE 441477
IGT 16" Upright Reel 1 DBL DOLLAR STYLE DBL 442023
IGT 16" Upright Reel 1 DBL JACKPOT HAYWIRE 451002
IGT 16" Upright Reel 1 DBL JACKPOT HAYWIRE 442011
IGT 16" Upright Reel 1 DBL JACKPOT HAYWIRE 442012
IGT 16" Upright Reel 1 DBL RED WHITE AND BLUE 441508
IGT 16" Upright Reel 1 DBL RED WHITE AND BLUE 441713
IGT 16" Upright Reel 1 DOUBLE BLACK TIE 441504
IGT 16" Upright Reel 1 DOUBLE BLACKJACK 441513
IGT 16" Upright Reel 1 DOUBLE BLACKJACK 441478
IGT 16" Upright Reel 1 DOUBLE BLACKJACK 441514
</TABLE>
41
<PAGE> 48
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
IGT 16" Upright Reel 1 DOUBLE CHERRY BAR 442036
IGT 16" Upright Reel 1 DOUBLE CHERRY BAR 442031
IGT 16" Upright Reel 1 DOUBLE DIAMOND 441493
IGT 16" Upright Reel 1 DOUBLE DIAMOND 451005
IGT 16" Upright Reel 1 DOUBLE DIAMOND 441492
IGT 16" Upright Reel 1 DOUBLE DIAMOND 441474
IGT 16" Upright Reel 1 DOUBLE DIAMOND 441475
IGT 16" Upright Reel 1 DOUBLE DOUBLE DIAMOND 441512
IGT 16" Upright Reel 1 DOUBLE DOUBLE DIAMOND 442029
IGT 16" Upright Reel 1 DOUBLE JACKPOT 441495
IGT 16" Upright Reel 1 DOUBLE JACKPOT 441494
IGT 16" Upright Reel 1 DOUBLE WILD CHERRY 451003
IGT 16" Upright Reel 1 FIVE THOUSAND 442043
IGT 16" Upright Reel 1 FIVE THOUSAND 442042
IGT 16" Upright Reel 1 FIVE TIMES PAY 442065
IGT 16" Upright Reel 1 FULL FRUIT WITH BARS 442064
IGT 16" Upright Reel 1 GO BANANAS 442039
IGT 16" Upright Reel 1 GOLD, SILVER & BRONZ 450994
IGT 16" Upright Reel 1 GOLD, SILVER & BRONZ 441511
IGT 16" Upright Reel 1 HOME RUN 450992
IGT 16" Upright Reel 1 HOME RUN 441499
IGT 16" Upright Reel 1 HOME RUN 441497
IGT 16" Upright Reel 1 HOT PEPPERS 442038
IGT 16" Upright Reel 1 HOT PEPPERS 441515
IGT 16" Upright Reel 1 HOT PEPPERS 441537
IGT 16" Upright Reel 1 JACKPOT JUNGLE 441488
IGT 16" Upright Reel 1 JACKPOT JUNGLE 442025
IGT 16" Upright Reel 1 KNOCKDOWN 441509
IGT 16" Upright Reel 1 LOUISIANA LOUIE 442028
IGT 16" Upright Reel 1 LOUISIANA LOUIE 451004
IGT 16" Upright Reel 1 MAJESTIC 7'S 441503
IGT 16" Upright Reel 1 MEGABUCKS BLACKTIE 467411
IGT 16" Upright Reel 1 MEGABUCKS DD 467406
IGT 16" Upright Reel 1 MEGABUCKS DD 467409
IGT 16" Upright Reel 1 MEGABUCKS DD 467410
IGT 16" Upright Reel 1 MEGABUCKS RW&B 467407
IGT 16" Upright Reel 1 MEGABUCKS RW&B 467408
</TABLE>
42
<PAGE> 49
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
IGT 16" Upright Reel 1 MOOLAH 441500
IGT 16" Upright Reel 1 MOOLAH 441510
IGT 16" Upright Reel 1 PHAROAH'S GOLD 451043
IGT 16" Upright Reel 1 PHAROAH'S GOLD 451042
IGT 16" Upright Reel 1 PLAYBALL 441502
IGT 16" Upright Reel 1 RED WHITE AND BLUE 441471
IGT 16" Upright Reel 1 RED WHITE AND BLUE WSTAR 441486
IGT 16" Upright Reel 1 RED, WHITE & BLUE 451039
IGT 16" Upright Reel 1 RED, WHITE & BLUE 442024
IGT 16" Upright Reel 1 RED, WHITE & BLUE 442017
IGT 16" Upright Reel 1 RED, WHITE & BLUE 441479
IGT 16" Upright Reel 1 RED, WHITE & BLUE 442018
IGT 16" Upright Reel 1 RED, WHITE & BLUE 441480
IGT 16" Upright Reel 1 RED, WHITE & BLUE 442016
IGT 16" Upright Reel 1 RED, WHITE, & BLUE 441535
IGT 16" Upright Reel 1 SCOREBOARD 442037
IGT 16" Upright Reel 1 SIERRA SILVER 442067
IGT 16" Upright Reel 1 SIERRA SILVER 450996
IGT 16" Upright Reel 1 SIERRA SILVER 441496
IGT 16" Upright Reel 1 SIZZLIN 7'S 451008
IGT 16" Upright Reel 1 SIZZLIN 7'S 441506
IGT 16" Upright Reel 1 SLAM DUNK 442032
IGT 16" Upright Reel 1 SLAM DUNK 442033
IGT 16" Upright Reel 1 SPIN TIL YOU WIN 442058
IGT 16" Upright Reel 1 SPIN TIL YOU WIN 442059
IGT 16" Upright Reel 1 SUPER 7 441505
IGT 16" Upright Reel 1 SUPER BAR 451009
IGT 16" Upright Reel 1 SUPERSTARS 451000
IGT 16" Upright Reel 1 TRIPLE BONANZA 442027
IGT 16" Upright Reel 1 TRIPLE BONANZA 442013
IGT 16" Upright Reel 1 TRIPLE BONANZA 450997
IGT 16" Upright Reel 1 TRIPLE BONANZA 441490
IGT 16" Upright Reel 1 TRIPLE DIAMOND 441516
IGT 16" Upright Reel 1 TRIPLE DIAMOND 450993
IGT 16" Upright Reel 1 TRIPLE DOLLAR 441507
IGT 16" Upright Reel 1 TRIPLE DOLLARS 441498
IGT 16" Upright Reel 1 TRIPLE JACKPOT 441485
IGT 16" Upright Reel 1 TRIPLE JACKPOT 441487
IGT 16" Upright Reel 1 TRIPLE JACKPOT III 450995
IGT 16" Upright Reel 1 TRIPLE JACKPOT III 442030
IGT 16" Upright Reel 1 WILD CHERRY 442055
IGT 16" Upright Reel 1 WILD CHERRY 442056
IGT 16" Upright Reel 1 WILD CHERRY 441541
IGT 16" Upright Reel 1 WILD CHERRY 441482
</TABLE>
43
<PAGE> 50
<TABLE>
<S> <C> <C> <C> <C>
IGT 16" Upright Reel 1 WILD CHERRY 441483
IGT 16" Upright Reel 1 WILD CHERRY 441484
IGT 16" Upright Reel 1 WILD CHERRY 441489
IGT 16" Upright Reel 1 WILD CHERRY 441491
IGT 16" Upright Reel 1 WILD CHERRY 441481
IGT 16" Upright Reel 1 WILD CHERRY 442022
IGT 16" Upright Reel 1 WILD STAR 442020
IGT 16" Upright Reel 1 WILD STAR 441470
IGT 16" Upright Reel 1 WILD STAR 441469
IGT 16" Upright Reel 1 WILD STAR RW&B 442019
IGT 16" Upright Reel 5 BLACK WIDOW 441561
IGT 16" Upright Reel 5 DBL RED WHITE AND BLUE 441558
IGT 16" Upright Reel 5 DOUBLE BLACK TIE 441563
IGT 16" Upright Reel 5 DOUBLE DIAMOND 450998
IGT 16" Upright Reel 5 DOUBLE DIAMOND DLX 441562
IGT 16" Upright Reel 5 MOOLAH 441560
IGT 16" Upright Reel 5 MOOLAH 441559
IGT 16" Upright Reel 5 PLAYBALL 441501
IGT 16" Upright Reel 25 DOUBLE DIAMOND 451244
IGT 16" Upright Reel 25 DOUBLE DIAMOND 451243
IGT 16" Upright Reel 25 RED, WHITE & BLUE 451241
IGT 16" Upright Reel 25 RED, WHITE & BLUE 451242
IGT 16" Upright Reel 100 DOUBLE DIAMOND 450751
IGT 16" Upright Reel 100 RED, WHITE & BLUE 450750
IGT 9" Upright Reel 0.05 CARTOON WILD CHERRY 450762
IGT 9" Upright Reel 0.05 CARTOON WILD CHERRY 450760
IGT 9" Upright Reel 0.05 CARTOON WILD CHERRY 450758
IGT 9" Upright Reel 0.05 CARTOON WILD CHERRY 450761
IGT 9" Upright Reel 0.05 DOUBLE DIAMOND 450763
IGT 9" Upright Reel 0.05 DOUBLE DIAMOND 450756
IGT 9" Upright Reel 0.05 DOUBLE DIAMOND 441524
IGT 9" Upright Reel 0.05 HAYWIRE 450772
IGT 9" Upright Reel 0.05 JACKPOT JUNGLE 450755
IGT 9" Upright Reel 0.05 JACKPOT JUNGLE 450754
IGT 9" Upright Reel 0.05 JACKPOT JUNGLE 450753
IGT 9" Upright Reel 0.05 JACKPOT JUNGLE 450752
IGT 9" Upright Reel 0.05 JOKERS WILD 450766
IGT 9" Upright Reel 0.05 JOKERS WILD 450767
IGT 9" Upright Reel 0.05 JOKERS WILD 450769
</TABLE>
44
<PAGE> 51
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
IGT 9" Upright Reel 0.05 JOKERS WILD 450768
IGT 9" Upright Reel 0.05 RED, WHITE & BLUE 450757
IGT 9" Upright Reel 0.05 ROYAL FLUSH QUEEN 450759
IGT 9" Upright Reel 0.05 S-SLOT 450770
IGT 9" Upright Reel 0.05 S-SLOT 450771
IGT 9" Upright Reel 0.05 TRIPLE PLAY 450764
IGT 9" Upright Reel 0.05 WILDSTAR 450773
IGT 9" Upright Reel 0.25 4TH OF JULY 452186
IGT 9" Upright Reel 0.25 4TH OF JULY 441440
IGT 9" Upright Reel 0.25 4TH OF JULY 450959
IGT 9" Upright Reel 0.25 4TH OF JULY 441441
IGT 9" Upright Reel 0.25 4TH OF JULY 450941
IGT 9" Upright Reel 0.25 4TH OF JULY 451294
IGT 9" Upright Reel 0.25 8 BALL 452166
IGT 9" Upright Reel 0.25 8 BALL 441543
IGT 9" Upright Reel 0.25 BALLOON BARS 450958
IGT 9" Upright Reel 0.25 BALLOON BARS 451310
IGT 9" Upright Reel 0.25 BLACK WIDOW 450937
IGT 9" Upright Reel 0.25 BLACKJACK 450950
IGT 9" Upright Reel 0.25 BLACKJACK 442069
IGT 9" Upright Reel 0.25 BLACKJACK 450949
IGT 9" Upright Reel 0.25 BLACKJACK 450948
IGT 9" Upright Reel 0.25 BLACKJACK 442070
IGT 9" Upright Reel 0.25 BLACKJACK 441989
IGT 9" Upright Reel 0.25 BULLS-EYE 452144
IGT 9" Upright Reel 0.25 BULLS-EYE 452145
IGT 9" Upright Reel 0.25 CANDY BARS 451332
IGT 9" Upright Reel 0.25 CARTOON WILD CHERRY 442116
IGT 9" Upright Reel 0.25 CARTOON WILD CHERRY 442113
IGT 9" Upright Reel 0.25 CARTOON WILD CHERRY 442114
IGT 9" Upright Reel 0.25 CARTOON WILD CHERRY 442111
IGT 9" Upright Reel 0.25 CORAL REEF 452143
IGT 9" Upright Reel 0.25 CORAL REEF 450952
IGT 9" Upright Reel 0.25 CORAL REEF 452142
IGT 9" Upright Reel 0.25 DBL DIAMOND DELUXE 452091
IGT 9" Upright Reel 0.25 DBL DIAMOND DELUXE 450914
IGT 9" Upright Reel 0.25 DBL DIAMOND DELUXE 450915
IGT 9" Upright Reel 0.25 DBL DIAMOND DELUXE 452093
</TABLE>
45
<PAGE> 52
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
IGT 9" Upright Reel 0.25 DBL DIAMOND DELUXE 452089
IGT 9" Upright Reel 0.25 DBL DIAMOND DELUXE 442080
IGT 9" Upright Reel 0.25 DBL DIAMOND DELUXE 450916
IGT 9" Upright Reel 0.25 DBL DIAMOND DELUXE 452092
IGT 9" Upright Reel 0.25 DBL DIAMOND DELUXE 452087
IGT 9" Upright Reel 0.25 DBL DIAMOND DELUXE 451330
IGT 9" Upright Reel 0.25 DBL DIAMOND DELUXE 452185
IGT 9" Upright Reel 0.25 DBL JACKPOT HAYWIRE 452102
IGT 9" Upright Reel 0.25 DBL JACKPOT HAYWIRE 450906
IGT 9" Upright Reel 0.25 DBL JACKPOT HAYWIRE 450907
IGT 9" Upright Reel 0.25 DBL JACKPOT HAYWIRE 442093
IGT 9" Upright Reel 0.25 DBL JACKPOT HAYWIRE 452105
IGT 9" Upright Reel 0.25 DBL JACKPOT HAYWIRE 442091
IGT 9" Upright Reel 0.25 DBL JACKPOT HAYWIRE 450960
IGT 9" Upright Reel 0.25 DBL JACKPOT HAYWIRE 450962
IGT 9" Upright Reel 0.25 DBL JACKPOT HAYWIRE 442092
IGT 9" Upright Reel 0.25 DBL JACKPOT HAYWIRE 450908
IGT 9" Upright Reel 0.25 DBL JACKPOT HAYWIRE 452104
IGT 9" Upright Reel 0.25 DBL JACKPOT HAYWIRE 450905
IGT 9" Upright Reel 0.25 DBL JACKPOT HAYWIRE 441446
IGT 9" Upright Reel 0.25 DBL RED WHITE AND BLUE 450980
IGT 9" Upright Reel 0.25 DBL RED WHITE AND BLUE 451302
IGT 9" Upright Reel 0.25 DOUBLE WILD CHERRY 452118
</TABLE>
46
<PAGE> 53
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
IGT 9" Upright Reel 0.25 DOUBLE BLACK TIE 452121
IGT 9" Upright Reel 0.25 DOUBLE BLACKJACK 450974
IGT 9" Upright Reel 0.25 DOUBLE CHERRY BAR 452139
IGT 9" Upright Reel 0.25 DOUBLE CHERRY BAR 451293
IGT 9" Upright Reel 0.25 DOUBLE DIAMOND 442121
IGT 9" Upright Reel 0.25 DOUBLE DIAMOND 452135
IGT 9" Upright Reel 0.25 DOUBLE DIAMOND 442079
IGT 9" Upright Reel 0.25 DOUBLE DIAMOND 442077
IGT 9" Upright Reel 0.25 DOUBLE DIAMOND 442120
IGT 9" Upright Reel 0.25 DOUBLE DIAMOND 452136
IGT 9" Upright Reel 0.25 DOUBLE DIAMOND 442078
IGT 9" Upright Reel 0.25 DOUBLE DIAMOND 450928
IGT 9" Upright Reel 0.25 DOUBLE DIAMOND 452082
IGT 9" Upright Reel 0.25 DOUBLE DIAMOND 452086
IGT 9" Upright Reel 0.25 DOUBLE DIAMOND 452081
IGT 9" Upright Reel 0.25 DOUBLE DIAMOND 452133
IGT 9" Upright Reel 0.25 DOUBLE DIAMOND 452084
IGT 9" Upright Reel 0.25 DOUBLE DIAMOND 442127
IGT 9" Upright Reel 0.25 DOUBLE DIAMOND 442122
IGT 9" Upright Reel 0.25 DOUBLE DIAMOND 452085
IGT 9" Upright Reel 0.25 DOUBLE DIAMOND 450972
IGT 9" Upright Reel 0.25 DOUBLE DIAMOND 450919
IGT 9" Upright Reel 0.25 DOUBLE DIAMOND 452131
IGT 9" Upright Reel 0.25 DOUBLE DIAMOND 452134
IGT 9" Upright Reel 0.25 DOUBLE DIAMOND 450917
IGT 9" Upright Reel 0.25 DOUBLE DOLLAR 442083
IGT 9" Upright Reel 0.25 DOUBLE DOLLAR 442082
IGT 9" Upright Reel 0.25 DOUBLE DOLLAR 442081
IGT 9" Upright Reel 0.25 DOUBLE JACKPOT 450973
IGT 9" Upright Reel 0.25 DOUBLE JACKPOT 442124
IGT 9" Upright Reel 0.25 DOUBLE JACKPOT 450976
IGT 9" Upright Reel 0.25 DOUBLE JACKPOT 442123
IGT 9" Upright Reel 0.25 DOUBLE JACKPOT 452120
IGT 9" Upright Reel 0.25 DOUBLE JACKPOT 452124
IGT 9" Upright Reel 0.25 DOUBLE JACKPOT 442087
IGT 9" Upright Reel 0.25 DOUBLE JACKPOT 442085
IGT 9" Upright Reel 0.25 DOUBLE JACKPOT 442094
IGT 9" Upright Reel 0.25 DOUBLE JACKPOT 442086
IGT 9" Upright Reel 0.25 DOUBLE JACKPOT 452123
IGT 9" Upright Reel 0.25 DOUBLE JACKPOT 442084
IGT 9" Upright Reel 0.25 DOUBLE JACKPOT 450934
IGT 9" Upright Reel 0.25 DOUBLE JACKPOT 452119
IGT 9" Upright Reel 0.25 DOUBLE MANIA 450945
IGT 9" Upright Reel 0.25 DOUBLE MANIA 450954
</TABLE>
47
<PAGE> 54
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
IGT 9" Upright Reel 0.25 DOUBLE MANIA 450955
IGT 9" Upright Reel 0.25 DOUBLE MANIA 450956
IGT 9" Upright Reel 0.25 DOUBLE MANIA 442072
IGT 9" Upright Reel 0.25 DOUBLE MANIA 452161
IGT 9" Upright Reel 0.25 DOUBLE MANIA 451320
IGT 9" Upright Reel 0.25 DOUBLE WILD CHERRY 450963
IGT 9" Upright Reel 0.25 DOUBLE WILD CHERRY 442053
IGT 9" Upright Reel 0.25 DOUBLE WILD CHERRY 441996
IGT 9" Upright Reel 0.25 DOUBLE WILD CHERRY 441450
IGT 9" Upright Reel 0.25 EARTHQUAKE 442071
IGT 9" Upright Reel 0.25 EARTHQUAKE 452146
IGT 9" Upright Reel 0.25 EARTHQUAKE 442135
IGT 9" Upright Reel 0.25 EARTHQUAKE 452147
IGT 9" Upright Reel 0.25 EARTHQUAKE 442136
IGT 9" Upright Reel 0.25 FIST FULL OF DOLLARS 452148
IGT 9" Upright Reel 0.25 FIST FULL OF DOLLARS 452149
IGT 9" Upright Reel 0.25 GOLD MOUNTAIN 442125
IGT 9" Upright Reel 0.25 GOLD MOUNTAIN 452150
IGT 9" Upright Reel 0.25 GOLD MOUNTAIN 452137
IGT 9" Upright Reel 0.25 GOLD MOUNTAIN 452151
IGT 9" Upright Reel 0.25 GOLD MOUNTAIN 442126
IGT 9" Upright Reel 0.25 GOLD, SILVER & BRONZ 452138
IGT 9" Upright Reel 0.25 GOLD, SILVER & BRONZ 451339
IGT 9" Upright Reel 0.25 HAYWIRE 442089
IGT 9" Upright Reel 0.25 HAYWIRE 452100
IGT 9" Upright Reel 0.25 HAYWIRE 450903
IGT 9" Upright Reel 0.25 HAYWIRE 442090
IGT 9" Upright Reel 0.25 HAYWIRE 442088
IGT 9" Upright Reel 0.25 HOME RUN 450991
IGT 9" Upright Reel 0.25 HOME RUN 442129
IGT 9" Upright Reel 0.25 HOME RUN 450984
IGT 9" Upright Reel 0.25 HOT PEPPERS 452154
IGT 9" Upright Reel 0.25 HOT PEPPERS 452103
IGT 9" Upright Reel 0.25 HOT PEPPERS 452155
IGT 9" Upright Reel 0.25 JACKPOT JEWELS 442138
IGT 9" Upright Reel 0.25 JACKPOT JEWELS 442073
IGT 9" Upright Reel 0.25 JACKPOT JEWELS 450947
IGT 9" Upright Reel 0.25 JACKPOT JEWELS 452153
</TABLE>
48
<PAGE> 55
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
IGT 9" Upright Reel 0.25 JACKPOT JEWELS 442137
IGT 9" Upright Reel 0.25 JACKPOT JUNGLE 442117
IGT 9" Upright Reel 0.25 JACKPOT JUNGLE 442107
IGT 9" Upright Reel 0.25 JACKPOT JUNGLE 452111
IGT 9" Upright Reel 0.25 JACKPOT JUNGLE 442109
IGT 9" Upright Reel 0.25 JACKPOT JUNGLE 452107
IGT 9" Upright Reel 0.25 JACKPOT JUNGLE 452108
IGT 9" Upright Reel 0.25 JACKPOT JUNGLE 450967
IGT 9" Upright Reel 0.25 JACKPOT JUNGLE 452106
IGT 9" Upright Reel 0.25 JOKERS WILD 450982
IGT 9" Upright Reel 0.25 JOKERS WILD 452177
IGT 9" Upright Reel 0.25 JOKERS WILD 452178
IGT 9" Upright Reel 0.25 LOUISIANA LOUIE 450929
IGT 9" Upright Reel 0.25 LOUSIANA LOUIE 442110
IGT 9" Upright Reel 0.25 MOOLAH 452122
IGT 9" Upright Reel 0.25 PLAYBALL 442132
IGT 9" Upright Reel 0.25 PLAYBALL 452174
IGT 9" Upright Reel 0.25 PLAYBALL 452172
IGT 9" Upright Reel 0.25 PLAYBALL 452176
IGT 9" Upright Reel 0.25 PLAYBALL 452171
IGT 9" Upright Reel 0.25 PLAYBALL 452169
IGT 9" Upright Reel 0.25 PLAYBALL 452173
IGT 9" Upright Reel 0.25 PLAYBALL 451341
IGT 9" Upright Reel 0.25 RED, WHITE & BLUE 451044
IGT 9" Upright Reel 0.25 RED, WHITE & BLUE 450986
IGT 9" Upright Reel 0.25 RED, WHITE & BLUE 442119
IGT 9" Upright Reel 0.25 RED, WHITE & BLUE 452130
IGT 9" Upright Reel 0.25 RED, WHITE & BLUE 450987
IGT 9" Upright Reel 0.25 RED, WHITE & BLUE 442097
IGT 9" Upright Reel 0.25 RED, WHITE & BLUE 450970
IGT 9" Upright Reel 0.25 RED, WHITE & BLUE 442098
IGT 9" Upright Reel 0.25 RED, WHITE & BLUE 452127
IGT 9" Upright Reel 0.25 RED, WHITE & BLUE 451045
IGT 9" Upright Reel 0.25 RED, WHITE & BLUE 451046
IGT 9" Upright Reel 0.25 RED, WHITE & BLUE 452126
IGT 9" Upright Reel 0.25 RED, WHITE & BLUE 451047
IGT 9" Upright Reel 0.25 RED, WHITE & BLUE 450925
IGT 9" Upright Reel 0.25 RED, WHITE & BLUE 451048
IGT 9" Upright Reel 0.25 RED, WHITE & BLUE 450983
IGT 9" Upright Reel 0.25 RED, WHITE & BLUE 450920
IGT 9" Upright Reel 0.25 RED, WHITE & BLUE 452129
IGT 9" Upright Reel 0.25 RED, WHITE & BLUE 442095
IGT 9" Upright Reel 0.25 RED, WHITE & BLUE 442128
IGT 9" Upright Reel 0.25 RED, WHITE & BLUE 451049
IGT 9" Upright Reel 0.25 SEVENS UP 441445
IGT 9" Upright Reel 0.25 SEVENS UP 450940
</TABLE>
49
<PAGE> 56
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
IGT 9" Upright Reel 0.25 SIERRA SILVER 442118
IGT 9" Upright Reel 0.25 SIZZLIN 7'S 450961
IGT 9" Upright Reel 0.25 SIZZLIN 7'S 452180
IGT 9" Upright Reel 0.25 SIZZLING 7'S 450989
IGT 9" Upright Reel 0.25 SIZZLING 7'S 450988
IGT 9" Upright Reel 0.25 SIZZLING 7'S 442130
IGT 9" Upright Reel 0.25 SIZZLING 7'S 450990
IGT 9" Upright Reel 0.25 SPIN TIL YOU WIN 441547
IGT 9" Upright Reel 0.25 STRIKE 441551
IGT 9" Upright Reel 0.25 SUPER 7 450979
IGT 9" Upright Reel 0.25 SUPER 7 452179
IGT 9" Upright Reel 0.25 SUPER 7 450902
IGT 9" Upright Reel 0.25 SUPER BAR 450964
IGT 9" Upright Reel 0.25 SUPER BAR 450968
IGT 9" Upright Reel 0.25 SUPER BAR 450965
IGT 9" Upright Reel 0.25 SUPER JOKER 452159
IGT 9" Upright Reel 0.25 SUPER JOKER 452158
IGT 9" Upright Reel 0.25 THEME JOKERS WILD 450981
IGT 9" Upright Reel 0.25 TRIPLE BONANZA 441447
IGT 9" Upright Reel 0.25 TRIPLE CASH 451289
IGT 9" Upright Reel 0.25 TRIPLE DIAMOND 442115
IGT 9" Upright Reel 0.25 TRIPLE DOLLAR 441545
IGT 9" Upright Reel 0.25 TRIPLE JACKPOT 452095
IGT 9" Upright Reel 0.25 TRIPLE JACKPOT 452098
IGT 9" Upright Reel 0.25 TRIPLE JACKPOT 450927
IGT 9" Upright Reel 0.25 TRIPLE JACKPOT 452099
IGT 9" Upright Reel 0.25 TRIPLE JACKPOT 452097
IGT 9" Upright Reel 0.25 TRIPLE JACKPOT 452096
IGT 9" Upright Reel 0.25 TRIPLE JACKPOT 450926
IGT 9" Upright Reel 0.25 TRIPLE JACKPOT III 451313
IGT 9" Upright Reel 0.25 TRIPLE JACKPOT III 451286
IGT 9" Upright Reel 0.25 TRIPLE PLAY 450933
IGT 9" Upright Reel 0.25 TRIPLE PLAY 450932
IGT 9" Upright Reel 0.25 TRIPLE PLAY 441444
IGT 9" Upright Reel 0.25 TRIPLE PLAY 452140
IGT 9" Upright Reel 0.25 TRIPLE PLAY 441443
IGT 9" Upright Reel 0.25 TRIPLE TRIPLE DIAMOND 450936
IGT 9" Upright Reel 0.25 TRIPLE TRIPLE DIAMOND 452167
IGT 9" Upright Reel 0.25 TRIPLE TRIPLE DIAMOND 450969
IGT 9" Upright Reel 0.25 TRIPLE TRIPLE DIAMOND 450930
IGT 9" Upright Reel 0.25 VOLCANO 452156
IGT 9" Upright Reel 0.25 VOLCANO 450939
</TABLE>
50
<PAGE> 57
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
IGT 9" Upright Reel 0.25 VOLCANO 450938
IGT 9" Upright Reel 0.25 VOLCANO 452157
IGT 9" Upright Reel 0.25 WILD CHERRY 452116
IGT 9" Upright Reel 0.25 WILD CHERRY 450909
IGT 9" Upright Reel 0.25 WILD CHERRY 452112
IGT 9" Upright Reel 0.25 WILD CHERRY 442104
IGT 9" Upright Reel 0.25 WILD CHERRY 450910
IGT 9" Upright Reel 0.25 WILD CHERRY 450911
IGT 9" Upright Reel 0.25 WILD CHERRY 442103
IGT 9" Upright Reel 0.25 WILD CHERRY 450913
IGT 9" Upright Reel 0.25 WILD CHERRY 452113
IGT 9" Upright Reel 0.25 WILD CHERRY 452114
IGT 9" Upright Reel 0.25 WILD CHERRY 452117
IGT 9" Upright Reel 0.25 WILD CHERRY 442105
IGT 9" Upright Reel 0.25 WILD STAR 452077
IGT 9" Upright Reel 0.25 WILD STAR 442102
IGT 9" Upright Reel 0.25 WILD STAR 452080
IGT 9" Upright Reel 0.25 WILD STAR 452076
IGT 9" Upright Reel 0.25 WILD STAR 450924
IGT 9" Upright Reel 0.25 WILD STAR 450923
IGT 9" Upright Reel 0.25 WILD STAR 452079
IGT 9" Upright Reel 0.25 WILD STAR 452078
IGT 9" Upright Reel 0.25 WILD STAR 442099
IGT 9" Upright Reel 0.25 WILD STAR 442101
IGT 9" Upright Reel 0.25 WILD STAR 442100
IGT 9" Upright Reel 0.25 WILD STAR 452182
IGT 9" Upright Reel 0.25 WIN, PLACE OR SHOW 452164
IGT 9" Upright Reel 0.25 WIN, PLACE, OR SHOW 450944
IGT 9" Upright Reel 0.25 WIN, PLACE, OR SHOW 450943
IGT 9" Upright Reel 0.5 4TH OF JULY 442001
IGT 9" Upright Reel 0.5 DBL DOLLAR STYLE DBL 442002
IGT 9" Upright Reel 0.5 DBL JACKPOT HAYWIRE 441999
IGT 9" Upright Reel 0.5 DBL JACKPOT HAYWIRE 450791
IGT 9" Upright Reel 0.5 DBL JACKPOT HAYWIRE 441998
IGT 9" Upright Reel 0.5 DOUBLE DIAMOND 442003
IGT 9" Upright Reel 0.5 DOUBLE JACKPOT 450788
IGT 9" Upright Reel 0.5 DOUBLE JACKPOT 450789
IGT 9" Upright Reel 0.5 DOUBLE JACKPOT 450787
IGT 9" Upright Reel 0.5 DOUBLE WILD CHERRY 450792
</TABLE>
51
<PAGE> 58
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
IGT 9" Upright Reel 0.5 JACKPOT JEWELS 442000
IGT 9" Upright Reel 0.5 RED, WHITE & BLUE 442004
IGT 9" Upright Reel 0.5 TRIPLE JACKPOT 450790
IGT 9" Upright Reel 1 4TH OF JULY 452141
IGT 9" Upright Reel 1 4TH OF JULY 451295
IGT 9" Upright Reel 1 4TH OF JULY 451296
IGT 9" Upright Reel 1 BALLOON BARS 450957
IGT 9" Upright Reel 1 BALLOON BARS 451309
IGT 9" Upright Reel 1 BLACK WIDOW 451326
IGT 9" Upright Reel 1 BLACKJACK 441993
IGT 9" Upright Reel 1 BLACKJACK 451343
IGT 9" Upright Reel 1 BLACKJACK 441995
IGT 9" Upright Reel 1 BLACKJACK 441991
IGT 9" Upright Reel 1 BLACKJACK 451342
IGT 9" Upright Reel 1 BLACKJACK 451299
IGT 9" Upright Reel 1 BLACKJACK 441994
IGT 9" Upright Reel 1 CANDY BARS 441557
IGT 9" Upright Reel 1 CARTOON WILD CHERRY 442112
IGT 9" Upright Reel 1 CATS AND DOGS 452160
IGT 9" Upright Reel 1 DBL DIAMOND DELUXE 452088
IGT 9" Upright Reel 1 DBL DIAMOND DELUXE 452090
IGT 9" Upright Reel 1 DBL DIAMOND DELUXE 441449
IGT 9" Upright Reel 1 DBL DIAMOND DELUXE 452184
IGT 9" Upright Reel 1 DBL DIAMOND DELUXE 441448
IGT 9" Upright Reel 1 DBL JACKPOT HAYWIRE 451306
IGT 9" Upright Reel 1 DOUBLE BLACKJACK 452109
IGT 9" Upright Reel 1 DOUBLE CHERRY BAR 451297
IGT 9" Upright Reel 1 DOUBLE DIAMOND 452083
IGT 9" Upright Reel 1 DOUBLE DIAMOND 452132
IGT 9" Upright Reel 1 DOUBLE DOLLAR 451325
IGT 9" Upright Reel 1 DOUBLE DOUBLE DIAMOND 451311
IGT 9" Upright Reel 1 DOUBLE JACKPOT 450975
IGT 9" Upright Reel 1 DOUBLE JACKPOT 441459
IGT 9" Upright Reel 1 DOUBLE JACKPOT 441453
IGT 9" Upright Reel 1 DOUBLE JACKPOT 441454
IGT 9" Upright Reel 1 DOUBLE MANIA 450946
</TABLE>
52
<PAGE> 59
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
IGT 9" Upright Reel 1 DOUBLE MANIA 451319
IGT 9" Upright Reel 1 DOUBLE WILD CHERRY 441442
IGT 9" Upright Reel 1 FIVE TIMES PAY 451324
IGT 9" Upright Reel 1 FIVE TIMES PAY 451333
IGT 9" Upright Reel 1 FIVE TIMES PAY 451323
IGT 9" Upright Reel 1 GO BANANAS 441556
IGT 9" Upright Reel 1 GOLD, SILVER & BRONZ 452125
IGT 9" Upright Reel 1 HAYWIRE 450904
IGT 9" Upright Reel 1 HAYWIRE 451321
IGT 9" Upright Reel 1 HAYWIRE 441452
IGT 9" Upright Reel 1 HAYWIRE 451301
IGT 9" Upright Reel 1 HAYWIRE 451322
IGT 9" Upright Reel 1 HURRICANE 452163
IGT 9" Upright Reel 1 JACKPOT JEWELS 452152
IGT 9" Upright Reel 1 JACKPOT JEWELS 451314
IGT 9" Upright Reel 1 JACKPOT JUNGLE 451334
IGT 9" Upright Reel 1 JOKERS WILD 442133
IGT 9" Upright Reel 1 JOKERS WILD 441456
IGT 9" Upright Reel 1 LEAP FROG 451298
IGT 9" Upright Reel 1 LOIUSIANA LOUIE 450901
IGT 9" Upright Reel 1 LOUISIANA LOUIE 452165
IGT 9" Upright Reel 1 MOOLAH 451316
IGT 9" Upright Reel 1 PLAYBALL 452170
IGT 9" Upright Reel 1 PLAYBALL 452168
IGT 9" Upright Reel 1 PLAYBALL 452175
IGT 9" Upright Reel 1 PLAYBALL 451340
IGT 9" Upright Reel 1 RED, WHITE & BLUE 450985
IGT 9" Upright Reel 1 RED, WHITE & BLUE 442108
IGT 9" Upright Reel 1 RED, WHITE & BLUE 450978
IGT 9" Upright Reel 1 RED, WHITE & BLUE 450922
IGT 9" Upright Reel 1 RED, WHITE & BLUE 450935
IGT 9" Upright Reel 1 RED, WHITE & BLUE 450971
IGT 9" Upright Reel 1 RED, WHITE & BLUE 452128
IGT 9" Upright Reel 1 RED, WHITE & BLUE 450921
IGT 9" Upright Reel 1 RED, WHITE & BLUE 450966
IGT 9" Upright Reel 1 RED, WHITE & BLUE 442096
IGT 9" Upright Reel 1 RED, WHITE & BLUE 451303
IGT 9" Upright Reel 1 RED, WHITE & BLUE 451317
IGT 9" Upright Reel 1 RED, WHITE & BLUE 451307
IGT 9" Upright Reel 1 RED, WHITE & BLUE 451300
IGT 9" Upright Reel 1 RED, WHITE & BLUE 441457
IGT 9" Upright Reel 1 RED, WHITE & BLUE 451318
IGT 9" Upright Reel 1 RED, WHITE & BLUE 451312
IGT 9" Upright Reel 1 RED, WHITE & BLUE 451331
</TABLE>
53
<PAGE> 60
<TABLE>
<S> <C> <C> <C> <C>
IGT 9" Upright Reel 1 RED, WHITE & BLUE 441990
IGT 9" Upright Reel 1 RED, WHITE & BLUE 441552
IGT 9" Upright Reel 1 RED, WHITE & BLUE 441546
IGT 9" Upright Reel 1 RED, WHITE & BLUE 451327
IGT 9" Upright Reel 1 RED, WHITE & BLUE 441458
IGT 9" Upright Reel 1 RED, WHITE & BLUE 441455
IGT 9" Upright Reel 1 RED, WHITE & BLUE 451338
IGT 9" Upright Reel 1 RED, WHITE & BLUE DLX WS 451329
IGT 9" Upright Reel 1 SIERRA SILVER 451335
IGT 9" Upright Reel 1 SIZZLIN 7'S 450951
IGT 9" Upright Reel 1 SPIN TIL YOU WIN 441549
IGT 9" Upright Reel 1 SPIN TIL YOU WIN 441548
IGT 9" Upright Reel 1 SPIN TIL YOU WIN 441550
IGT 9" Upright Reel 1 SUPER 7 442134
IGT 9" Upright Reel 1 SUPER 7 450977
IGT 9" Upright Reel 1 SUPER BAR 451287
IGT 9" Upright Reel 1 SUPER BAR 451288
IGT 9" Upright Reel 1 SUPER BAR 451290
IGT 9" Upright Reel 1 SUPERSTARS 441555
IGT 9" Upright Reel 1 TRIPLE CASH 450765
IGT 9" Upright Reel 1 TRIPLE DIAMOND 441553
IGT 9" Upright Reel 1 TRIPLE DIAMOND 441554
IGT 9" Upright Reel 1 TRIPLE DIAMOND 451291
IGT 9" Upright Reel 1 TRIPLE DIAMOND 451292
IGT 9" Upright Reel 1 TRIPLE DOLLAR 451328
IGT 9" Upright Reel 1 TRIPLE DOLLAR 441544
IGT 9" Upright Reel 1 TRIPLE DOLLAR 451304
IGT 9" Upright Reel 1 TRIPLE DOLLARS 452110
IGT 9" Upright Reel 1 TRIPLE DOLLARS 441997
IGT 9" Upright Reel 1 TRIPLE JACKPOT 452094
IGT 9" Upright Reel 1 WILD CHERRY 442106
IGT 9" Upright Reel 1 WILD CHERRY 450912
IGT 9" Upright Reel 1 WILD CHERRY 452115
IGT 9" Upright Reel 1 WILD STAR 450774
IGT 9" Upright Reel 1 WILD STAR 451050
IGT 9" Upright Reel 1 WILD STAR 452183
IGT 9" Upright Reel 1 WILD STAR 451007
IGT 9" Upright Reel 1 WILD STAR 451337
IGT 9" Upright Reel 1 WILD STAR 452181
IGT 9" Upright Reel 1 WILD STAR 441451
IGT 9" Upright Reel 5 BALLOON BARS 451308
IGT 9" Upright Reel 5 BLACKJACK 441992
IGT 9" Upright Reel 5 DBL RED WHITE AND BLUE 451336
IGT 9" Upright Reel 5 DOUBLE DIAMOND 451305
</TABLE>
54
<PAGE> 61
<TABLE>
<S> <C> <C> <C> <C>
IGT 9" Upright Reel 5 DOUBLE WILD CHERRY 442054
IGT 9" Upright Reel 5 TRIPLE JACKPOT 451315
IGT 9" Upright Reel I.00 TRIPLE BONANZA 450931
IGT Bar Top Poker 0.25 BONUS POKER 456816
IGT Bar Top Poker 0.25 BONUS POKER 456817
IGT Bar Top Poker 0.25 BONUS POKER 456818
IGT Bar Top Poker 0.25 BONUS POKER 456819
IGT Bar Top Poker 0.25 BONUS POKER 456820
IGT Bar Top Poker 0.25 BONUS POKER 456821
IGT Bar Top Poker 0.25 BONUS POKER 456824
IGT Bar Top Poker 0.25 BONUS POKER 456825
IGT Bar Top Poker 0.25 BONUS POKER 456826
IGT Bar Top Poker 0.25 DUECES WILD POKER 456833
IGT Bar Top Poker 0.25 DUECES WILD POKER 456832
IGT Bar Top Poker 0.25 JACKS OR BETTER 456799
IGT Bar Top Poker 0.25 JACKS OR BETTER 456800
IGT Bar Top Poker 0.25 JACKS OR BETTER 456801
IGT Bar Top Poker 0.25 JACKS OR BETTER 456802
IGT Bar Top Poker 0.25 JACKS OR BETTER 456803
IGT Bar Top Poker 0.25 JACKS OR BETTER 456804
IGT Bar Top Poker 0.25 JACKS OR BETTER 456805
IGT Bar Top Poker 0.25 JACKS OR BETTER 456806
IGT Bar Top Poker 0.25 JACKS OR BETTER 456807
IGT Bar Top Poker 0.25 JACKS OR BETTER 456808
IGT Bar Top Poker 0.25 JACKS OR BETTER 456809
IGT Bar Top Poker 0.25 JACKS OR BETTER 456810
IGT Bar Top Poker 0.25 JACKS OR BETTER 456813
IGT Bar Top Poker 0.25 JACKS OR BETTER 456814
IGT Bar Top Poker 0.25 JACKS OR BETTER 456839
IGT Bar Top Poker 0.25 JACKS OR BETTER 456827
IGT Bar Top Poker 0.25 JACKS OR BETTER 456828
IGT Bar Top Poker 0.25 JACKS OR BETTER 456829
IGT Bar Top Poker 0.25 JACKS OR BETTER 456834
IGT Bar Top Poker 0.25 JACKS OR BETTER 456830
IGT Bar Top Poker 0.25 JACKS OR BETTER 456831
IGT Bar Top Poker 0.25 JACKS OR BETTER 456842
IGT Bar Top Poker 0.25 JACKS OR BETTER 456840
IGT Bar Top Poker 0.25 JACKS OR BETTER 456843
IGT Bar Top Poker 0.25 JACKS OR BETTER 456844
IGT Bar Top Poker 0.25 JACKS OR BETTER 456845
IGT Bar Top Poker 0.25 JACKS OR BETTER 456847
IGT Bar Top Poker 0.25 JACKS OR BETTER 456848
IGT Bar Top Poker 0.25 JOKER POKER 456836
</TABLE>
55
<PAGE> 62
<TABLE>
<S> <C> <C> <C> <C>
IGT Bar Top Poker 0.25 JOKER POKER 456837
IGT Bar Top Poker 0.25 JOKER POKER 456838
IGT Dbl Scr 0.25 KENO 457672
IGT Dbl Scr 0.25 KENO 457678
IGT Dbl Scr 0.25 KENO 457683
IGT Dbl Scr 0.25 KENO 457679
IGT Dbl Scr 0.25 KENO 457680
IGT Dbl Scr 0.25 KENO 457681
IGT Dbl Scr 0.25 KENO 457684
IGT Dbl Scr 0.25 KENO 457682
IGT Dbl Scr 0.25 KENO 457673
IGT Round Top 0.25 4TH OF JULY 451025
IGT Round Top 0.25 BLACK WIDOW 451030
IGT Round Top 0.25 DBL DIAMOND DELUXE 451028
IGT Round Top 0.25 DBL DIAMOND DELUXE 451027
IGT Round Top 0.25 DBL DIAMOND DELUXE 441521
IGT Round Top 0.25 DBL DIAMOND DELUXE 450866
IGT Round Top 0.25 DBL DOLLAR STYLE DBL 451034
IGT Round Top 0.25 DBL JACKPOT HAYWIRE 451020
IGT Round Top 0.25 DBL JACKPOT HAYWIRE 450893
IGT Round Top 0.25 DBL JACKPOT HAYWIRE 451194
IGT Round Top 0.25 DBL JACKPOT HAYWIRE 450896
IGT Round Top 0.25 DBL JACKPOT HAYWIRE 450898
IGT Round Top 0.25 DBL JACKPOT HAYWIRE 450895
IGT Round Top 0.25 DBL JACKPOT HAYWIRE 450899
IGT Round Top 0.25 DBL JACKPOT HAYWIRE 451195
IGT Round Top 0.25 DBL JACKPOT HAYWIRE 451196
IGT Round Top 0.25 DBL JACKPOT HAYWIRE 450897
IGT Round Top 0.25 DBL JACKPOT HAYWIRE 451197
IGT Round Top 0.25 DBL JACKPOT HAYWIRE 450894
</TABLE>
56
<PAGE> 63
<TABLE>
<S> <C> <C> <C> <C>
IGT Round Top 0.25 DBL JACKPOT HAYWIRE 451021
IGT Round Top 0.25 DBL JACKPOT HAYWIRE 442048
IGT Round Top 0.25 DBL JACKPOT HAYWIRE 441520
IGT Round Top 0.25 DBL JACKPOT HAYWIRE 452101
IGT Round Top 0.25 DOUBLE DIAMOND 442063
IGT Round Top 0.25 DOUBLE DIAMOND 451232
IGT Round Top 0.25 DOUBLE DIAMOND 451231
IGT Round Top 0.25 DOUBLE DIAMOND 451240
IGT Round Top 0.25 DOUBLE DIAMOND 451239
IGT Round Top 0.25 DOUBLE DIAMOND 451036
IGT Round Top 0.25 DOUBLE DIAMOND 442062
IGT Round Top 0.25 DOUBLE DIAMOND 442061
IGT Round Top 0.25 DOUBLE DIAMOND 451233
IGT Round Top 0.25 DOUBLE DIAMOND 442040
IGT Round Top 0.25 DOUBLE DIAMOND 442041
IGT Round Top 0.25 DOUBLE DIAMOND 450918
IGT Round Top 0.25 DOUBLE JACKPOT 442060
IGT Round Top 0.25 DOUBLE WILD CHERRY 451019
IGT Round Top 0.25 EARTHQUAKE 441525
IGT Round Top 0.25 GOLD MOUNTAIN 451234
IGT Round Top 0.25 GOLD MOUNTAIN 451235
IGT Round Top 0.25 GOLD MOUNTAIN 451237
IGT Round Top 0.25 GOLD MOUNTAIN 451238
IGT Round Top 0.25 GOLD MOUNTAIN 441532
IGT Round Top 0.25 HAYWIRE 451014
IGT Round Top 0.25 HAYWIRE 442046
IGT Round Top 0.25 HAYWIRE 442045
IGT Round Top 0.25 HAYWIRE 442047
IGT Round Top 0.25 JACKPOT JEWELS 442074
IGT Round Top 0.25 JACKPOT JUNGLE 442050
IGT Round Top 0.25 PHARAOH' S GOLD 441533
IGT Round Top 0.25 PHARAOH'S GOLD 441534
IGT Round Top 0.25 RED, WHITE & BLUE 451204
IGT Round Top 0.25 RED, WHITE & BLUE 451201
IGT Round Top 0.25 RED, WHITE & BLUE 451198
IGT Round Top 0.25 RED, WHITE & BLUE 451207
IGT Round Top 0.25 RED, WHITE & BLUE 451202
IGT Round Top 0.25 RED, WHITE & BLUE 451205
IGT Round Top 0.25 RED, WHITE & BLUE 451200
IGT Round Top 0.25 RED, WHITE & BLUE 451208
</TABLE>
57
<PAGE> 64
<TABLE>
<S> <C> <C> <C> <C>
IGT Round Top 0.25 RED, WHITE & BLUE 451203
IGT Round Top 0.25 RED, WHITE & BLUE 451209
IGT Round Top 0.25 RED, WHITE & BLUE 451199
IGT Round Top 0.25 RED, WHITE & BLUE 451010
IGT Round Top 0.25 RED, WHITE & BLUE 451012
IGT Round Top 0.25 RED, WHITE & BLUE 451011
IGT Round Top 0.25 RED, WHITE & BLUE 450847
IGT Round Top 0.25 RED, WHITE & BLUE 450840
IGT Round Top 0.25 RED, WHITE & BLUE 450845
IGT Round Top 0.25 RED, WHITE & BLUE 450851
IGT Round Top 0.25 RED, WHITE & BLUE 450839
IGT Round Top 0.25 RED, WHITE & BLUE 450843
IGT Round Top 0.25 RED, WHITE & BLUE 450849
IGT Round Top 0.25 RED, WHITE & BLUE 450850
IGT Round Top 0.25 RED, WHITE & BLUE 450848
IGT Round Top 0.25 RED, WHITE & BLUE 450846
IGT Round Top 0.25 RED, WHITE & BLUE 450841
IGT Round Top 0.25 RED, WHITE & BLUE 450844
IGT Round Top 0.25 RED, WHITE & BLUE 442009
IGT Round Top 0.25 RED, WHITE & BLUE 451037
IGT Round Top 0.25 RED, WHITE & BLUE 442131
IGT Round Top 0.25 RED, WHITE & BLUE 442051
IGT Round Top 0.25 SLAM DUNK 451032
IGT Round Top 0.25 SLAM DUNK 451031
IGT Round Top 0.25 SPIN TIL YOU WIN 451029
IGT Round Top 0.25 SUPER BAR 451006
IGT Round Top 0.25 TOUCH DOWN 442066
IGT Round Top 0.25 WILD CHERRY 451018
IGT Round Top 0.25 WILD CHERRY 451017
IGT Round Top 0.25 WILD CHERRY 441528
IGT Round Top 0.25 WILD CHERRY 451016
IGT Round Top 0.25 WILD CHERRY 441527
IGT Round Top 0.25 WILD STAR 442057
IGT Round Top 0.25 WILD STAR 441523
IGT Round Top 0.25 WILDSTAR 451013
IGT Round Top 0.5 DBL DIAMOND DELUXE 450785
IGT Round Top 0.5 DBL DIAMOND DELUXE 450783
IGT Round Top 0.5 DBL DIAMOND DELUXE 450786
IGT Round Top 0.5 DBL DIAMOND DELUXE 450799
IGT Round Top 0.5 DBL DIAMOND DELUXE 450784
IGT Round Top 0.5 DBL DIAMOND DELUXE 450798
</TABLE>
58
<PAGE> 65
<TABLE>
<S> <C> <C> <C> <C>
IGT Round Top 0.5 DBL DIAMOND DELUXE 450781
IGT Round Top 0.5 DBL DIAMOND DELUXE 450782
IGT Round Top 0.5 DOUBLE DIAMOND 450796
IGT Round Top 0.5 DOUBLE DIAMOND 450780
IGT Round Top 0.5 DOUBLE DIAMOND 450779
IGT Round Top 0.5 DOUBLE DIAMOND 450794
IGT Round Top 0.5 DOUBLE DIAMOND 450778
IGT Round Top 0.5 DOUBLE DIAMOND 450793
IGT Round Top 0.5 DOUBLE DIAMOND 450777
IGT Round Top 0.5 DOUBLE DIAMOND 450797
IGT Round Top 0.5 DOUBLE DIAMOND 450776
IGT Round Top 0.5 DOUBLE DIAMOND 450795
IGT Round Top 0.5 DOUBLE DIAMOND 450775
IGT Round Top 0.5 RED, WHITE & BLUE 450870
IGT Round Top 0.5 RED, WHITE & BLUE 450867
IGT Round Top 0.5 RED, WHITE & BLUE 450874
IGT Round Top 0.5 RED, WHITE & BLUE 450873
IGT Round Top 0.5 RED, WHITE & BLUE 450875
IGT Round Top 0.5 RED, WHITE & BLUE 450868
IGT Round Top 0.5 RED, WHITE & BLUE 450879
IGT Round Top 0.5 RED, WHITE & BLUE 450872
IGT Round Top 0.5 RED, WHITE & BLUE 450877
IGT Round Top 0.5 RED, WHITE & BLUE 450869
IGT Round Top 0.5 RED, WHITE & BLUE 450878
IGT Round Top 0.5 RED, WHITE & BLUE 450871
IGT Round Top 0.5 RED, WHITE & BLUE 450876
IGT Round Top 1 8 BALL 441519
IGT Round Top 1 BALLOON BARS 441518
IGT Round Top 1 DBL $ DOUBLE JACKPOT 441522
IGT Round Top 1 DBL $ DOUBLE JACKPOT 442044
IGT Round Top 1 DBL DIAMOND DELUXE 450862
IGT Round Top 1 DBL DIAMOND DELUXE 450861
IGT Round Top 1 DBL DIAMOND DELUXE 442006
IGT Round Top 1 DBL DIAMOND DELUXE 450863
IGT Round Top 1 DBL DIAMOND DELUXE 450859
IGT Round Top 1 DBL DIAMOND DELUXE 450864
</TABLE>
59
<PAGE> 66
<TABLE>
<S> <C> <C> <C> <C>
IGT Round Top 1 DBL DIAMOND DELUXE 450865
IGT Round Top 1 DBL DOLLAR STYLE DBL 451275
IGT Round Top 1 DBL DOLLAR STYLE DBL 441466
IGT Round Top 1 DBL JACKPOT HAYWIRE 451022
IGT Round Top 1 DBL JACKPOT HAYWIRE 451023
IGT Round Top 1 DOUBLE BLACK TIE 441530
IGT Round Top 1 DOUBLE CHERRY BAR 442076
IGT Round Top 1 DOUBLE DIAMOND 451035
IGT Round Top 1 DOUBLE DIAMOND 450853
IGT Round Top 1 DOUBLE DIAMOND 450857
IGT Round Top 1 DOUBLE DIAMOND 450852
IGT Round Top 1 DOUBLE DIAMOND 450858
IGT Round Top 1 DOUBLE DIAMOND 450856
IGT Round Top 1 DOUBLE DIAMOND 450854
IGT Round Top 1 DOUBLE DIAMOND 450855
IGT Round Top 1 DOUBLE DIAMOND 441462
IGT Round Top 1 DOUBLE DIAMOND 442005
IGT Round Top 1 DOUBLE DIAMOND 441529
IGT Round Top 1 DOUBLE JACKPOT 451033
IGT Round Top 1 DOUBLE JACKPOT 451279
IGT Round Top 1 DOUBLE JACKPOT 451278
IGT Round Top 1 DOUBLE WILD CHERRY 450834
IGT Round Top 1 DOUBLE WILD CHERRY 450837
IGT Round Top 1 DOUBLE WILD CHERRY 450838
IGT Round Top 1 DOUBLE WILD CHERRY 450816
IGT Round Top 1 DOUBLE WILD CHERRY 450811
IGT Round Top 1 DOUBLE WILD CHERRY 450810
IGT Round Top 1 DOUBLE WILD CHERRY 450812
IGT Round Top 1 DOUBLE WILD CHERRY 450836
IGT Round Top 1 DOUBLE WILD CHERRY 450813
</TABLE>
60
<PAGE> 67
<TABLE>
<S> <C> <C> <C> <C>
IGT Round Top 1 DOUBLE WILD CHERRY 450832
IGT Round Top 1 DOUBLE WILD CHERRY 450815
IGT Round Top 1 DOUBLE WILD CHERRY 450835
IGT Round Top 1 DOUBLE WILD CHERRY 450831
IGT Round Top 1 DOUBLE WILD CHERRY 441465
IGT Round Top 1 DOUBLE WILD CHERRY 450829
IGT Round Top 1 DOUBLE WILD CHERRY 450833
IGT Round Top 1 DOUBLE WILD CHERRY 450817
IGT Round Top 1 DOUBLE WILD CHERRY 450814
IGT Round Top 1 DOUBLE WILD CHERRY 450830
IGT Round Top 1 FIVE TIMES PAY 441461
IGT Round Top 1 GOLD MOUNTAIN 441531
IGT Round Top 1 HAYWIRE 451015
IGT Round Top 1 HAYWIRE 442007
IGT Round Top 1 HAYWIRE 451284
IGT Round Top 1 HOME RUN 451041
IGT Round Top 1 HURRICANE 451274
IGT Round Top 1 KNOCK DOWN 451282
IGT Round Top 1 KNOCK DOWN 451283
IGT Round Top 1 PLAYBALL 442068
IGT Round Top 1 RED, WHITE & BLUE 450842
IGT Round Top 1 RED, WHITE & BLUE 441463
IGT Round Top 1 RED, WHITE & BLUE 442008
IGT Round Top 1 SATELLITE 441467
IGT Round Top 1 SIZZLIN 7'S 442049
IGT Round Top 1 TRIPLE DIAMOND 451229
IGT Round Top 1 TRIPLE DIAMOND 451214
IGT Round Top 1 TRIPLE DIAMOND 451217
IGT Round Top 1 TRIPLE DIAMOND 451228
IGT Round Top 1 TRIPLE DIAMOND 451218
IGT Round Top 1 TRIPLE DIAMOND 451216
IGT Round Top 1 TRIPLE DIAMOND 451223
IGT Round Top 1 TRIPLE DIAMOND 451212
IGT Round Top 1 TRIPLE DIAMOND 451224
IGT Round Top 1 TRIPLE DIAMOND 451219
IGT Round Top 1 TRIPLE DIAMOND 451222
</TABLE>
61
<PAGE> 68
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
IGT Round Top 1 TRIPLE DIAMOND 451211
IGT Round Top 1 TRIPLE DIAMOND 451221
IGT Round Top 1 TRIPLE DIAMOND 451213
IGT Round Top 1 TRIPLE DIAMOND 451230
IGT Round Top 1 TRIPLE DIAMOND 451227
IGT Round Top 1 TRIPLE DIAMOND 451210
IGT Round Top 1 TRIPLE DIAMOND 451220
IGT Round Top 1 TRIPLE DIAMOND 451225
IGT Round Top 1 TRIPLE DOLLARS 451281
IGT Round Top 1 WILD CHERRY 450809
IGT Round Top 1 WILD CHERRY 450822
IGT Round Top 1 WILD CHERRY 450818
IGT Round Top 1 WILD CHERRY 450808
IGT Round Top 1 WILD CHERRY 450827
IGT Round Top 1 WILD CHERRY 450820
IGT Round Top 1 WILD CHERRY 450821
IGT Round Top 1 WILD CHERRY 450826
IGT Round Top 1 WILD CHERRY 450828
IGT Round Top 1 WILD CHERRY 450825
IGT Round Top 1 WILD CHERRY 450803
IGT Round Top 1 WILD CHERRY 450802
IGT Round Top 1 WILD CHERRY 450824
IGT Round Top 1 WILD CHERRY 450805
IGT Round Top 1 WILD CHERRY 450804
IGT Round Top 1 WILD CHERRY 450806
IGT Round Top 1 WILD CHERRY 450800
IGT Round Top 1 WILD CHERRY 450823
IGT Round Top 1 WILD CHERRY 450807
IGT Round Top 1 WILD CHERRY 450819
IGT Round Top 1 WILD CHERRY 450801
IGT Round Top 5 BALLOON BARS 451280
IGT Round Top 5 BALLOON BARS 441468
IGT Round Top 5 BALLOON BARS 441460
IGT Round Top 5 BALLOON BARS 451285
IGT Round Top 5 DBL DIAMOND DELUXE 451026
IGT Round Top 5 DBL DIAMOND DELUXE 450860
IGT Round Top 5 DBL DOLLAR STYLE DBL 451276
IGT Round Top 5 DOUBLE DIAMOND 451249
IGT Round Top 5 DOUBLE DIAMOND 451257
IGT Round Top 5 DOUBLE DIAMOND 451256
IGT Round Top 5 DOUBLE DIAMOND 451259
IGT Round Top 5 DOUBLE DIAMOND 451254
IGT Round Top 5 DOUBLE DIAMOND 451252
</TABLE>
62
<PAGE> 69
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
IGT Round Top 5 DOUBLE DIAMOND 451250
IGT Round Top 5 DOUBLE DIAMOND 451270
IGT Round Top 5 DOUBLE DIAMOND 451255
IGT Round Top 5 DOUBLE DIAMOND 451253
IGT Round Top 5 DOUBLE DIAMOND 451258
IGT Round Top 5 DOUBLE JACKPOT 451261
IGT Round Top 5 DOUBLE JACKPOT 451260
IGT Round Top 5 GOLD MOUNTAIN 451236
IGT Round Top 5 HAYWIRE 451273
IGT Round Top 5 HOME RUN 451265
IGT Round Top 5 HOME RUN 451264
IGT Round Top 5 HOME RUN 451262
IGT Round Top 5 HOME RUN 451263
IGT Round Top 5 HURRICANE 441526
IGT Round Top 5 JACKPOT JEWELS 451215
IGT Round Top 5 MOOLAH 451226
IGT Round Top 5 MOOLAH 451266
IGT Round Top 5 RED, WHITE & BLUE 451206
IGT Round Top 5 RED, WHITE & BLUE 451038
IGT Round Top 5 RED, WHITE & BLUE 451247
IGT Round Top 5 RED, WHITE & BLUE 451246
IGT Round Top 5 RED, WHITE & BLUE 451248
IGT Round Top 5 RED, WHITE & BLUE 451245
IGT Round Top 5 TRIPLE DIAMOND 451024
IGT Round Top 5 TRIPLE DIAMOND 451277
IGT Round Top 5 WILD CHERRY 442010
IGT Round Top 5 WILD CHERRY 441464
IGT Round Top 5 WILD CHERRY 451268
IGT Round Top 5 WILD CHERRY 451271
IGT Round Top 5 WILD CHERRY 451269
IGT Round Top 5 WILDSTAR 451272
IGT Round Top 5 WILDSTAR 451267
IGT Round Top 5 WILDSTAR 451251
IGT Slant Top 0.25 4TH OF JULY 457419
IGT Slant Top 0.25 4TH OF JULY 457430
IGT Slant Top 0.25 4TH OF JULY 457429
IGT Slant Top 0.25 4TH OF JULY 457418
IGT Slant Top 0.25 4TH OF JULY 457428
IGT Slant Top 0.25 BALLOON BARS 457443
IGT Slant Top 0.25 BLACKJACK 457416
IGT Slant Top 0.25 BLACKJACK 457431
IGT Slant Top 0.25 BLACKJACK 457432
IGT Slant Top 0.25 BLACKJACK 457417
IGT Slant Top 0.25 DBL DIAMOND DELUXE 457434
IGT Slant Top 0.25 DBL DIAMOND DELUXE 457433
</TABLE>
63
<PAGE> 70
<TABLE>
<S> <C> <C> <C> <C>
IGT Slant Top 0.25 DBL DIAMOND DELUXE 457450
IGT Slant Top 0.25 DOUBLE DIAMOND 457449
IGT Slant Top 0.25 GOLD MOUNTAIN 457420
IGT Slant Top 0.25 GOLD, SILVER & BRONZ 457422
IGT Slant Top 0.25 JACKPOT JEWELS 457445
IGT Slant Top 0.25 RED, WHITE & BLUE 457426
IGT Slant Top 0.25 RED, WHITE & BLUE(Harley) 457425
IGT Slant Top 0.25 RED, WHITE & BLUE(Harley) 457436
IGT Slant Top 0.25 RED, WHITE & BLUE(Harley) 446933
IGT Slant Top 0.25 RED, WHITE & BLUE(Harley) 457454
IGT Slant Top 0.25 RED, WHITE & BLUE(Harley) 457413
IGT Slant Top 0.25 RED, WHITE & BLUE(Harley) 457415
IGT Slant Top 0.25 RED, WHITE & BLUE(Harley) 457452
IGT Slant Top 0.25 RED, WHITE & BLUE(Harley) 457451
IGT Slant Top 0.25 RED, WHITE & BLUE(Harley) 457409
IGT Slant Top 0.25 RED, WHITE & BLUE(Harley) 457466
IGT Slant Top 0.25 RED, WHITE & BLUE(Harley) 457463
IGT Slant Top 0.25 RED, WHITE & BLUE(Harley) 457467
IGT Slant Top 0.25 VOLCANO 457442
IGT Slant Top 0.25 VOLCANO 457441
IGT Slant Top 0.25 WILD CHERRY 457440
IGT Slant Top 0.25 WILD STAR 457447
IGT Slant Top 0.5 4TH OF JULY 457453
IGT Slant Top 0.5 DBL DIAMOND DELUXE 446934
IGT Slant Top 0.5 DBL JACKPOT HAYWIRE 457437
IGT Slant Top 0.5 DOUBLE DIAMOND 446932
IGT Slant Top 0.5 DOUBLE DIAMOND 446931
IGT Slant Top 0.5 DOUBLE DIAMOND 457403
IGT Slant Top 0.5 DOUBLE WILD CHERRY 457438
</TABLE>
64
<PAGE> 71
<TABLE>
<S> <C> <C> <C> <C>
IGT Slant Top 0.5 DOUBLE WILD CHERRY 457414
IGT Slant Top 0.5 HAYWIRE 457461
IGT Slant Top 0.5 JACKS OR BETTER 456869
IGT Slant Top 0.5 JACKS OR BETTER 456868
IGT Slant Top 0.5 JACKS OR BETTER 456867
IGT Slant Top 0.5 JACKS OR BETTER 456866
IGT Slant Top 0.5 RED, WHITE & BLUE 457448
IGT Slant Top 0.5 RED, WHITE & BLUE 457464
IGT Slant Top 0.5 WILD CHERRY 457405
IGT Slant Top 0.5 WILD STAR 457412
IGT Slant Top 0.5 WIN, PLACE, OR SHOW 457423
IGT Slant Top 1 4TH OF JULY 457462
IGT Slant Top 1 BLACKJACK 457411
IGT Slant Top 1 DBL DIAMOND DELUXE 457435
IGT Slant Top 1 DBL DOLLAR STYLE DBL 457456
IGT Slant Top 1 DBL JACKPOT HAYWIRE 457408
IGT Slant Top 1 DOUBLE BLACK TIE 457457
IGT Slant Top 1 DOUBLE DIAMOND 457402
IGT Slant Top 1 DOUBLE DIAMOND 457401
IGT Slant Top 1 DOUBLE DIAMOND 457400
IGT Slant Top 1 DOUBLE MANIA 457455
IGT Slant Top 1 DOUBLE WILD CHERRY 457439
IGT Slant Top 1 DOUBLE WILD CHERRY 457410
IGT Slant Top 1 GOLD MOUNTAIN 457444
IGT Slant Top 1 GOLD, SILVER & BRONZ 457421
IGT Slant Top 1 HAYWIRE 457406
IGT Slant Top 1 HAYWIRE 457407
IGT Slant Top 1 JACKPOT JEWELS 457446
IGT Slant Top 1 JACKPOT JEWELS 457465
IGT Slant Top 1 RED, WHITE & BLUE 457427
IGT Slant Top 1 RED, WHITE & BLUE 457399
IGT Slant Top 1 RED, WHITE & BLUE 457398
IGT Slant Top 1 TRIPLE JACKPOT 457458
IGT Slant Top 1 WILD CHERRY 457460
IGT Slant Top 1 WILD CHERRY 457459
IGT Slant Top 1 WILD CHERRY 457404
IGT Slant Top 1 WIN, PLACE OR SHOW 457424
</TABLE>
65
<PAGE> 72
<TABLE>
<S> <C> <C> <C> <C>
IGT Slant Top Poker 1 BONUS POKER 456865
IGT Slant Top Poker 1 BONUS POKER 456864
IGT Slant Top Poker 1 BONUS POKER 456863
IGT Slant Top Poker 1 BONUS POKER 456862
IGT Upright 0.25 JACKS OR BETTER 467125
IGT Upright 0.25 JACKS OR BETTER 467124
IGT Upright 0.25 JACKS OR BETTER 467123
IGT Upright 0.25 JACKS OR BETTER 467122
IGT Upright 1 JACKS OR BETTER 467120
IGT Upright 1 JACKS OR BETTER 467119
IGT Upright 1 JACKS OR BETTER 467118
IGT Upright Poker 0.25 BONUS POKER 467142
IGT Upright Poker 0.25 BONUS POKER 467141
IGT Upright Poker 0.25 BONUS POKER 467140
IGT Upright Poker 0.25 BONUS POKER 467139
IGT Upright Poker 0.25 BONUS POKER 467138
IGT Upright Poker 0.25 BONUS POKER 467137
IGT Upright Poker 0.25 BONUS POKER 467136
IGT Upright Poker 0.25 BONUS POKER 467098
IGT Upright Poker 0.25 BONUS POKER 467135
IGT Upright Poker 0.25 BONUS POKER 467134
IGT Upright Poker 0.25 BONUS POKER 467101
IGT Upright Poker 0.25 BONUS POKER 467100
IGT Upright Poker 0.25 BONUS POKER 467099
IGT Upright Poker 0.25 BONUS POKER 467097
IGT Upright Poker 0.25 DUECES JOKER POKER 467131
IGT Upright Poker 0.25 DUECES JOKER POKER 467130
IGT Upright Poker 0.25 DUECES JOKER POKER 467133
IGT Upright Poker 0.25 DUECES JOKER POKER 467132
IGT Upright Poker 0.25 JOKER POKER 467109
IGT Upright Poker 0.25 JOKER POKER 467108
IGT Upright Poker 0.25 JOKER POKER 467107
IGT Upright Poker 0.25 JOKER POKER 467106
IGT Upright Poker 0.25 JOKER POKER 467105
IGT Upright Poker 0.25 JOKER POKER 467104
IGT Upright Poker 0.25 JOKER POKER 467103
IGT Upright Poker 0.25 JOKER POKER 467102
IGT Upright Poker 0.25 JOKER POKER 467117
IGT Upright Poker 0.25 JOKER POKER 467116
IGT Upright Poker 0.25 JOKER POKER 467115
IGT Upright Poker 0.25 JOKER POKER 467114
</TABLE>
66
<PAGE> 73
<TABLE>
<S> <C> <C> <C> <C>
IGT Upright Poker 0.25 JOKER POKER 467113
IGT Upright Poker 0.25 JOKER POKER 467112
IGT Upright Poker 0.25 JOKER POKER 467111
IGT Upright Poker 0.25 JOKER POKER 467110
IGT Upright Poker 1 DUECES WILD POKER 467129
IGT Upright Poker 1 DUECES WILD POKER 467128
IGT Upright Poker 1 DUECES WILD POKER 467127
IGT Upright Poker 1 DUECES WILD POKER 467126
IGT Upright Poker 1 JACKS OR BETTER 467121
IGMA Round Top 0.25 SILVER STRIKE 77000095
IGMA Round Top 1 SILVER STRIKE 77000076
WMS 16" Upright Reel 0.25 HIGH SPEED CHASE 821000
WMS 16" Upright Reel 0.25 HIGH SPEED CHASE 820999
WMS 16" Upright Reel 0.25 HIGH SPEED CHASE 820998
WMS 16" Upright Reel 0.25 HIGH SPEED CHASE 820997
WMS 16" Upright Reel 0.25 PIGGY BANKIN' 821017
WMS 16" Upright Reel 0.25 PIGGY BANKIN' 821016
WMS 16" Upright Reel 0.25 PIGGY BANKIN' 821015
WMS 16" Upright Reel 0.25 PIGGY BANKIN' 821014
WMS 16" Upright Reel 0.25 PIGGY BANKIN' 821013
WMS 16" Upright Reel 0.25 PIGGY BANKIN' 821012
WMS 16" Upright Reel 0.25 PIGGY BANKIN' 821019
WMS 16" Upright Reel 0.25 PIGGY BANKIN' 821018
WMS 9" Upright Reel 0.25 JITTERBUG 821002
WMS 9" Upright Reel 0.25 JITTERBUG 821001
WMS 9" Upright Reel 0.25 POWER SEVENS 821009
WMS 9" Upright Reel 0.25 POWER SEVENS 821008
WMS 9" Upright Reel 0.25 REEL EM' IN 821006
WMS 9" Upright Reel 0.25 REEL EM' IN 821005
WMS 9" Upright Reel 0.25 REEL EM' IN 821007
WMS 9" Upright Reel 0.25 TRIPLE BONUS 821010
WMS 9" Upright Reel 0.25 TRIPLE BONUS 821011
WMS 9" Upright Reel 0.25 WILD & LOOSE 821004
WMS 9" Upright Reel 0.25 WILD & LOOSE 821003
WMS Round Top 0.25 JACKPOT STAMPEDE 820996
WMS Round Top 0.25 JACKPOT STAMPEDE 820994
WMS Round Top 0.25 JACKPOT STAMPEDE 820993
WMS Round Top 0.25 JACKPOT STAMPEDE 820991
WMS Round Top 0.25 JACKPOT STAMPEDE 820990
WMS Round Top 0.25 JACKPOT STAMPEDE 820992
WMS Round Top 0.25 JACKPOT STAMPEDE 820995
</TABLE>
67
<PAGE> 74
August 12, 1997
QUEEN OF THE RED
WARRANTY ITEMS
<TABLE>
<CAPTION>
ITEM SERIAL/MODEL # WARRANTY
- ----------------------------------------------------------------------------------------
<S> <C> <C>
Fluke Model #87 SR# 63130781 3 Yr.
Fluke Model #97 SR# DM6273045 3 Yr.
Dewalt Jig Saw SR# DW321 Exp. 8/98
Rigid Drain Cleaner SR# 94C76374 Mod. K-38-1 Lifetime
Rigid Drain Cleaner SR# J95-88653 Mod. K-38B-1 Lifetime
Rigid Drain Cleaner SR# VV-296957 Mod. K-375 Lifetime
Rigid Pipe Threader SR# 12R Lifetime
Rigid H.D. Pipe Cutter SR# 2-A Lifetime
90% off all hand tools Lifetime
Porter Polisher SR# 02402487932 Mod. 7401 8/98
FWD Rescue Boat Winch Mod. DLB2500 6/2000
All A/C Chiller Unit Compressors 5 Yr. from start
Teel Potable Water Pressure Tank Mod. SP230 8/98
AEVAD/Music System 1 Yr. from Install
</TABLE>
68
<PAGE> 75
<TABLE>
<CAPTION>
EQUIPMENT - QUEEN OF THE RED
BRIDGE
<S> <C> <C>
15 GP350 hand held radios 9405.00
15 spare batteries 1440.00
2 6 bank batter 756.00
3 desks 725.00
3 file cabinets 882.00
3 book cases 486.00
3 chairs 570.00
1 computer , monitor, and printer with fax modem 3,500.00
8 glass frame cases for certificates
1 TV 200.00
Bridge tools
62 - pc tool set 456.00
Emergency equipment locker 133.80
2 Spare 1\ 2"x 75' fire hose 396.00
1 Navy nozzle 1 1\ 2" 225.00
2 Spare 2 1\ 2"x 75' fire hose 500.00
1 Navy nozzle 2 1\ 2" 300.00
2 Y gate 2 1\ 2'x 1 1\ 2"x 1 1\ 2" 240.00
First aid kit
2 15lb Co2 extinguishers 214.00
2 5lb dry chemical extinguishers 40.00
2 10lb dry chemical extinguishers 75.00
2 20lb dry chemical extinguishers 125.00
BOS'N LOCKER
6 6'x 48" metal stock shelves 1,341.00
1 16 gal wet vac 177.00
1 6 gal wet vac 81.55
2 mop buckets and ringers 233.40
Light bulb inventory 400.00
Housekeeping supplies 400.00
2 Castex back pac vacuums 900.00
1 High volume air circulator 584.00
3 6'x 48"x 24" metal
stock shelves 723.75
2 4x5 locker room lockers 728.50
2 4' metal stock shelves 678.00
1 up right vacuum cleaner 575.00
1 hand truck 291.00
1 platform truck 255.75
1 wet floor signs 125.00
</TABLE>
69
<PAGE> 76
<TABLE>
<CAPTION>
HOLD BREAK ROOM
<S> <C> <C>
1 TV 260.00
4 metal cabinets 535.20
1 coffee machine N\C
1 tea machine N\C
2 lemonade dispensers N\C
1 water cooler N\C
10 water bottle's 50.00
5 Tables 480.00
5 glass frame cases 525.00
24 chairs 800.00
1 portable air conditioner 3785.00
1 4' ladder 137.25
1 6' ladder 186.50
1 8' ladder 249.50
1 10' ladder 271.75
1 12 ladder 333.75
4 File cabinets 1176.00
2 8 shelf metal parts bin 418.00
2 5.25hp shop vac. 864.00
1 refrigerator 698.00
1 microwave 200.00
1 water cooler NC
3 Curtis cabinets 230.30
2 30 gal. metal Trash cans 47.00
1 45 gal. Metal oil rag can 160.00
2 28 draw parts cabinets 124.82
1 drill bit cabinet 71.67
1 24"x 34" x12" pipe bin 149.00
1 30"x 36" x 22" pipe cabinet 165.00
2 42"x 36" x 12 book shelf 162.00
1 desk 241.00
3 chairs 570.00
1 TV 200.00
1 coffee machine NC
1 6 bank battery charger 378.00
2 8" bench vises 520.00
2 8" bench grinders 480.00
1 portable compress air tank 59.00
TOOLS complete 400 pc master
tool set with top chest and
roller cabinet 6,112.00
1 Oilers desk 241.00
2 chairs 190.00
1 personal locker for electrical parts 194.00
</TABLE>
70
<PAGE> 77
<TABLE>
<S> <C> <C>
1 30 gal metal trash can 47.00
1 84x38x12 metal parts shelf 296.78
4 34x41x24 metal parts shelf 688.00
1 work bench 36"x126"x34" 780.00
2 spools of 12/ 3 marine grade wire 720.00
1 wire rack 100" x 44" 120.00
2 chain falls 1 ton each 466.00
2 1 ton come-a-long 230.00
1 Cutting torch with bottles 464.00
1 arc welding machine 380.00
80' welding cable extension 168.80
100 LB welding rods 160.00
1 welders shield 49.00
1 set welding goggles 8.49
2 set welding gloves 52.00
1 welding apron 48.00
2 safety shields 34.00
12 pair safety glasses 46.56
4 ear protectors 152.00
6 mask gas respirators 828.00
6 toilet bowl gaskets 41.00
1 3500 psi power washer 5800.00
2 floor blowers 846.00
3 lanterns battery 20.00
3 lanterns lights 69.00
3 mag lights 75.00
1 case batteries 28.00
3 fluorescent 261.00
5 50' extension cords 180.00
4 6 outlet power strips 246.00
1 roll fire cloth 69.00
1 roll rubber banding 43.00
3 bandit tools. 792.00
3 plastic tool boxes 120.00
4 hoisting straps 80.00
4 air hoses 50' 128.00
2 rolls gasket material 85.00
8 rolls aluminum tape 103.00
Air filter primary and secondary inventory 1200.00
6 lube oil funnels 96.00
2 Jabsco pumps 586.00
1 battery fill canisters 19.41
1 battery tester 230.00
1 black and decker angle grinder 168.00
2 wash down guns 100.00
1 fuel sounding tape 50.00
</TABLE>
71
<PAGE> 78
<TABLE>
<S> <C> <C>
2 small tubing cutters 25.00
2 large tubing cutters 48.00
1 tubing flare kit 104.00
1 complete drill bit set 259.00
1 I.D and O. D. calipers 89.00
1 number stamp kit 42.00
1 letter stamp kit 48.00
2 Milwaukee 12v drills with chargers 498.00
1 air die grinder 109.00
1 electric tin snips 269.00
1 1 / 2 " air impact 169.00
1 hole saw kit 129.00
1 combustible gas detector gage 243.00
1 40pc tap and die set 114.45
2 rivet gun sets 100.00
1 o ring kit 36.95
1 nitrogen charge gage kit 549.00
1 Thomas a Betts wire tie tool 49.00
3 Buchanan crimper tool 65.25
1 heat gun 69.00
1 4 1/ 2" disc grinder 149.00
1 jig saw 172.00
1 1/ 2 drill 151.75
1 3/ 8 " drill 126.75
1 Pipe threading kit and cutters 571.00
1 supper saws all 209.00
2 pipe and drain cleaners 640.00
1 electric impact gun 288.00
2 pairs insulated electrician gloves 280.00
2 grease guns 36.00
3 voltage testers 54.00
3 wire tracers 263.00
1 Rox-blox puller 269.00
Rox-blox inventory 900.00
1 magnehelic gage 168.00
1 dial indicator with magnetic stand 289.00
1 battery Hydrometer 18.00
1 biddle megger with case 850.00
1 model 97 fluke scope meter with case 1890.00
2 model 87 fluke multi meter 670.00
1 analog amp meter 90.00
2 amp probes with case 536.00
1 soldering gun 40.00
1 soldering iron 29.00
1 tape label gun 22.60
1 hole punch set 89.00
</TABLE>
72
<PAGE> 79
<TABLE>
<S> <C>
1 air fitting kit 59.95
2 nut and bolt gages 17.99
bolts, nuts, washers & screws assortments 1,391.00
pipe fitting inventory 625.00
wire hangers and studs 250.00
Racor fuel filtration sys. 4,600.00
Engine filter inventory 800.00
Engine oil inventory 480.00
fuel inventory 8,500.00
other lubricants 120.00
Misc. Electrical supplies 1500.00
HURRICANE DECK
2 75'x 5\ 8" garden hose 55.00
TEXAS DECK
2 75'x5\8" garden hose 55.00
1 12' Fiberglass ladder 333.75
1 16' Fiberglass ladder 551.22
LOUISIANA DECK
2 75'x 5\ 8" garden hose 55.00
1 12' Fiberglass ladder 333.75
1 16 Fiberglass ladder 551.22
ARKANSAS DECK
2 75'x 5 \ 8" garden hose 55.00
1 12' Fiberglass ladder 333.75
1 16' Fiberglass ladder 551.22
</TABLE>
73
<PAGE> 80
EXHIBIT 1.2
CERTIFICATE OF FORMATION
OF
HORSESHOE VICKSBURG CASINO, L.L.C.
This Certificate of Formation is being executed as of , 1997, for the
purpose of forming a limited liability company pursuant to the Mississippi
Limited Liability Company Act, Miss. Code Ann. Section 79-29-201.
The undersigned, being duly authorized to execute and file this
Certificate, does hereby certify as follows:
1. Name. The name of the limited liability company is Horseshoe
Vicksburg Casino, L.L.C. (the "Company").
2. Registered Office and Registered Agent. The Company's registered
office in the State of Mississippi is located at 200 North Congress Street,
Suite 310, Jackson, MS 39202. The registered agent of the Company for service of
process at such address is Scott Andress, Esq. of Eaton & Cottrell.
3. Date of Dissolution. The Company will automatically dissolve
December 31, 2047 or at such earlier time as specified in its Limited Liability
Company Agreement or under applicable law.
4. Manager. The Company has a Manager and the business and affairs of
the Company shall be managed by or under the direction of the Manager. No member
of the Company, by reason of its status as such, shall have any right or
authority to act for or bind the Company.
IN WITNESS WHEREOF, the undersigned has duly executed this Certificate
of Formation as of the day and year first above written.
--------------------------------------
Name:
---------------------------------
Title:
---------------------------------
74
<PAGE> 81
EXHIBIT 5.4(a)(i)
Assignment and Assumption Agreement - Lady Luck
THIS ASSIGNMENT AND ASSUMPTION AGREEMENT (the "Agreement"), dated as of
___________, 1997 is entered into by and among Horseshoe Vicksburg Casino, LLC,
a Mississippi limited liability company (the "Company") and Lady Luck Vicksburg,
Inc., a Mississippi corporation ("Lady Luck")
WHEREAS, pursuant to the terms of that certain Contribution and Sale
Agreement, dated as of _________, 1997 (the "Contribution Agreement") by and
among Lady Luck, and Horseshoe Gaming, LLC, a Delaware corporation, Lady Luck is
contributing the Lady Luck Contributed Assets in exchange for an interest in the
Company;
WHEREAS, pursuant to the Contribution Agreement, Lady Luck is assigning
to the Company all of its rights under various approvals relating to the Lady
Luck Contributed Assets;
WHEREAS, pursuant to the terms of the Contribution Agreement, the
Company is assuming certain liabilities and obligations of Lady Luck relating to
the Lady Luck Contributed Assets;
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Company hereby, subject to the
terms hereof and of the Contribution Agreement, covenants and agrees as follows:
1. Definitions. All terms used herein shall have the meanings assigned
to them in the Contribution Agreement, unless otherwise defined herein.
2. Assignment. Lady Luck does hereby assign, transfer and convey to the
Company all of its rights, title and interest in and to all Property Approvals,
including all transferable warranties and guarantees with respect to the Lady
Luck Contributed Assets.
3. Assumption. The Company hereby assumes and agrees to pay, perform
and discharge, when due, all of the obligations and liabilities relating to (a)
the Property Approvals which arise after the Closing Date, and (b) the Lady Luck
Permitted Liabilities, other than the Losses subject to indemnification by Lady
Luck under Section 9.1 of the Contribution Agreement (collectively, the "Assumed
Liabilities").
4. Excluded Liabilities. Anything to the contrary herein
notwithstanding, the Company shall not assume or agree to pay, perform or
discharge any liabilities of Lady Luck other than the Assumed Liabilities.
75
<PAGE> 82
5. Contest. Nothing in the Contribution Agreement shall preclude or
prohibit the Company from contesting in good faith the legality, validity or
enforceability of the Assumed Liabilities.
6. No Third Party Beneficiaries. No person or entity other than Lady
Luck and the Company and their respective successors shall be permitted to bring
any action to enforce any provision of this Agreement against any of the parties
hereto.
7. Interpretation. In the event of any conflict or inconsistency
between the terms, provisions and conditions of this Agreement and the
Contribution Agreement, the terms, provisions and conditions of the Contribution
Agreement shall govern.
8. Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed to be an original but all of which together shall
constitute a single agreement.
9. Governing Law. THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, AND ALL QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY,
INTERPRETATION AND PERFORMANCE OF THIS AGREEMENT, SHALL BE GOVERNED BY, THE LAWS
OF THE STATE OF MISSISSIPPI, WITHOUT GIVING EFFECT TO PROVISIONS THEREOF
REGARDING CONFLICT OF LAWS.
IN WITNESS WHEREOF, the Company and Lady Luck have executed this
Assignment and Assumption Agreement as of the date first above written.
LADY LUCK VICKSBURG, INC.
By:________________________
Name:
Title:
HORSESHOE VICKSBURG CASINO, LLC
By:________________________
Name:
Title:
76
<PAGE> 83
EXHIBIT 5.4(a)(iii)
BILL OF SALE
This Bill of Sale (this "Bill of Sale") is made by Lady Luck
Vicksburg, Inc., a Mississippi corporation ("Lady Luck") and given to Horseshoe
Vicksburg Casino LLC, a Mississippi limited liability company (the "Company").
For the consideration set forth in Section 1.1(a) of that
certain Contribution and Sale Agreement dated as of July __, 1997 (the
"Agreement") by and among, Lady Luck and Horseshoe Gaming, LLC, a Delaware
limited liability company ("Horseshoe"), and Section 5.2 of the Limited
Liability Company Agreement of the Company, dated July __, 1997 between Lady
Luck and Horseshoe, Lady Luck hereby sells, conveys, transfers, assigns and
delivers to the Company all right, title and interest in and to the assets
listed in Exhibit A hereto (the "Assets").
Pursuant to the Agreement, Lady Luck has, among other things,
made certain representations and warranties with respect to the ownership of the
Assets.
Subject to the terms and conditions of the Agreement, Lady
Luck hereby constitutes and appoints the Company and its successors and assigns
as Lady Luck's true and lawful attorney in fact to demand and receive, in Lady
Luck's stead, and on behalf of and for the benefit of Lady Luck, its successors
and assigns, any and all of the Assets and to give receipts and releases for and
in respect to the same and any part thereof, and from time to time to institute
and prosecute in Lady Luck's name or otherwise for the benefit of the Company,
its successors and assigns any and all proceedings at law, in equity or
otherwise, which Company, its successors and assigns may deem proper for the
collection or reduction to possession of any of the Assets or for the collection
and enforcement of any claim or right of any kind hereby sold, conveyed,
transferred, assigned and delivered or intended so to be, and to do all acts and
things in relation to the Assets which the Company, its successors and assigns,
shall deem desirable; Lady Luck hereby declaring that the foregoing powers are
coupled with an interest and are not and shall not be revocable by Lady Luck in
any manner for any reason whatsoever.
After the date hereof, Lady Luck shall promptly forward to the
Company all mail, telegrams and other communications, and all express or other
packages, addressed to Lady Luck or its agents to the extent the same relate to
the Assets.
From time to time after the date hereof, at the request of the
Company, Lady Luck shall, without consideration, deliver such further
instruments of transfer and shall take such other action as Lady Luck may
reasonably request in order to convey more effectively any of the Assets
transferred hereunder to the Company.
This Bill of Sale is being executed and delivered by Lady Luck
as of the date set forth below pursuant to the terms of the Agreement.
77
<PAGE> 84
Executed at __________________, this __th day of July, 1997.
LADY LUCK VICKSBURG, INC.
a Mississippi corporation
By:
------------------------------------
Name:
Title:
78
<PAGE> 85
EXHIBIT 5.4(a)(iv)
CERTIFICATE OF NON-FOREIGN STATUS
The undersigned, on behalf of Lady Luck Vicksburg, Inc., a Mississippi
corporation ("Lady Luck"), being first duly sworn on oath, under the penalty of
perjury, hereby certifies as follows:
1. Section 1445 of the Internal Revenue Code of 1986, as amended,
provides that a transferee of a U.S. real property interest must withhold tax if
the transferor is a foreign person.
2. Lady Luck is the owner of certain property located in Vicksburg,
Warren County, Mississippi (the "Owned Property"), which Owned Property is
legally described on Exhibit A attached hereto.
3. Lady Luck is assigning all of its right, title and interest in the
Owned Property to Horseshoe Gaming, LLC, a Delaware limited liability company
("Horseshoe").
4. Lady Luck is not a foreign person, foreign partnership, foreign
trust, foreign estate or foreign person, as those terms are defined in the
Internal Revenue Code of 1986, as amended, and the Income Tax Regulations
promulgated thereunder (collectively the "Code"). The office of Lady Luck is 206
North Third Street, Las Vegas, Nevada 89101, Attention: Rory Reid, Esq.
5. The United States taxpayer identification number of Lady Luck is
__________.
6. This Affidavit is being given pursuant to Section 1445 of the Code
to inform Horseshoe that withholding of tax is not required upon this
disposition of a United States real property interest.
7. Lady Luck understands that this certification may be disclosed to
the Internal Revenue Service by the transferee and that any false statement
contained herein could be punished by fine, imprisonment, or both.
79
<PAGE> 86
Under penalties of perjury, the undersigned declares that the
undersigned has examined this Affidavit and to the best of Lady Luck's knowledge
and belief, it is true, correct and complete.
Dated: _________, 1997
LADY LUCK VICKSBURG, INC., a Mississippi
corporation
By:_______________________
Its:
80
<PAGE> 87
EXHIBIT 5.4(b)(i)
BILL OF SALE
This Bill of Sale (this "Bill of Sale") is made by Horseshoe
Gaming LLC, a Delaware limited liability company ("Horseshoe") and given to
Horseshoe Vicksburg Casino LLC, a Mississippi limited liability company (the
"Company").
For the consideration set forth in Section 1.1(b) of that
certain Contribution and Sale Agreement dated as of July __, 1997 (the
"Agreement") by and among, Lady Luck Vicksburg, Inc., a Mississippi corporation
("Lady Luck") and Horseshoe, and Section 5.2 of the Limited Liability Company
Agreement of the Company, dated July __, 1997 between Lady Luck and Horseshoe,
Horseshoe hereby sells, conveys, transfers, assigns and delivers to the Company
all right, title and interest in and to the assets listed in Exhibit A hereto
(the "Assets").
Pursuant to the Agreement, Horseshoe has, among other things,
made certain representations and warranties with respect to the ownership of the
Assets.
Subject to the terms and conditions of the Agreement,
Horseshoe hereby constitutes and appoints the Company and its successors and
assigns as Horseshoe's true and lawful attorney in fact to demand and receive,
in Horseshoe's stead, and on behalf of and for the benefit of Horseshoe, its
successors and assigns, any and all of the Assets and to give receipts and
releases for and in respect to the same and any part thereof, and from time to
time to institute and prosecute in Horseshoe's name or otherwise for the benefit
of the Company, its successors and assigns any and all proceedings at law, in
equity or otherwise, which Company, its successors and assigns may deem proper
for the collection or reduction to possession of any of the Assets or for the
collection and enforcement of any claim or right of any kind hereby sold,
conveyed, transferred, assigned and delivered or intended so to be, and to do
all acts and things in relation to the Assets which the Company, its successors
and assigns, shall deem desirable; Horseshoe hereby declaring that the foregoing
powers are coupled with an interest and are not and shall not be revocable by
Horseshoe in any manner for any reason whatsoever.
After the date hereof, Horseshoe shall promptly forward to the
Company all mail, telegrams and other communications, and all express or other
packages, addressed to Horseshoe or its agents to the extent the same relate to
the Assets.
From time to time after the date hereof, at the request of the
Company, Horseshoe shall, without consideration, deliver such further
instruments of transfer and shall take such other action as Horseshoe may
reasonably request in order to convey more effectively any of the Assets
transferred hereunder to the Company.
This Bill of Sale is being executed and delivered by Horseshoe
as of the date set forth below pursuant to the terms of the Agreement.
81
<PAGE> 88
Executed at __________________, this __th day of July, 1997.
HORSESHOE GAMING LLC
a Delaware limited liability
company
By:
------------------------------------
Name:
Title:
82
<PAGE> 89
EXHIBIT 5.4(b)(ii)
Assignment and Assumption Agreement - Horseshoe
THIS ASSIGNMENT AND ASSUMPTION AGREEMENT (the "Agreement"), dated as of
___________, 1997 is entered into by and among Horseshoe Vicksburg Casino, LLC,
a Mississippi limited liability company (the "Company") and Horseshoe Gaming,
LLC, a Delaware limited liability corporation ("Horseshoe")
WHEREAS, pursuant to the terms of that certain Contribution and Sale
Agreement, dated as of _________, 1997 (the "Contribution Agreement") by and
among Horseshoe, and Lady Luck Vicksburg, Inc., a Mississippi corporation,
Horseshoe is contributing the Horseshoe Contributed Assets in exchange for an
interest in the Company;
WHEREAS, pursuant to the Contribution Agreement, Horseshoe is assigning
to the Company all of its rights under various contracts and approvals relating
to the Horseshoe Contributed Assets;
WHEREAS, pursuant to the terms of the Contribution Agreement, the
Company is assuming certain liabilities and obligations of Horseshoe relating to
the Horseshoe Contributed Assets;
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Company hereby, subject to the
terms hereof and of the Contribution Agreement, covenants and agrees as follows:
1. Definitions. All terms used herein shall have the meanings assigned
to them in the Contribution Agreement, unless otherwise defined herein.
2. Assignment. Horseshoe does hereby assign, transfer and convey to the
Company all of its rights, title and interest in and to all Vessel Contracts and
Vessel Approvals, including all transferable warranties and guarantees with
respect to the Horseshoe Contributed Assets.
3. Assumption. The Company hereby assumes and agrees to pay, perform
and discharge, when due, all of the obligations and liabilities relating to (a)
the Vessel Contracts and Vessel Approvals which arise after the Closing Date,
and (b) the Horseshoe Permitted Liabilities, other than the Losses subject to
indemnification by Horseshoe under Section 9.1 of the Contribution Agreement
(collectively, the "Assumed Liabilities").
4. Excluded Liabilities. Anything to the contrary herein
notwithstanding, the Company shall not assume or agree to pay, perform or
discharge any liabilities of Horseshoe other than the Assumed Liabilities.
83
<PAGE> 90
5. Contest. Nothing in the Contribution Agreement shall preclude or
prohibit the Company from contesting in good faith the legality, validity or
enforceability of the Assumed Liabilities.
6. No Third Party Beneficiaries. No person or entity other than
Horseshoe and the Company and their respective successors shall be permitted to
bring any action to enforce any provision of this Agreement against any of the
parties hereto.
7. Interpretation. In the event of any conflict or inconsistency
between the terms, provisions and conditions of this Agreement and the
Contribution Agreement, the terms, provisions and conditions of the Contribution
Agreement shall govern.
8. Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed to be an original but all of which together shall
constitute a single agreement.
9. Governing Law. THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, AND ALL QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY,
INTERPRETATION AND PERFORMANCE OF THIS AGREEMENT, SHALL BE GOVERNED BY, THE LAWS
OF THE STATE OF MISSISSIPPI, WITHOUT GIVING EFFECT TO PROVISIONS THEREOF
REGARDING CONFLICT OF LAWS.
IN WITNESS WHEREOF, the Company and Horseshoe have executed this
Assignment and Assumption Agreement as of the date first above written.
HORSESHOE GAMING, LLC
By:
-----------------------------------------
Name:
Title:
HORSESHOE VICKSBURG CASINO, LLC
By:
----------------------------------------
Name:
Title:
84
<PAGE> 91
SCHEDULE 2.1(d)(i)
1. Lady Luck is a Guarantor under that certain Indenture dated February 17,
1994, as amended and supplemented, by and among Lady Luck Gaming Finance
Corporation ("LLGFC"), First Trust National Association, as Trustee, and
certain subsidiaries of LLGFC named therein relating to the $173.5 million
11 7/8% First Mortgage Notes due 2001 issued by LLGFC. Accordingly,
substantially all of the Lady Luck Contributed Assets are currently subject
to liens issued pursuant to such Indenture.
Lady Luck has entered amendments to the Indenture to allow it to be
effectuate the transactions contemplated hereby.
2. Those certain Exceptions listed on the Owner's Title Policy dated June 17,
1994 (Policy #25-0029-93-000073) issued by Chicago Title Insurance Company.
3. Those certain Exceptions listed on the Commitment for Title Insurance dated
January 31, 1994 (Policy #94-13429-C) issued by First American Title
Insurance Company
85
<PAGE> 92
SCHEDULE 2.1(d)(ii)
None.
86
<PAGE> 93
SCHEDULE 2.1(d)(v)
None.
87
<PAGE> 94
SCHEDULE 2.1(d)(vi)
None.
88
<PAGE> 95
SCHEDULE 2.1(g)
Holly Grove Missionary Baptist Church, successor to Holly Grove Union Society
vs. Lady Luck Vicksburg, Inc., Cause No. 94-0271 in the Chancery Court of Warren
County, Mississippi.
The Plaintiff ("Holly Grove") owned approximately 1.5 acres of property in
Vicksburg, Mississippi located completely within the boundaries of property
owned by Lady Luck. It has been reportedly used as a cemetery since the early
1900's, with the last recorded burial occurring in 1945.
On July 31, 1994, Holly Grove filed suit seeking a court-ordered easement across
Lady Luck's property claiming historical access to the cemetery by way of a
"private roadway". Alternatively, they claim to enjoy a right to ingress and
egress by virtue of a prescriptive easement. Holly Grove alleged that Lady Luck
had denied them access to the cemetery, and also alleged that Lady Luck's
construction activities were infringing upon the cemetery property, causing
irreparable harm to the grave sites.
On August 22, 1994 Lady Luck filed its answer denying the substance of the Holly
Grove's complaint. On September 6, 1994, the Court granted Holly Grove a
preliminary injunction and directed Lady Luck to grant Holly Grove "reasonable
access" to the landlocked property "so they may preserve, protect and maintain
their cemetery." The order by its own terms expired thirty (30) days from
issuance, but has twice been re-instated by the Court.
On or about June 14, 1997, Holly Grove conveyed ownership of the property to Mr.
Martin Crevitt. Also, on July 1, 1997, the Court set a final hearing date of
August 18, 1997 on Holly Grove's request for an easement across Lady Luck's
property. As of this date there has been no substitution or addition of parties
reflecting the new ownership.
89
<PAGE> 96
Schedule 3.1(d)-1
Excluded Assets-Horseshoe
None
90
<PAGE> 97
SCHEDULE 3.1(d)-2
Permitted Liens and Permitted Liabilities - Horseshoe
Pursuant to
1. That certain Senior Secured Credit Facility Note Purchase Agreement,
dated as of October 10, 1995, between Horseshoe Gaming, L.L.C. and
Robinson Property Group Limited Partnership, and Yewdale Holding
Limited, Hanwa American Corp., and debis Financial Services, Inc.; and
2. That certain Indenture, dated as of October 10, 1995, between Horseshoe
Gaming, L.L.C. and U.S. Trust Company of California, N.A., Trustee.
Horseshoe Entertainment, a Louisiana limited partnership and a subsidiary of
Horseshoe Gaming, L.L.C., has executed liens on the Horseshoe Contributed Assets
in favor of Horseshoe Gaming, L.L.C., which in turn has assigned such liens to
the lenders under the above referenced loan documents. All of such liens will be
removed prior to the closing under the Contribution Agreement between Horseshoe
Gaming, L.L.C., a Delaware limited liability company and Lady Luck Vicksburg,
Inc., a Mississippi corporation dated , 1997.
91
<PAGE> 98
SCHEDULE 3.1(d)(iii)
Permits-Horseshoe
Horseshoe possesses no permits that may be required by the State of
Mississippi. Horseshoe Entertainment, a subsidiary of Horseshoe which currently
owns the Queen of the Red, holds the following permits with respect to the
vessel.
- --------------------------------------------------------------------------------
1. City of Bossier City, 1997 Alcoholic Beverage Permit, Low
Alcoholic Content, issued to Horseshoe Casino (Riverboat),
date issued 12/31/96.
- --------------------------------------------------------------------------------
2. City of Bossier City, 1997 Alcoholic Beverage Permit, High
Alcoholic Conent, issued to Horseshoe Casino (Riverboat),
date issued 12/31/96.
- --------------------------------------------------------------------------------
3. State of Louisiana, Office of Alcoholic Beverage Control
Permit, issued to Horseshoe Riverboat Casino, date issued
10/23/96.
- --------------------------------------------------------------------------------
4. Horseshoe Entertainment, Department of Army Permit, 10/20/93
- --------------------------------------------------------------------------------
5. Horseshoe Entertainment, Certification of Compliance With
Department of the Army Permit, dated 10/20/93.
- --------------------------------------------------------------------------------
6. Horseshoe Entertainment, United States Army Corps of
Engineers, Permit for Regulated Activities Associated with
the Construction of a Terminal Building and Docking Facility
for a Paddlewheel Riverboat Casino, dated 10/20/93.
- --------------------------------------------------------------------------------
7. Horseshoe Entertainment, Caddo/Bossier Port Commission,
Permit to Operate, dated 7/8/94.
- --------------------------------------------------------------------------------
8. Horseshoe Entertainment, State of Louisiana, Department of
Environmental Quality, Completion of Requirements for Water
Quality Certification, re: Proposal for Horseshoe
Entertainment to install pilings, mooring dolphins, access
ramps, docking barges, and a terminal building and perform
bank stabilization and dredging activities, dated 10/1/93.
- --------------------------------------------------------------------------------
9. Horseshoe Entertainment, United States of America,
Department of Transportation, United States Coast Guard,
Certificate of Inspection, dated 8/12/94.
- --------------------------------------------------------------------------------
10. Horseshoe Entertainment, Certificate of Final Approval for
Riverboat Gaming Operations-Horseshoe Riverboat Casino, dated
7/9/94 and letter thereto, dated 7/25/94.
- --------------------------------------------------------------------------------
11. Horseshoe Entertainment, State of Louisiana, Department of
Health and Hospitals, Permit, dated 3/13/97.
- --------------------------------------------------------------------------------
12. Letter dated 7/9/97 from Arthur D. Darden, Naval
Architects and Marine Engineers to Marine Safety Office/US
Coast Guard re: Proposed Changes to the Vessel's Lightship
Weight and LCG Report and Changes to the Vessel's Fire Load
Calculations.
- --------------------------------------------------------------------------------
13. Changes to the Vessel's Lightship Weight and LCG - Summary
of Results.
- --------------------------------------------------------------------------------
14. Changes to the Vessel's Fire Load Calculations.
- --------------------------------------------------------------------------------
15. State of Louisiana, Department of Health and
Hospitals/Office of Public Health, Permit to Operate 1997 and
1998.
- --------------------------------------------------------------------------------
16. US Coast Guard, Temporary Certificate of Inspection dated
8/3/97.
- --------------------------------------------------------------------------------
17. US Coast Guard, Certificate of Inspection, dated 8/6/96.
- --------------------------------------------------------------------------------
18. US Coast Guard, Certificate of Documentation.
19. Internal Memorandum re: Placement of Certificate and
Conditions pursuant to the Certificate of Preliminary
Approval.
- --------------------------------------------------------------------------------
20. Riverboat Gaming Division, Notice of Authorization.
21. Department of Transportation, United States Coast Guard,
Vessel Certificate of Financial Responsibility, effective
7/8/97.
- --------------------------------------------------------------------------------
22. Letter dated 3/6/96 from Bender Shipbuilding & Repair Co.,
Inc. to Arthur Darden Incorp. re: Keel Date for M/V Queen of
the Red.
- --------------------------------------------------------------------------------
23. Revere Survival Products, Certificate re: Inflatable Life
Raft inspection and packing.
- --------------------------------------------------------------------------------
92
<PAGE> 99
24. Tonage Certificate.
- --------------------------------------------------------------------------------
25. Oil Transfer Manual front page approval.
- --------------------------------------------------------------------------------
26. Emergency Evacuation Plan.
- --------------------------------------------------------------------------------
27. Ship/Aircraft Radio Station License.
- --------------------------------------------------------------------------------
28. Special Tax Stamp.
- --------------------------------------------------------------------------------
29. Station Bill.
- --------------------------------------------------------------------------------
30. Lifesaving Signals, Helicopter Recovery Procedures and
Breeches Buoy Instructions.
- --------------------------------------------------------------------------------
93
<PAGE> 100
SCHEDULE 3.1(d)(v)
Mechanics Liens-Horseshoe
None
94
<PAGE> 101
SCHEDULE 3.1(h)
Litigation-Horseshoe
None.
95
<PAGE> 1
EXHIBIT 12.2
HORSESHOE GAMING, L.L.C. AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Dollars in thousands)
<TABLE>
<CAPTION> Six Months ended
June 30, Year Ended December 31,
-------------------- -----------------------------------------------
1997 1996 1996 1995 1994 1993
-----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net income (loss) from continuing
operations before minority interests
and extraordinary loss on early
retirement of debt $ 26,925 $ 26,769 $ 48,822 $ 55,969 $ 3,924 $ (1,521)
Add:
Portion of rents representative
of the interest factor 98 163 207 517 292 15
Interest on indebtedness 8,497 12,341 24,809 17,365 5,215 --
Amortization of debt expense 1,348 1,913 3,281 2,823 1,582 --
----------------------------------------------------------------------
Income as adjusted $ 36,868 $ 41,186 $ 77,119 $ 76,674 $ 11,013 $ (1,506)
======================================================================
Fixed charges
Portion of rents representative
of the interest factor $ 98 $ 163 $ 207 $ 517 $ 292 $ 15
Interest on indebtedness 8,497 12,341 24,809 17,365 5,215 --
Amortization of debt expense 1,348 1,913 3,281 2,823 1,582 --
Capitalized interest 4,676 118 1,272 651 3,595 400
----------------------------------------------------------------------
Fixed charges $ 14,619 $ 14,535 $ 29,569 $ 21,356 $ 10,684 $ 415
======================================================================
Ratio of earnings to fixed charges 2.5 2.8 2.6 3.6 1.0 --
======================================================================
</TABLE>
NOTE: Earnings were inadequate to cover fixed charges for the year ended
December 31, 1993 by $1,921,000
<PAGE> 1
EXHIBIT 23.4
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
To: Horseshoe Gaming, LLC
As independent public accountants, we hereby consent to the use of our reports
and to all references to our firm included in or made a part of this
registration statement.
ARTHUR ANDERSEN LLP
Las Vegas, Nevada
October 6, 1997
