<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 7, 1997
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
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: [ ]
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
=================================================================================================================
PROPOSED
PROPOSED MAXIMUM
MAXIMUM OFFERING AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO BE PRICE PER OFFERING REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED UNIT(1) PRICE(1) FEE
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------
9 3/8% Senior Subordinated Notes due 2007,
Series B........................................ $160,000,000 100% $160,000,000 $48,485
- -----------------------------------------------------------------------------------------------------------------
Guarantee of the 9 3/8% Senior Subordinated Notes
due 2007, Series B.............................. -- -- -- None(2)
=================================================================================================================
</TABLE>
(1) Estimated pursuant to Rule 457(f)(2) solely for the purpose of calculating
the registration fee.
(2) Pursuant to Rule 457(n).
----------------------------
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 1 of Pages
Exhibit Index Appears at Page .
<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 New
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 New Notes
</TABLE>
- ---------------
* Inapplicable
<PAGE> 3
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION DATED AUGUST 7, 1997
PROSPECTUS
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
, 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 $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 $160.00 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 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 THE CLAIM 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. (The Intercompany Notes are not included because they
are owed to the Company and assigned by the Company to secure the Credit
Facility and the Senior Notes.)
Continued on following page
THIS PROSPECTUS AND THE LETTER OF TRANSMITTAL ARE FIRST BEING MAILED TO
HOLDERS ON , 1997.
SEE "RISK FACTORS" ON PAGE 13 FOR INFORMATION THAT SHOULD BE CONSIDERED 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 , 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 , 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 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 $275 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.
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 $180 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, subject to final review and approval by
governmental authorities, 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.
5
<PAGE> 8
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 $180
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 $95 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 $95 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 ,
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 Notes. Holders of Old
Notes whose Old Notes are not exchanged will
7
<PAGE> 10
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 possible to complete a transfer initiated
shortly before the Expiration Date. See "The
Exchange Offer -- Procedures for Tendering."
8
<PAGE> 11
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 Indebtedness initially guaranteed by
such Subsidiary. See "Description of
Notes -- Guarantee" and "-- Certain
Covenants -- Additional Subsidiary Guarantors."
9
<PAGE> 12
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) 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 Notes will be
issued (the "Indenture") will contain 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."
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
10
<PAGE> 13
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>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
----------------------------------------- -----------------
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 $87,350 $83,060
Operating income (loss).............. (1,742) 4,941 74,704 70,704 21,736 19,246
Interest (expense), net.............. 221 (6,259) (18,735) (21,964) (5,483) (3,765)
Net income (loss) before minority
interest and extraordinary loss
from early retirement of long-term
debt............................... (1,521) 3,924 55,969 48,822 16,198 15,417
Net income (loss) (4)................ (1,391) (1,767) 39,940 46,961 15,695 15,035
Ratio of earnings to fixed charges... N/A(5) 1.0x 3.6x 2.6x 3.4x 2.8x
</TABLE>
<TABLE>
<CAPTION>
AT MARCH 31,
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 $ 93,672
Total assets............................... 27,082 145,535 300,088 377,597 389,097
Total debt(7).............................. 25,393 124,963 197,603 232,708 227,219
Members' equity (deficit)................ (2,469) 3,633 52,747 79,782 89,413
</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 $12,725,000 as of March 31, 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
awarded an additional license to operate a riverboat casino in 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.
The Louisiana 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. The
license, once granted, may be located in Bossier City. In addition, a riverboat
casino with an existing berth in New Orleans which had obtained permission to
relocate to Shreveport, recently announced its intention to remain in New
Orleans, but the Louisiana Gaming Control Board has not yet approved this
request. 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
13
<PAGE> 16
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.
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.
14
<PAGE> 17
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 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 $275 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 $162 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 lender under the Credit Facility has entered into an amendment to
the Credit Facility pursuant to which the lender has agreed to purchase on or
prior to August 31, 1997, up to an additional $80 million in notes pursuant to
the Credit Facility, subject to the fulfillment of certain conditions by the
Company, including receipt of certain regulatory approvals. The Company intends
to amend its Credit Facility or enter into a new revolving credit facility to
provide for approximately $100 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, including debt of the
Subsidiaries, was $137 million.
15
<PAGE> 18
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 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 March 31, 1997, the aggregate fair
market value of all interests subject to such put/call provisions was
approximately $26 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
16
<PAGE> 19
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 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
17
<PAGE> 20
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 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.
18
<PAGE> 21
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.
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.
19
<PAGE> 22
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.
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 (i) the consolidated capitalization of the
Company at March 31, 1997, and (ii) the capitalization as adjusted and pro forma
to give effect to the sale of the Old Notes and the application of the net
proceeds thereof. 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>
MARCH 31, 1997
----------------------
AS
ADJUSTED
AND
ACTUAL PRO FORMA
-------- ---------
UNAUDITED
(IN THOUSANDS)
<S> <C> <C>
Cash and cash equivalents............................ $ 93,672 $158,285
======== ========
Long-term debt, including current portion:
Credit Facility.................................... $ 75,338 $ 250
12 3/4% Senior Notes Due 2000...................... 147,879 135,063
9 3/8% Senior Subordinated Notes Due 2007.......... 0 159,838
Existing debt from purchase of ownership
interests....................................... 4,002 4,002
-------- --------
Total long-term debt....................... $227,219 $299,153
-------- --------
Redeemable ownership interests(1).................. 26,042 26,042
Members' equity(2)................................... 89,413 84,429
-------- --------
115,455 110,471
-------- --------
Total capitalization....................... $342,674 $409,624
======== ========
</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 March 31, 1997, the aggregate fair
market value of all interests subject to such put/call provision was
$26,042,000.
(2) Members' equity is reduced to account for the write-off of deferred
financing costs, premiums and prepayment penalties related to the Credit
Facility and repurchase of Senior Notes.
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 , 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 , 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 , 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
$ , 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 March 31, 1996 and 1997 have been
derived from the Company's unaudited consolidated financial statements included
in this Prospectus.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
----------------------------------------- -------------------
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 $ 83,672 $ 79,956
Food and beverage..................................... -- 5,879 24,299 26,947 6,711 6,891
Hotel................................................. -- 1,830 7,289 7,919 1,971 1,649
Other................................................. -- 881 4,092 4,419 1,250 1,016
Less promotional allowances........................... -- (4,417) (20,697) (25,033) (6,254) (6,452)
-------- -------- -------- -------- -------- --------
Net revenues........................................ -- 63,403 298,385 331,731 87,350 83,060
OPERATING EXPENSES:
Casino................................................ -- 24,339 133,299 162,408 42,052 42,359
Food and beverage..................................... -- 3,167 12,741 12,317 2,748 2,581
Hotel................................................. -- 1,144 5,662 6,798 1,641 1,171
Other................................................. 24 676 1,728 1,359 378 255
General and administrative............................ 351 17,844 46,298 55,527 14,189 12,921
Development........................................... 1,367 2,128 4,387 6,629 883 228
Depreciation and amortization......................... -- 2,499 12,545 15,989 3,723 4,299
Preopening............................................ -- 6,665 7,021 -- -- --
-------- -------- -------- -------- -------- --------
Total operating expenses ........................... 1,742 58,462 223,681 261,027 65,614 63,814
-------- -------- -------- -------- -------- --------
Operating income........................................ (1,742) 4,941 74,704 70,704 21,736 19,246
Interest (expense), net................................. 221 (6,259) (18,735) (21,964) (5,483) (3,765)
Gain on sale of land.................................... -- 5,242 -- -- -- --
Other, net.............................................. -- -- -- 82 (55) (64)
-------- -------- -------- -------- -------- --------
Net income before minority interest and extraordinary (1,521) 3,924 55,969 48,822 16,198 15,417
loss from early retirement of long-term debt..........
Minority interest in (income), loss of subsidiary(4).... 130 (5,691) (8,850) (1,861) (503) (382)
Extraordinary loss from early retirement of long-term -- -- (7,179) -- -- --
debt..................................................
-------- -------- -------- -------- -------- --------
Net income(5)........................................... $ (1,391) $ (1,767) $ 39,940 $ 46,961 $ 15,695 $ 15,035
======== ======== ======== ======== ======== ========
OTHER DATA:
EBITDA(6)............................................... $ (1,742) 14,105 94,270 86,693 25,459 23,545
Net cash provided by (used in):
Operating activities.................................. (380) 9,935 91,117 69,396 30,304 20,652
Investing activities.................................. (19,835) (56,361) (58,318) (65,461) (8,140) (8,195)
Financing activities.................................. 20,225 65,000 14,158 9,681 (7,844) (10,669)
Capital expenditures.................................... 19,504 65,675 18,986 58,824 10,813 40,220
Ratio of earnings to fixed charges...................... N/A(7) 1.0x 3.6x 2.6x 3.4x 2.8x
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31, AT MARCH
---------------------------------------- 31,
1993 1994 1995 1996 1997
------- -------- -------- -------- ACTUAL
--------
(DOLLARS IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents(8).................................... $ 10 $ 18,584 $ 96,857 $121,394 $ 93,672
Total assets.................................................... 27,082 145,535 300,088 377,597 389,097
Total debt(9)................................................... 25,393 124,963 197,603 232,708 227,219
Members' equity (deficit)....................................... (2,469) 3,633 52,747 79,782 89,413
</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 $12,725,000 as of March 31, 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, the Company acquired an additional 2.92% ownership interest in HE. During
1996, the Company 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.
QUARTER ENDED MARCH 31, 1997 AND 1996
Net revenues for the quarter ended March 31, 1997 was $83.1 million as
compared to $87.4 million for the comparable period in 1996. The decrease in net
revenues of $4.3 million, or 4.9%, occurred mainly at the Horseshoe Bossier
City, which reflected a decrease in casino revenues of $4.0 million. The
decrease in casino revenues was mainly due to a reduction in volume due to the
addition of a fourth riverboat casino in the Bossier City/Shreveport market
during October 1996.
The Horseshoe Bossier City contributed net revenues of $41.4 million for
the quarter ended March 31, 1997 and $45.6 million for the quarter ended March
31, 1996. The Horseshoe Bossier City's net revenues included casino revenues and
non-casino revenues, respectively, of $39.5 million and $1.9 million for the
quarter ended March 31, 1997 and $43.5 million and $2.1 million for the quarter
ended March 31, 1996. Casino revenue per day decreased approximately 8.4% in
1997 to $438,000 from $478,000 in 1996.
The Horseshoe Casino Center contributed net revenues of $41.7 million for
the quarter ended March 31, 1997 and $41.8 million for the quarter ended March
31, 1996. The Horseshoe Casino Center's 1996 net revenues include casino
revenues and non-casino revenues, respectively, of $40.5 million and $1.2
million for the quarter ended March 31, 1997 and $40.1 million and $1.7 million
for the quarter ended March 31, 1996. Casino revenue per day increased
approximately 2.0% in 1997 to $450,000 from $441,000 in 1996.
Casino expenses were $42.4 million, or 51.0% of net revenues, for the
quarter ended March 31, 1997 as compared to $42.1 million, or 48.1% of net
revenues, for the comparable period in 1996. The 2.9 percentage point increase
in casino expenses occurred at the Horseshoe Casino Center. During 1996 the
Company responded to the opening of two additional casinos in the Tunica market
by increasing casino service levels in order 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 all reflect increases from the 1996 period as a direct result of
increased competition in the Tunica market.
Development expenses, which are included in operating income, were $.2
million and $.9 million for the quarters ended March 31, 1997 and 1996,
respectively. The decrease in development expenses is due to the 1996 period
including development expenses of $.5 million incurred by the Company in its
attempt at securing a license to conduct gaming in the State of Indiana.
The increase of $.6 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 interest expense of $1.4 million for the three months ended
March 31, 1997, compared with the prior year period ended March 31, 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 three months ended March 31, 1997 was $2.0 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.
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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 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 (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 $275
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 $197
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 lender
under the Credit Facility has entered into an amendment to the Credit Facility
pursuant to which the lender has agreed to purchase on or prior to August 31,
1997, up to an additional $80 million in notes pursuant to the Credit Facility,
subject to the fulfillment of certain conditions by the Company, including
receipt of certain regulatory approvals. The Company intends to amend its Credit
Facility or enter into a new revolving credit facility to provide for
approximately $100 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 $180 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, subject to final review and
approval by governmental authorities), 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 $95 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
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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.
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 March 31, 1997. The value
of these ownership interests, amounting to $26.0 million, is reflected in the
accompanying consolidated financial statements as Redeemable Ownership
Interests.
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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 $275 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%, subject to final review and
approval by governmental authorities, 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.
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 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 $180 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
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wide beam. This riverboat will contain all new furnishings and equipment
including, subject to final review and approval by governmental authorities,
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 $180 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 March 31, 1997, the gaming win in this
market exceeded $490 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 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 $95 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 $95 million budget
had been expended.
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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 $760 million for the
twelve months ended March 31, 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
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.
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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 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.
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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.
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.
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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.
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
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<PAGE> 45
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 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.
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<PAGE> 46
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.
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.
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<PAGE> 47
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,
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<PAGE> 48
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.
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.
46
<PAGE> 49
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
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<PAGE> 50
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,
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<PAGE> 51
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
49
<PAGE> 52
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.
50
<PAGE> 53
OWNERSHIP OF UNITS
The following table sets forth certain information regarding beneficial
ownership of membership interests in the Company ("Units"), as of March 31,
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.
51
<PAGE> 54
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 June 27, 1997, HGI had 29 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 $321,000
for the three months ended March 31, 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.
52
<PAGE> 55
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 March 31, 1997 was $75 million. The
Company intends to amend the Credit Facility or enter into a new revolving
credit facility to provide for approximately $100 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.
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<PAGE> 56
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 therefrom, 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
54
<PAGE> 57
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").
Senior Notes:.............. $150 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 (h) any Permitted
Indebtedness (as defined). As of March 31, 1997,
the
55
<PAGE> 58
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
56
<PAGE> 59
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.
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<PAGE> 60
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.
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<PAGE> 61
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.
59
<PAGE> 62
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
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"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 March 31, 1997,
after giving pro forma effect to the sale of the Old Notes and the application
of the net proceeds therefrom, 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.
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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 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.
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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, 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
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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, 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
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<PAGE> 67
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;
(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.
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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 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
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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 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
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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 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
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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
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
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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, 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
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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.
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.
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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.
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
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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 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
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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 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.
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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 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
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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 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.
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"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 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
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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
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
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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
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
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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.
"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
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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.
"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,
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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.
"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.
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"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.
"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
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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;
(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;
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(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);
(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.
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"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 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
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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 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.
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"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). 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
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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.
"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
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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 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.
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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 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
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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.
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
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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 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.
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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 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
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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.
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-mailing 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
(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.
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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.
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.
96
<PAGE> 99
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...................................... 44
Acceleration Notice...................... 74
Acceptance Amount........................ 71
Affiliated Gaming Persons................ 40
Affiliate Transaction.................... 71
Asset Sale............................... 68
Asset Sale Event of Loss Put Date........ 70
Asset Sale Event of Loss Offer Amount.... 69
Asset Sale Event of Loss Purchase Date... 70
Asset Sale Event of Loss Offer Price..... 70
Asset Sale Event of Loss Offer........... 70
Change of Control Offer.................. 67
Change of Control Payment Date........... 67
Change of Control Offer Price............ 67
Change of Control Offer Period........... 67
Club..................................... 18
Commission............................... 2
Company.................................. 1
Company Agreement........................ 45
Covenant Defeasance...................... 75
Default.................................. 64
Depositor................................ 26
Disposition Event........................ 48
DTC...................................... 90
DWAC..................................... 90
Eligible Institution..................... 25
Excess Funding Offer..................... 53
Excess Funding Offer Date................ 53
Exchange Agent........................... 7
Exchange Offer........................... 1
Expiration Date.......................... 2
FBI...................................... 18
Global New Note.......................... 2
Global Note.............................. 90
Global Old Note.......................... 2
Guarantee................................ 1
Guarantor................................ 1
HE Intercompany Note..................... 60
HE Intercompany Senior Note.............. 58
HGI...................................... 31
HGP...................................... 45
Holders.................................. 2
Horseshoe Bossier City................... 4
Horseshoe Casino Center.................. 4
Horseshoe Casinos........................ 4
Horseshoe Gaming......................... 1
Horseshoe Ventures....................... 31
Incurrence Date.......................... 66
Indenture................................ 2
Indirect Participants.................... 90
Initial Credit Facility.................. 35
Initial Purchaser........................ 2
Issue Date............................... 62
JBB...................................... 52
Legal Defeasance......................... 75
Letter of Transmittal.................... 1
Louisiana Enforcement Division........... 40
Manager.................................. 45
Minimum Accumulation Date................ 70
Mississippi Act.......................... 42
Named Executive Officers................. 47
New Notes................................ 1
Non-U.S. Holder.......................... 94
Old Notes................................ 1
Onyx..................................... 53
Participants............................. 90
Payment Blockage Notice.................. 63
Permitted Tax Distributions.............. 66
Prospectus............................... 1
Registration Rights Agreement............ 2
Registration Statement................... 1
Roll-Up Transaction...................... 31
RPG...................................... 1
RPG Intercompany Note.................... 60
RPG Intercompany Senior Note............. 59
Securities Act........................... 1
Service.................................. 93
Shelf Registration Statement............. 22
Subsidiary Guarantors.................... 71
Transfer................................. 41
Transfer Restricted Security............. 95
Trustee.................................. 26
Units.................................... 51
US Holder................................ 93
Warrants................................. 56
</TABLE>
97
<PAGE> 100
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 F-5
and 1994.........................................................................
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, F-21
1995 and 1994....................................................................
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, F-34
1995 and 1994....................................................................
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 March 31, 1997 and December 31, 1996....... F-42
Consolidated Condensed Statements of Operations for the three months ended March 31, F-43
1997 and 1996....................................................................
Consolidated Condensed Statements of Cash Flows for the three months ended March 31, F-44
1997 and 1996....................................................................
Notes to Consolidated Condensed Financial Statements................................ F-45
NEW GAMING CAPITAL PARTNERSHIP AND SUBSIDIARY:
Consolidated Condensed Balance Sheets at March 31, 1997 and December 31, 1996....... F-46
Consolidated Condensed Statements of Operations for the three months ended March 31, F-47
1997 and 1996....................................................................
Consolidated Condensed Statements of Cash Flows for the three months ended March 31, F-48
1997 and 1996....................................................................
Notes to Consolidated Condensed Financial Statements................................ F-49
ROBINSON PROPERTY GROUP, L.P.:
Condensed Balance Sheets at March 31, 1997 and December 31, 1996.................... F-50
Condensed Statements of Operations for the three months ended March 31, 1997 and F-51
1996.............................................................................
Condensed Statements of Cash Flows for the three months ended March 31, 1997 and F-52
1996.............................................................................
Notes to Condensed Financial Statements............................................. F-53
</TABLE>
F-1
<PAGE> 101
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> 102
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> 103
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> 104
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> 105
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> 106
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> 107
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> 108
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> 109
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> 110
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> 111
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> 112
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 intercompany notes received by the Company from its
subsidiaries, in each case secured by a second lien on the casino
F-13
<PAGE> 113
HORSESHOE GAMING, L.L.C. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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 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
F-14
<PAGE> 114
HORSESHOE GAMING, L.L.C. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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 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
F-15
<PAGE> 115
HORSESHOE GAMING, L.L.C. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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.
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
F-16
<PAGE> 116
HORSESHOE GAMING, L.L.C. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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> 117
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> 118
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> 119
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> 120
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 2,867 -- 2,867
with senior and subordinated notes (Note 5)............
------- ------ --------
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 17,729 -- 17,729
interest...............................................
------- ------ --------
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> 121
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 708 3,171 2,364
costs and other.....................................
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> 122
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> 123
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 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.
F-24
<PAGE> 124
NEW GAMING CAPITAL PARTNERSHIP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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 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.
F-25
<PAGE> 125
NEW GAMING CAPITAL PARTNERSHIP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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.
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>
F-26
<PAGE> 126
NEW GAMING CAPITAL PARTNERSHIP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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.
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
F-27
<PAGE> 127
NEW GAMING CAPITAL PARTNERSHIP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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 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
F-28
<PAGE> 128
NEW GAMING CAPITAL PARTNERSHIP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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 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
F-29
<PAGE> 129
NEW GAMING CAPITAL PARTNERSHIP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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> 130
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> 131
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> 132
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> 133
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> 134
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> 135
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>
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.
F-36
<PAGE> 136
ROBINSON PROPERTY GROUP, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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.
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
F-37
<PAGE> 137
ROBINSON PROPERTY GROUP, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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.
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.
F-38
<PAGE> 138
ROBINSON PROPERTY GROUP, L.P.
NOTES TO 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........................ $1,225 $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 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
F-39
<PAGE> 139
ROBINSON PROPERTY GROUP, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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 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.
F-40
<PAGE> 140
ROBINSON PROPERTY GROUP, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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 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-41
<PAGE> 141
HORSESHOE GAMING, L.L.C. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1997 1996
----------- ------------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C>
Current Assets:
Cash and cash equivalents...................................... $ 80,947 $ 79,159
Accounts receivable, net....................................... 9,128 8,026
Inventories.................................................... 1,803 1,435
Prepaid expenses and other..................................... 3,225 1,639
----------- ------------
Total current assets................................... 95,103 90,259
----------- ------------
Property and Equipment:
Land........................................................... 14,521 10,225
Buildings, boat, barge and improvements........................ 122,473 121,807
Furniture, fixtures and equipment.............................. 42,421 41,572
Less: accumulated depreciation................................. (30,046) (26,493)
----------- ------------
149,369 147,111
Construction in progress....................................... 74,053 38,644
----------- ------------
Net property and equipment............................. 223,422 185,755
----------- ------------
Other Assets:
Escrow funds................................................... 12,725 42,235
Goodwill, net.................................................. 38,968 39,226
Other.......................................................... 18,879 20,122
----------- ------------
$ 389,097 $377,597
=========== ============
LIABILITIES AND MEMBERS' EQUITY
Current Liabilities:
Current maturities of long-term debt........................... $ 10,173 $ 11,060
Accounts payable............................................... 3,543 3,184
Construction payables.......................................... 17,214 14,106
Accrued expenses and other..................................... 26,111 23,751
----------- ------------
Total current liabilities.............................. 57,041 52,101
Long-term debt, less current maturities.......................... 217,046 221,648
Minority Interest................................................ (445) (827)
Commitments and Contingencies
Redeemable Ownership Interests, net.............................. 26,042 24,893
Members' Equity.................................................. 89,413 79,782
----------- ------------
$ 389,097 $377,597
=========== ============
</TABLE>
The accompanying notes are an integral part of these consolidated condensed
financial statements.
F-42
<PAGE> 142
HORSESHOE GAMING, L.L.C. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-------------------
1997 1996
------- -------
(IN THOUSANDS)
<S> <C> <C>
Revenues:
Casino................................................................. $79,956 $83,672
Food and beverage...................................................... 6,891 6,711
Hotel.................................................................. 1,649 1,971
Other.................................................................. 1,016 1,250
------- -------
89,512 93,604
Promotional allowances................................................. (6,452) (6,254)
------- -------
Net revenues........................................................ 83,060 87,350
------- -------
Expenses:
Casino................................................................. 42,359 42,052
Food and beverage...................................................... 2,581 2,748
Hotel.................................................................. 1,171 1,641
Other.................................................................. 255 378
General and administrative............................................. 12,921 14,189
Development............................................................ 228 883
Depreciation and amortization.......................................... 4,299 3,723
------- -------
Total expenses...................................................... 63,814 65,614
------- -------
Operating Income......................................................... 19,246 21,736
Other Income (Expense):
Interest expense....................................................... (5,249) (6,615)
Interest and other income.............................................. 1,484 1,132
Other.................................................................. (64) (55)
Minority interest in income of subsidiaries............................ (382) (503)
------- -------
Net Income............................................................... $15,035 $15,695
======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated condensed
financial statements.
F-43
<PAGE> 143
HORSESHOE GAMING, L.L.C. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
---------------------
1997 1996
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Cash provided by operating activities:
Net Income........................................................... $ 15,035 $ 15,695
Adjustments to reconcile net income to net cash provided by operating
activities:
Minority interest in income of subsidiary......................... 382 503
Depreciation and amortization..................................... 4,299 3,723
Amortization of debt discount, deferred finance charges and
other............................................................ 674 1,107
Loss on disposal of land and other assets......................... -- 515
Provision for doubtful accounts................................... 1,553 1,183
Increase in redeemable ownership interests........................ 599 705
Net change in assets and liabilities.............................. (1,890) 6,873
-------- --------
Net cash provided by operating activities....................... 20,652 30,304
-------- --------
Cash flows from investing activities:
Purchases of property and equipment.................................. (40,220) (10,813)
Proceeds from land held for sale..................................... -- 1,400
Decrease in escrow funds............................................. 29,510 4,745
Increase (decrease) in construction payables......................... 3,108 (1,119)
Increase in other assets............................................. (593) (2,353)
-------- --------
Net cash used in investing activities........................... (8,195) (8,140)
-------- --------
Cash flows from financing activities:
Payments on debt..................................................... (5,640) (12)
Capital distributions................................................ (5,029) (7,832)
-------- --------
Net cash used in financing activities........................... (10,669) (7,844)
-------- --------
Net change in cash and cash equivalents................................ 1,788 14,320
Cash and cash equivalents, beginning of period......................... 79,159 65,541
-------- --------
Cash and cash equivalents, end of period............................... $ 80,947 $ 79,861
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated condensed
financial statements.
F-44
<PAGE> 144
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., a Delaware corporation, 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 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 its
business, 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. UNIT OPTION PLAN:
During the quarter, 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 March 31, 1997, 631,225 units had been granted, 210,408 of
which had 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 market 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 units in the Company increases above the exercise price
of the options.
4. SUBSEQUENT EVENT:
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 approximately $14.5 million together with
accrued and unpaid interest related thereto and 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. An
extraordinary loss on early retirement of debt of approximately $5.2 million
will be reported in the Company's financial statements for the quarter ended
June 30, 1997.
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.
F-45
<PAGE> 145
NEW GAMING CAPITAL PARTNERSHIP AND SUBSIDIARY
CONSOLIDATED CONDENSED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1997 1996
----------- ------------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C>
Current Assets:
Cash and cash equivalents........................................... $ 20,127 $ 14,913
Accounts receivable, net............................................ 1,593 1,901
Inventories......................................................... 1,338 957
Prepaid expenses and other.......................................... 1,855 1,102
-------- --------
Total current assets........................................ 24,913 18,873
-------- --------
Property and Equipment:
Land................................................................ 10,411 6,115
Buildings, boat and improvements.................................... 72,214 71,554
Furniture, fixtures and equipment................................... 24,900 24,125
Less: accumulated depreciation...................................... (17,009) (15,028)
-------- --------
90,516 86,766
Construction in progress............................................ 41,918 18,482
-------- --------
Net property and equipment.................................. 132,434 105,248
-------- --------
Other Assets:
Goodwill, net....................................................... 18,649 18,788
Other............................................................... 9,559 11,269
-------- --------
$ 185,555 $154,178
======== ========
LIABILITIES AND PARTNERS' CAPITAL
Current Liabilities:
Current maturities of long-term debt................................ $ 13,615 $ 11,854
Accounts payable.................................................... 1,690 1,882
Due to affiliates................................................... 2,434 2,536
Construction payables............................................... 11,935 7,161
Accrued expenses and other.......................................... 9,146 8,373
-------- --------
Total current liabilities................................... 38,820 31,806
Long-term debt, less current maturities............................... 117,766 97,837
Minority Interest..................................................... (445) (827)
Commitments and Contingencies
Partners' Capital..................................................... 29,414 25,362
-------- --------
$ 185,555 $154,178
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated condensed
financial statements.
F-46
<PAGE> 146
NEW GAMING CAPITAL PARTNERSHIP AND SUBSIDIARY
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-------------------
1997 1996
------- -------
(IN THOUSANDS)
<S> <C> <C>
Revenues:
Casino................................................................. $39,459 $43,525
Food and beverage...................................................... 3,719 3,866
Hotel.................................................................. 827 1,075
Other.................................................................. 420 461
------- -------
44,425 48,927
Promotional allowances................................................. (3,028) (3,362)
------- -------
Net revenues................................................... 41,397 45,565
------- -------
Expenses:
Casino................................................................. 22,197 24,161
Food and beverage...................................................... 1,772 1,835
Hotel.................................................................. 450 883
Other.................................................................. 112 191
General and administrative............................................. 7,165 8,248
Depreciation and amortization.......................................... 2,486 1,950
------- -------
Total.......................................................... 34,182 37,268
------- -------
Operating Income......................................................... 7,215 8,297
Other Income (Expense):
Interest expense....................................................... (3,099) (2,621)
Interest income........................................................ 247 265
Other.................................................................. (5) --
Minority interest in income of subsidiary.............................. (382) (503)
------- -------
Net Income............................................................... $ 3,976 $ 5,438
======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated condensed
financial statements.
F-47
<PAGE> 147
NEW GAMING CAPITAL PARTNERSHIP AND SUBSIDIARY
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
---------------------
1997 1996
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Cash provided by operating activities:
Net Income........................................................... $ 3,976 $ 5,438
Adjustments to reconcile net income to net cash provided by operating
activities:
Minority interest in income of subsidiary......................... 382 503
Depreciation and amortization..................................... 2,486 1,950
Provision for doubtful accounts................................... 471 388
Amortization of debt discounts, deferred finance costs and
other............................................................ 245 157
Loss on sale of land and other assets............................. -- 358
Net change in assets and liabilities.............................. (716) (1,457)
-------- --------
Net cash provided by operating activities.................... 6,844 7,337
-------- --------
Cash flows from investing activities:
Purchase of property and equipment................................... (28,167) (10,085)
Increase (decrease) in construction payables......................... 4,774 (1,119)
Proceeds from land held for sale..................................... -- 1,400
(Increase)/decrease in other assets.................................. 194 (845)
-------- --------
Net cash used in investing activities........................ (23,199) (10,649)
-------- --------
Cash flows from financing activities:
Proceeds from debt................................................... 30,000 5,200
Payments on debt..................................................... (8,310) (12)
Capital distributions................................................ -- (14,169)
Increase (decrease) in due to affiliates............................. (121) 3,939
-------- --------
Net cash provided by (used in) financing activities.......... 21,569 (5,042)
-------- --------
Net change in cash and cash equivalents................................ 5,214 (8,354)
Cash and cash equivalents, beginning of period......................... 14,913 27,025
-------- --------
Cash and cash equivalents, end of period............................... $ 20,127 $ 18,671
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated condensed
financial statements.
F-48
<PAGE> 148
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, 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 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:
Litigation
The Partnership and its subsidiary, during the normal course of operating
its 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-49
<PAGE> 149
ROBINSON PROPERTY GROUP, L.P.
CONDENSED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1997 1996
----------- ------------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C>
Current Assets:
Cash and cash equivalents........................................... $ 20,067 $ 22,858
Accounts receivable, net............................................ 7,077 5,883
Inventories......................................................... 465 478
Prepaid expenses and other.......................................... 986 275
-------- --------
Total current assets........................................ 28,595 29,494
-------- --------
Property and Equipment:
Land................................................................ 4,110 4,110
Buildings, barge and improvements................................... 50,258 50,253
Furniture, fixtures and equipment................................... 16,984 16,933
Less: accumulated depreciation...................................... (12,907) (11,370)
-------- --------
58,445 59,926
Construction in progress............................................ 32,135 20,162
-------- --------
Net property and equipment.................................. 90,580 80,088
-------- --------
Other Assets:
Goodwill, net....................................................... 20,318 20,438
Other............................................................... 3,732 3,857
-------- --------
$ 143,225 $133,877
======== ========
LIABILITIES AND PARTNERS' CAPITAL
Current Liabilities:
Accounts payable.................................................... $ 1,725 $ 1,274
Construction Payables............................................... 5,278 6,945
Due to affiliates................................................... 587 1,736
Accrued expenses and other.......................................... 8,257 8,503
-------- --------
Total current liabilities................................... 15,847 18,458
-------- --------
Long-term debt........................................................ 43,000 43,000
Commitments and Contingencies
Partners' Capital..................................................... 84,378 72,419
-------- --------
$ 143,225 $133,877
======== ========
</TABLE>
The accompanying notes are an integral part of these condensed financial
statements.
F-50
<PAGE> 150
ROBINSON PROPERTY GROUP, L.P.
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-------------------
1997 1996
------- -------
(IN THOUSANDS)
<S> <C> <C>
Revenues:
Casino................................................................. $40,497 $40,147
Food and beverage...................................................... 3,172 2,845
Hotel.................................................................. 822 896
Other.................................................................. 596 789
------- -------
45,087 44,677
Promotional allowances................................................. (3,424) (2,892)
------- -------
Net revenues........................................................ 41,663 41,785
------- -------
Expenses:
Casino................................................................. 20,162 17,891
Food and beverage...................................................... 809 913
Hotel.................................................................. 721 758
Other.................................................................. 143 187
General and administrative............................................. 5,756 5,943
Depreciation and amortization.......................................... 1,808 1,748
------- -------
Total.......................................................... 29,399 27,440
------- -------
Operating Income......................................................... 12,264 14,345
Other Income (Expense):
Interest expense....................................................... (602) (2,950)
Interest and other income.............................................. 200 301
Other.................................................................. (4) --
------- -------
Net Income............................................................... $11,858 $11,696
======= =======
</TABLE>
The accompanying notes are an integral part of these condensed financial
statements.
F-51
<PAGE> 151
ROBINSON PROPERTY GROUP, L.P.
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
---------------------
1997 1996
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Cash provided by operating activities:
Net Income........................................................... $ 11,858 $ 11,696
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization..................................... 1,808 1,748
Provision for doubtful accounts................................... 1,082 795
Amortization of debt discounts, deferred finance charges and
other............................................................ 128 722
Net change in assets and liabilities.............................. (2,769) (2,506)
-------- --------
Net cash provided by operating activities.................... 12,107 12,455
-------- --------
Cash flows from investing activities:
Purchases of property and equipment.................................. (12,029) (513)
Decrease in construction payables.................................... (1,667) --
(Increase) decrease in other assets.................................. (34) 305
-------- --------
Net cash used in investing activities........................ (13,730) (208)
-------- --------
Cash flows from financing activities:
Payments on debt..................................................... -- (20,000)
Changes in due to/from affiliates.................................... (1,168) 1,592
-------- --------
Net cash used in financing activities........................ (1,168) (18,408)
-------- --------
Net change in cash and cash equivalents................................ (2,791) (6,161)
Cash and cash equivalents, beginning of period......................... 22,858 32,706
-------- --------
Cash and cash equivalents, end of period............................... $ 20,067 $ 26,545
======== ========
</TABLE>
The accompanying notes are an integral part of these condensed financial
statements.
F-52
<PAGE> 152
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., 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 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 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:
Litigation
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-53
<PAGE> 153
======================================================
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............................ 45
Executive Compensation................ 47
Ownership of Units.................... 51
Related Party Transactions............ 52
Description of Certain Other
Indebtedness........................ 53
Description of Notes.................. 60
Certain Federal Income Tax
Considerations...................... 91
Plan of Distribution.................. 95
Legal Matters......................... 96
Experts............................... 96
Available Information................. 96
Index of Defined Terms................ 97
Indices to Financial Statements....... F-1
------------------------
UNTIL , 1997 ALL DEALERS
EFFECTING TRANSACTIONS IN THE NEW NOTES,
WHETHER OR NOT PARTICIPATING IN THIS
DISTRIBUTION, MAY BE REQUIRED TO DELIVER A
PROSPECTUS. THIS DELIVERY REQUIREMENT IS IN
ADDITION TO THE OBLIGATION OF DEALERS TO
DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
=============================================
</TABLE>
======================================================
$160,000,000
HORSESHOE GAMING, L.L.C.
9 3/8% SENIOR SUBORDINATED NOTES
DUE JUNE 15, 2007
---------------------------
PROSPECTUS
---------------------------
, 1997
======================================================
<PAGE> 154
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> 155
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> 156
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>
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<PAGE> 157
<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> 158
<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> 159
<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> 160
<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.
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.
</TABLE>
II-7
<PAGE> 161
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- --------- --------------------------------------------------------------------------------
<S> <C>
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.
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> 162
- ---------------
* 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 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> 163
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> 164
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 August 5, 1997.
Horseshoe Gaming, L.L.C.,
a Delaware limited liability company
By: Horseshoe Gaming, Inc.,
a Nevada corporation
Manager
Its:
By: /s/ JACK B. BINION
------------------------------------
Jack B. Binion
Its: Chief Executive Officer and
Chairman of the Board of Directors
POWER OF ATTORNEY
Each person whose signature appears below on this Registration Statement
hereby constitutes and appoints Jack B. Binion and Walter J. Haybert and each of
them, with full power to act without the other, his or her true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him or her, and in his or her name, place and stead, in any and all
capacities (unless revoked in writing), to sign any and all amendments to the
Registrant's Form S-4 Registration Statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting to such attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in connection therewith,
as fully to all intents and purposes as he or she might and could do in person,
hereby ratifying and confirming all that such attorneys-in-fact and agents or
any of them, or their or his substitute or substitutes, may lawfully do or cause
to be done by virtue hereof.
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 August 5, 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 August 5, 1997
- ----------------------------------------------- Treasurer (Principal
Walter J. Haybert Financial and Accounting
Officer) of Horseshoe
Gaming, Inc.
/s/ PHYLLIS M. COPE Director August 5, 1997
- -----------------------------------------------
Phyllis M. Cope
/s/ PERI HOWARD Director August 5, 1997
- -----------------------------------------------
Peri Howard
</TABLE>
II-11
<PAGE> 165
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 August 5, 1997.
Robinson Property Group Limited
Partnership
a Mississippi limited partnership
By: Horseshoe GP, Inc.,
a Nevada corporation
Manager
Its:
By: /s/ JACK B. BINION
------------------------------------
Jack B. Binion
Its: Chief Executive Officer and
Chairman of the Board of
Directors
POWER OF ATTORNEY
Each person whose signature appears below on this Registration Statement
hereby constitutes and appoints Jack B. Binion and Walter J. Haybert and each of
them, with full power to act without the other, his or her true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him or her, and in his or her name, place and stead, in any and all
capacities (unless revoked in writing), to sign any and all amendments to the
Registrant's Form S-4 Registration Statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting to such attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in connection therewith,
as fully to all intents and purposes as he or she might and could do in person,
hereby ratifying and confirming all that such attorneys-in-fact and agents or
any of them, or their or his substitute or substitutes, may lawfully do or cause
to be done by virtue hereof.
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
- ----------------------------------------------- Chairman of the Board of
Jack B. Binion Directors (Principal
Executive Officer) of
Horseshoe GP, Inc. August 5, 1997
/s/ WALTER J. HAYBERT Chief Financial Officer and
- ----------------------------------------------- Treasurer (Principal
Walter J. Haybert Financial and Accounting
Officer) of Horseshoe GP,
Inc. August 5, 1997
/s/ PHYLLIS M. COPE Director
- -----------------------------------------------
Phyllis M. Cope August 5, 1997
/s/ PERI HOWARD Director
- -----------------------------------------------
Peri Howard August 5, 1997
</TABLE>
II-12
<PAGE> 166
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> 167
<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> 168
<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> 169
<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> 170
<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> 171
<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> 172
<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.........................................................
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>
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* 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 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 4.42
PURCHASE AGREEMENT
June 18, 1997
WASSERSTEIN PERELLA SECURITIES, INC.
1999 Avenue of the Stars, Suite 2950
Los Angeles, California 90067
Ladies and Gentlemen:
Horseshoe Gaming, L.L.C., a Delaware limited liability company (the
"Company"), proposes, subject to the terms and conditions stated herein, to
issue and sell to Wasserstein Perella Securities, Inc. (the "Initial Purchaser")
an aggregate principal amount of $160,000,000 of its 9 3/8% Series A Senior
Subordinated Notes due 2007 (the "Series A Notes").
The Series A Notes and the Series B Notes (as defined below) (the Series A
Notes and the Series B Notes collectively referred to herein as the "Notes")
will be issued pursuant to an Indenture (the "Indenture") to be dated as of the
Closing date (as defined below) among the Company, Robinson Property Group,
Limited Partnership, a Mississippi limited partnership (the "Guarantor") and
U.S. Trust Company of Texas, N.A., as trustee (the "Trustee"). The Notes will be
unconditionally guaranteed by the Guarantor on a senior subordinated basis
pursuant to the terms of the Indenture (the "Guarantee"). As used herein, the
term "Notes" shall include the Guarantees whenever the context permits.
1. ISSUANCE OF SECURITIES
The Company proposes to issue and sell to the Initial Purchaser an
aggregate of $160,000,000 principal amount of Series A Notes pursuant to the
Indenture. The Series A Notes will be offered and sold to the Initial Purchaser
pursuant to an exemption or exemptions from the registration requirements under
the Securities Act of 1933, as amended (the "Securities Act"). The Company has
prepared a preliminary offering memorandum dated June 17, 1997 (the "Preliminary
Offering Memorandum) and a final offering memorandum dated the date hereof (the
"Offering Memorandum") relating to the Company, the Guarantor, the Series A
Notes and the Guarantee.
The Initial Purchaser has advised the Company and the Guarantor that the
Initial Purchaser will make offers (the "Exempt Resales") of the Series A Notes
on the terms set forth in the Offering Memorandum, as amended or supplemented,
solely to persons whom the Initial Purchaser reasonably believe to be "qualified
institutional buyers," as defined in Rule 144A under the Securities Act
("QIBs"), and to a limited number of other "accredited investors," as defined in
Rule 501(a) under Regulation D of the Securities Act that execute Annex A to the
<PAGE> 2
Offering Memorandum (each, an "Accredited Investor"). The QIBs and the
Accredited Investors are referred to herein as the "Eligible Purchasers."
Holders (including subsequent transferees) of the Series A Notes will be
entitled to certain registration rights provided under a registration rights
agreement (the "Registration Rights Agreement") to be dated as of the Closing
Date among the Company, the Guarantor and the Initial Purchaser, in
substantially the form of Exhibit A hereto. Pursuant to the Registration Rights
Agreement, the Company and the Guarantor will agree to file with the Securities
and Exchange Commission (the "Commission"), under the circumstances set forth
therein, (I) a registration statement under the Securities Act (the "Exchange
Offer Registration Statement") relating to the 9 3/8% Series B Senior
Subordinated Notes due 2007 (the "Series B Notes") to be offered in exchange for
the Series A Notes (the "Exchange Offer") and (ii) under certain circumstances
set forth in the Registration Rights Agreement, a shelf registration statement
pursuant to Rule 415 under the Securities Act (the "Shelf Registration
Statement") relating to the resale by certain holders of the Series A Notes, and
to use its best efforts to cause such registration statements to be declared
effective and consummate the Exchange Offer. This Agreement, the Notes, the
Indenture, the Registration Rights Agreement and the Guarantee are hereinafter
referred to collectively as the "Transaction Document."
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE GUARANTOR
The Company and the Guarantor, jointly and severally, represent and
warrant to, and agree with, the Initial Purchaser that as of the date hereof
(except as otherwise expressly provided):
a. The Preliminary Offering Memorandum as of its date does not, and the
Offering Memorandum as of its date and the date hereof does not and as of the
Closing Date will not, and any supplement or amendment thereto will not, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. No representation and warranty is made in this subsection (a) with
respect to any information contained in or omitted from the Preliminary Offering
Memorandum and the Offering Memorandum (or any amendment thereof or supplement
thereto) made in reliance upon and in conformity with information relating to
the Initial Purchaser (as set forth in Section 8(b) hereof) furnished in writing
to the Company by the Initial Purchaser expressly for use therein. No stop order
preventing the use of the Preliminary Offering Memorandum or the Offering
Memorandum, or any amendment or supplement thereto, or any order asserting that
any of the transactions contemplated by this Agreement are subject to the
registration requirements of the Securities Act, has been issued and no
proceeding for the purpose has been commenced or is pending or, to the knowledge
of the Company and the Guarantor, is contemplated.
-2-
<PAGE> 3
b. Arthur Andersen LLP are independent public accountants with respect
to the Company, its Subsidiaries (as hereinafter defined) and the Guarantor as
required by the Securities Act and the rules and regulations thereunder. Except
as set forth in the Offering Memorandum, the historical consolidated financial
statements of the Company, the historical consolidated financial statements of
New Capital Gaming Partnership and its Subsidiary (together "NCGP") and the
historical financial statements to the Guarantor, together with the notes
thereto, forming part of the Preliminary Offering Memorandum and the Offering
Memorandum (and any amendment or supplement thereto) comply as to form with the
requirements applicable to financial statements required to be included in
registration statements on Form S-1 under the Securities Act and present fairly
the financial position, results of operations and cash flows of the Company,
NCGP and the Guarantor, respectively, at the date and for the period indicated.
Such consolidated financial statements have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis
throughout the period presented except as stated therein. Except as set forth in
the Offering Memorandum, the financial and statistical information and data
included in the Offering Memorandum, historical and pro forma, are currently
presented and prepared on a basis consistent with the relevant financial
statements, historical and pro forma, and the books and records of the Company,
NCGP and the Guarantor, as applicable. The forward-looking statements contained
in the Offering Memorandum are based upon good faith estimates and assumptions
believed by the Company and the Guarantor to be reasonable at the time made. As
used herein, "Subsidiary" or "Subsidiaries" of any person means any entity of
which such person or any Subsidiaries of such person owns or will own as of the
Closing Date, directly or indirectly, 50% or more of the outstanding equity
securities.
c. Subsequent to the respective dates as of which information is given
in the Offering Memorandum, and except as set forth therein, (I) there has not
been, singly or in the aggregate, any material adverse change or development
which might reasonably be expected to result in any material adverse change in
the business, properties, prospects, operations, condition (financial or other)
or results of operations of the Company, the Guarantor or its Subsidiaries,
whether or not arising from transactions in the ordinary course of business (ii)
none of the Company, its Subsidiaries and the Guarantor has incurred or
undertaken any liabilities or obligations, direct or contingent, which are
material, individually or in the aggregate, to the Company, its Subsidiaries and
the Guarantor, as the case may be, nor entered into any transaction not in the
ordinary course of business and (iii) there has not been any material change in
the Company's, its Subsidiaries' or the Guarantor's equity interests or any
material increase in long-term or short-term indebtedness of the Company, its
Subsidiaries or the Guarantor incurred in connection with the construction
described in the Offering Memorandum or any dividend or distribution (other than
permitted tax distributions consistent with past practices) of any kind
declared, paid or made by the Company, its Subsidiaries or the Guarantor on any
class of capital stock, membership interests or partnership interests, as
applicable (any such event referred to in clauses (I), (ii) or (iii), a
"Material Adverse Change").
-3-
<PAGE> 4
d. Each of the Company, its Subsidiaries and the Guarantor has all
requisite power (corporate or otherwise) and authority to own, lease and operate
its properties and to conduct its business as described in the Offering
Memorandum and, in the case of the Company and the Guarantor, to execute,
deliver and perform its obligations under this Agreement and the other
Transaction Documents to which it is a party and to consummate the transactions
contemplated hereby and thereby, including without limitation, the corporate
power and authority to issue, sell and deliver the Notes and the Guarantee.
e. None of (I) the execution, delivery, and performance of this
Agreement and each of the other Transaction Documents by the Company and the
Guarantor, to the extent it is a party thereto, (ii) the issuance, sale or
delivery of the Notes and the Guarantee, or (iii) the consummation of the
transaction contemplated hereby and thereby will (A) conflict with or result in
a breach of any of the terms and provisions of, require consent under or
constitute a default (or an event which with notice or lapse of time, or both,
would constitute a default) under, or result in the creation or imposition of
any lien, charge or encumbrance upon any property or assets of the Company, its
Subsidiaries or the Guarantor or an acceleration of indebtedness pursuant to,
any agreement, bond, debenture, mortgage, deed of trust, indenture, note,
instrument, franchise, license or permit to which the Company, any of its
Subsidiaries or the Guarantor is a party or by which their respective properties
or assets may be bound or (B) violate or conflict with any judgment, decree,
order, statute, rule or regulation of any court or any public, governmental or
regulatory agency or body applicable to the Company, any of its Subsidiaries or
the Guarantor or any of their respective properties or assets. The execution,
delivery and performance of this Agreement and the other Transaction Document by
the Company and the Guarantor, to the extent it is a party thereto, and the
consummation of the transactions contemplated hereby and thereby, as described
in the Offering Memorandum, do not and will not violate or conflict with, or
require consent under, any provision of the certificate of organization or
formation, charter, operating agreement, partnership agreement or bylaws, as
applicable, as amended or restated, of the Company, any of its Subsidiaries or
the Guarantor as currently in effect. No consent, waiver, approval,
authorization, order, registration, filing, qualification, license or permit of
or with any court or any public, governmental or regulatory agency or body, or
any other person, is required for the execution, delivery and performance of
this Agreement, the other Transaction Documents or the consummation of the
transactions contemplated hereby and thereby, including the issuance, sale and
delivery of the Notes (including and Guarantee) to be issued, sold and delivered
by the Company and the Guarantor hereunder except such consent, waiver,
approvals, authorizations, orders, registrations, filings, qualifications,
licenses and permits as may be required under state securities or Blue Sky laws
in connection with the purchase and distribution of the Notes by the Initial
Purchaser, or as may be required under applicable gaming laws, all of which
either shall have been made and obtained on the Closing Date (and copies of
which have been delivered to the Initial Purchaser) or shall have no bearing on
the validity and enforceability of this Agreement, the other Transaction
Documents and the Notes, except for such filings, qualifications, orders and
approvals as may in the future be required under the Registration Rights
Agreement.
-4-
<PAGE> 5
f. The Company had, as of March 31, 1997, an authorized and outstanding
capitalization as set forth in the Offering Memorandum and the capital of the
Company conforms in all material respect to the description thereof contained in
the Offering Memorandum prior to and after giving pro forma effect to the
consummation of the offering of the Notes and the application of the net
proceeds therefrom and the related transactions on the terms described in the
Offering Memorandum.
g. Each of the Company, its Subsidiaries and the Guarantor is duly
organized, validly existing and in good standing under the laws of its
jurisdiction of organization and is duly qualified or licensed to do business as
a foreign entity in good standing in all jurisdictions in which it owns or
leases property or in which the conduct of its business makes such qualification
or license necessary.
h. Each of the Company, its Subsidiaries and the Guarantor has such
permits, licenses, franchises, certificates, consents, orders, qualifications,
approvals, registrations and authorizations ("Permits") of and from, and has
made all declarations and filings with, all federal, state, local and other
governmental authorities, all self-regulatory organizations and all courts and
other tribunals as are necessary to own, lease and operate its respective
properties and to conduct its business in the manner described in the
Preliminary Offering Memorandum and the Offering Memorandum, except as set forth
in the Offering Memorandum, and no such Permit contains a materially burdensome
restriction not adequately disclosed in the Offering Memorandum. Except as set
forth in the immediately preceding sentence, all such Permits are in full force
and effect, and each of the Company, its Subsidiaries and the Guarantor has
fulfilled and performed all of its material obligations with respect to such
Permits. No event has occurred which allows, or after notice or lapse of time
would allow, revocation or termination by the issuer thereof or which results in
any other material impairment of the right of the holder of any such Permits.
The Company, its Subsidiaries and the Guarantor have no reason to believe that
any governmental body or agency is considering limiting, suspending or revoking
any such Permit or that any governmental body or agency is investigating any of
the Company, its Subsidiaries or the Guarantor other than ordinary course
reviews or any ordinary course review of the transactions contemplated hereby.
i. There is (I) no action, suit, proceeding or investigation pending
or, to the best knowledge of the Company and the Guarantor, threatened or
contemplated to which the Company, any of its Subsidiaries or the Guarantor is a
party or to which any property of the Company, any of its Subsidiaries or the
Guarantor is subject in any court or before any governmental authority,
arbitration board or tribunal, foreign or domestic, (ii) no statute, rule,
regulation or order that has been enacted, adopted or issued by any government
agency and (iii) no injunction, restraining order or order of any nature by a
federal or state court or foreign court of competent jurisdiction to which the
Company, any of its Subsidiaries or the Guarantor, or any of their respective
business, assets or property, is or may be subject, which might in any case
reasonably be expected to have a material adverse effect on (A) the business,
properties, operations, conditions (financial or other) or results of operations
of such person, or (B) the issuance and sale of the Notes or the Guarantee or
the consummation of the transaction contemplated by this Agreement or any of the
other Transaction Agreements (a "Material
-5-
<PAGE> 6
Adverse Effect"), and there is no such action seeking to restrain, enjoin,
prevent the consummation of or otherwise challenge this Agreement or any of the
other Transaction Documents or the transactions contemplated hereby or thereby.
j. None of the Company, its Subsidiaries, the Guarantor or any of their
respective affiliates (I) has taken or will take, directly or indirectly, any
action designed to cause or result in, or which constitutes or which might
reasonably be expected to constitute, the stabilization or manipulation of the
price of any security of the Company or the Guarantor to facilitate the sale or
resale of the Notes or (ii) since the date of the Preliminary Offering
Memorandum (A) sold, bid for, purchased or paid any person any compensation for
soliciting purchases of, any of the Notes (including the Guarantee) or (B) paid
or agreed to pay to any person any compensation for soliciting another to
purchase any other securities of the Company or the Guarantor.
k. Neither the Company nor the Guarantor is (I) an "investment company"
or a company "controlled" by an investment company within the meaning of the
Investment Company Act of 1940, as amended, (ii) a "holding company" or a
"subsidiary company" of a holding company or an "affiliate" thereof within the
meaning of the Public Utility Holding Company Act of 1935, as amended, or (iii)
subject to regulation under the Federal Power Act or any federal or state
statute or regulation limiting its ability to incur indebtedness for borrowed
money, except as disclosed in the Offering Memorandum.
l. Assuming (a) the accuracy of the Initial Purchaser's representations
and warranties set forth in Section 3 of this Agreement and the compliance by
the Initial Purchaser with the procedures set forth in Section 4 of this
Agreement and (b) that the purchasers who buy the Series A Notes in the Exempt
Resales are QIBs the offer and sale of the Series A Notes (including the
Guarantee) to the Initial Purchaser as contemplated hereby and the Exempt
Resales are exempt from the registration requirements of the Securities Act and
the qualification requirements under the Trust Indenture Act. No form of general
solicitation or general advertising was used by the Company, the Guarantor or
any of their representatives (although no representation or warranty is made as
to actions taken by the Initial Purchaser and its representatives) in connection
with the offer and sale of any of the Series A Notes (including the Guarantee)
or in connection with Exempt Resales, including, but not limited to, articles,
notices or other communications published in any newspaper, magazine, or similar
medium or broadcast over television or radio, or any seminar or meeting whose
attendees have been invited by any general solicitation or general advertising.
No securities of the same class as the Series A Notes have been issued and sold
by the Company or the Guarantor within the six-month period immediately prior to
the date hereof.
m. None of the Company, its Subsidiaries, the Guarantor, or any of
their respective affiliates (as defined in Rule 501(b) under the Securities Act)
or any person authorized to act on their respective behalf (excluding the
Initial Purchaser, as to which no representation is made) has sold, offered for
sale, solicited offers to buy or otherwise negotiated in respect of any security
(as such term is defined in the Securities Act) or the Company in a manner which
would require registration under the Securities Act.
-6-
<PAGE> 7
n. The Series A Notes are eligible for resale pursuant to Rule 144A
under the Securities Act and, when issued, will not be of the same class as
securities listed on a national securities exchange registered under Section 6
of the Securities Exchange Act of 1934, as amended (the "Exchange Act") or
quoted in a U.S. automated inter-dealer quotation system.
o. None of the Company, its Subsidiaries and the Guarantor has any
material liabilities or obligations, absolute, accrued, contingent or otherwise
("Liabilities"), except (I) as reflected or reserved against in the consolidated
balance sheet of the Company and its Subsidiaries, the balance sheet of the
Guarantor or the consolidated balance sheet of NCGP as of March 31, 1997, and
not heretofore discharged, (ii) as specifically disclosed or specifically
contemplated in the Offering Memorandum or (iii) liabilities incurred in the
ordinary course of business since March 31, 1997.
p. None of the Company, its Subsidiaries or the Guarantor is in
violation of its respective certificate of formation or organization, charter,
partnership agreement, operating agreement or bylaws, as applicable, or in
default in the performance or observance of any obligation, agreement, covenant
or condition contained in any bond, debenture, note or any other evidence of
indebtedness or any indenture, mortgage, deed of trust or other contract, lease
or other instrument to which any of them is a party or by which any of them or
any of their respective properties are bound except where such default would
not, singly or in the aggregate, have a Material Adverse Effect. There does not
exist any state of facts which constitutes an event of default on the part of
the Company, its Subsidiaries or the Guarantor as defined in such documents or
which, with notice or lapse of time or both, would constitute such an event of
default which would have a Material Adverse Effect.
q. Each of the Company, its Subsidiaries and the Guarantor is in
compliance, and has complied in all material respects, at all times during its
existence, and all transactions involving the issuance, offer, placement and
sale, pursuant to the terms of the Transaction Documents, of the Notes comply,
in all material respects, with all applicable federal, state and local statutes,
codes, ordinances, rules and regulations of the United States and all other
countries and subdivisions thereof (the "Laws"), except where the failure to so
comply would not, singly or in the aggregate, have a Material Adverse Effect on
the Company, its Subsidiaries and the Guarantor. None of the Company, its
Subsidiaries or the Guarantor has received notice within the past three (3)
years of any violations of any Laws which would singly or in the aggregate have
a Material Adverse Effect on the Company, its Subsidiaries and the Guarantor.
r. The Company, its Subsidiaries and the Guarantor are each in
compliance with any and all Laws relating to the environment or health and
safety, except where the failure to so comply would not, singly or in the
aggregate, have a Material Adverse Effect on the Company, its Subsidiaries and
the Guarantor. To the knowledge of the Company, there exists no fact, and no
event has occurred, which has or is reasonably likely to result in material
liability (including, without limitation, alleged or potential liability for
investigatory costs, cleanup costs, governmental response costs, natural
resource damages, property damages, personal injuries or penalties) of the
Company, its Subsidiaries or the Guarantor arising out of, based on or resulting
from the presence or release into the environment of any hazardous
-7-
<PAGE> 8
material (including, without limitation, any pollutant or contamination or
hazardous, dangerous or toxic chemical, material, waste or substance regulated
under or within the meaning of any Law) or any violation of any Law relating to
the environment.
s. This Agreement has been duly and validly authorized, executed and
delivered by the Company and the Guarantor and is a valid and binding obligation
of the Company and the Guarantor, enforceable against the Company and the
Guarantor in accordance with its terms except as such enforcement may be subject
to or limited by (I) bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect relating to creditors' rights and
remedies generally, (ii) general principles of equity (regardless of whether
such enforcement may be sought in a proceeding in equity or at law) and (iii)
with respect to any rights to indemnification or contribution, federal
securities laws.
t. The Series A Notes have been duly and validly authorized by the
Company, the Guarantee endorsed on the Series A Notes have been duly and validly
authorized by the Guarantor, and the Series A Notes (including the Guarantee
endorsed thereon), when authenticated by the Trustee and issued, sold and
delivered in accordance with this Agreement and the Indenture, will have been
duly and validly executed, authenticated, issued and delivered and will
constitute legally valid and binding obligations of the Company and the
Guarantor, enforceable against the Company and the Guarantor in accordance with
their terms and entitled to the benefits provided by the Indenture except as
such enforcement may be subject to or limited by (I) bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights and remedies generally and (ii) general principles
of equity (regardless of whether such enforcement may be sought in a proceeding
in equity or at law). The Series A Notes and the Guarantee endorsed thereon,
when executed, authenticated, issued and delivered as provided in the Indenture,
will conform to the description thereof contained in the Offering Memorandum.
u. The Series B Notes have been duly and validly authorized for
issuance by the Company, the Guarantee endorsed on the Series B Notes have been
duly and validly authorized by the Guarantor, and the Series B Notes (including
the Guarantee endorsed thereon), when authenticated by the Trustee and issued
and delivered in accordance with the Exchange Offer and the Indenture, assuming
the consummation of the Exchange Offer, will have been duly and validly
executed, authenticated, issued and delivered and will constitute valid and
binding obligations of the Company and the Guarantor, enforceable against the
Company and the Guarantor in accordance with their terms and entitled to the
benefits provided by the Indenture except as such enforcement may be subject to
or limited by (I) bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect relating to creditors' rights and
remedies generally and (ii) general principles of equity (regardless of whether
such enforcement may be sought in a proceeding in equity or at Law). The Series
B Notes and the Guarantee endorsed thereon, when executed, authenticated, issued
and delivered as provided in the Indenture and Exchange Offer will conform to
the description thereof contained in the Offering Memorandum.
-8-
<PAGE> 9
v. The Indenture has been duly and validly authorized by the Company
and the Guarantor, and the Indenture, when executed and delivered by the
Company, the Guarantor and the Trustee, will constitute a valid and binding
obligation of the Company and the Guarantor, enforceable against the Company and
the Guarantor in accordance with its terms, except as such enforcement may be
subject to or limited by (I) bankruptcy, insolvency, reorganization, moratorium
or other similar laws now or hereafter in effect relating to creditors' rights
and remedies generally and (ii) general principles of equity (regardless of
whether such enforcement may be sought in a proceeding in equity or at law). The
Indenture, when executed and delivered by the Company, the Guarantor and the
Trustee, will conform to the description thereof contained in the Offering
Memorandum.
w. Assuming that the Registration Rights Agreement has been duly and
validly authorized by the Initial Purchaser, the Registration Rights Agreement
has been duly and validly authorized by the Company and the Guarantor, and the
Registration Rights Agreement, when executed and delivered by the Company, the
Guarantor and the Initial Purchaser, will constitute a legally valid and binding
obligation of the Company and the Guarantor, enforceable against the Company and
the Guarantor in accordance with its terms, except as such enforcement may be
subject to or limited by (I) bankruptcy, insolvency, reorganization, moratorium
or other similar laws now or hereafter in effect relating to creditors' rights
and remedies generally, (ii) general principles of equity (regardless of whether
such enforcement may be sought in a proceeding in equity or at law) and (iii)
with respect to any rights to indemnification or contribution, federal
securities laws. The Registration Rights Agreement, when executed and delivered
by the Company, the Guarantor and the Initial Purchaser, will conform to the
description thereof contained in the Offering Memorandum.
x. All of the outstanding membership interests, partnership interests
or shares of capital stock, as applicable, in the Company, its Subsidiaries and
the Guarantor are duly and validly authorized and issued, fully paid and
nonassessable, have been issued in compliance with all federal and state
securities laws, and were not issued and are not now in violation of or subject
to any preemptive rights. None of the Company, its Subsidiaries or the Guarantor
has outstanding any options to purchase, or any preemptive rights or other
rights to subscribe for or to purchase, any securities or obligations
convertible into, or any contracts or commitments to issue or sell, membership
interests, partnership interests or shares of capital stock or any such options,
rights, convertible securities or obligations other than as described in the
Company's filings with the Commission that are publicly-available documents.
y. No preemptive rights or other rights to subscribe for or purchase
securities exist with respect to the issuance and sale of the Notes by the
Company pursuant to this Agreement. No security holder of the Company has any
right which has not been satisfied or waived to require the Company to register
the sale of any securities owned by such security holder under the Securities
Act, except as contemplated by the Registration Rights Agreement.
z. Each of the Company, its Subsidiaries and the Guarantor has good and
marketable title to all the properties and assets reflected in the financial
statements in the Preliminary Offering Memorandum and the Offering Memorandum or
elsewhere in the
-9-
<PAGE> 10
Preliminary Offering Memorandum or the Offering Memorandum as owned by it, which
on the Closing Date, will be free and clear of all liens, except as described in
the Preliminary Offering Memorandum and the Offering Memorandum. All material
leases to which the Company or any of its Subsidiaries is, or on the Closing
Date will be, a party are valid and binding and in full force and effect and no
default by the Company, or its Subsidiaries or to the knowledge of the Company,
by any other party thereto, has occurred or is continuing thereunder and each of
the Company and its Subsidiaries enjoy peaceful and undisturbed possession under
all such leases as to which it is a party as lessee. Except as disclosed in the
Offering Memorandum, the Company and its Subsidiaries own or lease, or has
commitments for the construction of, all such properties as are necessary to its
operations as contemplated in the Offering Memorandum.
aa. The Company, its Subsidiaries and the Guarantor own, possess or
currently have the right to use the trademarks, service marks, trade names,
patent rights, copyrights, licenses, inventions, know-how (including trade
secrets and other unpatented and/or unpatentable proprietary or confidential
information, systems or procedures) (collectively, "Intellectual Property")
presently employed by them in connection with, or necessary for the conduct of,
the businesses now operated by them or to be operated by them as contemplated in
the Offering Memorandum, and none of the Company, its Subsidiaries or the
Guarantor has received any notice of, or is otherwise aware of, any infringement
of, or conflict with, asserted rights of others with respect to the foregoing.
bb. Each of the Company, its Subsidiaries and the Guarantor has timely
filed all necessary federal, state and foreign income and franchise tax returns
and all material taxes, including without limitation, withholding taxes,
penalties and interest, assessments fees and other charges due or claimed to be
due, have been paid; all such tax returns were correct and complete in all
material respects when so filed; and none of the Company, its Subsidiaries or
the Guarantor has any knowledge of any tax deficiency which has been asserted or
threatened against the Company, its Subsidiaries or the Guarantor.
cc. Each of the Company, its Subsidiaries and the Guarantor maintains
insurance covering the properties, operations, personnel and business, including
without limitation, comprehensive general liability, property and casualty and
business interruption insurance, and builders risk coverage insurance is in
effect with respect to Horseshoe Casino Center and Horseshoe Bossier City, in
each case on such terms and in the amounts as are customarily carried by similar
businesses against theft, damage, destruction, acts of vandalism and all other
risks customarily insured against, all of which insurance is in full force and
effect on the date hereof and on the Closing Date, except for insurance which
the Company would not customarily possess at the date hereof but which will be
obtained in the ordinary course as development continues of Horseshoe Casino
Center and Horseshoe Bossier City, None of the Company, its Subsidiaries or the
Guarantor has received notice from any insurer or agent of such insurer that
substantial capital improvements or other expenditures will have to be made in
order to continue such insurance.
dd. None of the Company, its Subsidiaries or the Guarantor or any
affiliate or representative acting on the behalf of any of them has at any time
(I) made any unlawful
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<PAGE> 11
contribution to any candidate for office, or failed to disclose fully any
contribution in violation of law or (ii) made any payment to any federal, state
or local government officer or official, or other person charged with similar
public or quasi-public duties, or customers or suppliers other than payments
which do not constitute a violation of the laws of the United States or any
jurisdiction thereof.
ee. No action has been taken and no law, statute, rule or regulation or
order has been enacted, adopted or issued by any governmental agency or body
which prevents the issuance of the Notes or the Guarantee, prevents or suspends
the use of any Preliminary Offering Memorandum or the Offering Memorandum, or
suspends the sale of the Notes in any jurisdiction referred to in Section 5(e)
hereof; no injunction, restraining order or other order or relief of any nature
by a federal or state court or other tribunal of competent jurisdiction has been
issued with respect to the Company that would prevent or suspend the issuance or
sale of the Notes or the use of any Preliminary Offering Memorandum or the
Offering Memorandum in any jurisdiction referred to in Section 5(e) hereof; no
action, suit or proceeding is pending or threatened against or affecting the
Company or the Guarantor before any court or arbitrator or any governmental
body, agency of official, domestic or foreign, which, if adversely determined,
would materially interfere with or adversely affect the issuance of the Notes or
the Guarantee or in any manner draw into question the validity of the
Transaction Documents, the Notes or the Guarantee; and every request of any
securities authority or agency of any jurisdiction for additional information
(to be included in the Offering Memorandum or otherwise) has been complied with.
ff. The execution and delivery of this Agreement, the other Transaction
Documents and the sale of the Series A Notes to be purchased by the Eligible
Purchasers will not involve any non-exempt prohibited transaction within the
meaning of Section 406 of ERISA or Section 4975 of the Internal Revenue Code of
1986. The representations made in the preceding sentence are made in reliance
upon and subject to the accuracy of, and compliance with, the representations
and covenants made or deemed made by the Initial Purchaser as set forth in the
Offering Memorandum under the caption "Notice to Investors."
gg. Each of the Preliminary Offering Memorandum and the Offering
Memorandum, as of its date, contains all the information specified in, and
meeting the requirements of, Rule 144A(d)(4) under the Securities Act.
hh. Each of the Company, its Subsidiaries and the Guarantor does not
intend to, nor does it believe that it will, incur debts beyond its ability to
pay such debts as they mature. Immediately after the consummation of the
transactions contemplated by the Transaction Documents, the fair value and
present fair saleable value of the assets of each of the Company, its
Subsidiaries and the Guarantor will exceed the sum of its respective liabilities
(including contingent liabilities) and none of the Company, its Subsidiaries or
the Guarantor will be, after giving effect to the execution, delivery and
performance of the Transaction Documents, to the extent each is a party thereof,
and the consummation of the transactions contemplated thereby, (I) left with
unreasonably small capital with which to carry on its business as it is proposed
to be conducted or (ii) unable to pay its debts (contingent or otherwise) as
they mature.
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<PAGE> 12
Upon issuance of the Notes, the assets of the Company, its Subsidiaries and the
Guarantor, taken as a whole, will not constitute unreasonably small capital to
carry out their businesses as described in the Offering Memorandum, including
the capital needs of the Company, its Subsidiaries and the Guarantor taking into
account the projected capital requirements and capital availability.
ii. Each of the Company, its Subsidiaries and the Guarantor maintains a
system of internal accounting controls sufficient to provide reasonable
assurance that: (I) transactions are executed in accordance with management's
general or specific authorizations; (ii) transactions are recorded as necessary
to permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain accountability for assets; (iii)
access to assets is permitted only in accordance with management's general or
specific authorization and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.
jj. None of the execution, delivery and performance of this Agreement,
the issuance and sale of the Notes (including the issuance of the Guarantee),
the application of the proceeds from the issuance and sale of the Notes and the
consummation of the transactions contemplated thereby by the Company as set
forth in the Offering Memorandum, will violate Regulations G, T, U or X
promulgated by the Board of Governors of the Federal Reserve System.
kk. Other than this Agreement and a financial advisory agreement with
Onyx, Inc., with respect to which the Company and the Guarantor shall be the
exclusive obligors, there are no contracts, agreements or understandings between
or among the Company or the Guarantor, on the one hand, and any other person, on
the other hand, that could give rise to a valid claim against the Company, the
Guarantor or the Initial Purchaser for a brokerage commission, finder's fee or
like payment in connection with the issuance, purchase and sale of the Notes
(including the Guarantee).
ll. Each certificate signed by any officer of the Company or the
Guarantor and delivered to the Initial Purchaser or counsel for the Initial
Purchaser on or prior to the Closing Date shall be deemed to be a representation
and warranty by Company or such Guarantor to the Initial Purchaser as to the
matters covered thereby.
mm. No statements, representation, warranty or covenant made by the
Company or the Guarantor in any of the Transaction Documents or made in any
certificate or document required by this Agreement to be delivered to the
Initial Purchaser was or will be, when made, inaccurate, untrue or incorrect in
any material respect.
nn. The vessel "Queen of the Red" (the "Bossier Riverboat") is a
"Riverboat" as that term is defined in the Louisiana Riverboat Economic
Development and Gaming Control Act. La. R.S. 4:504, and is otherwise fully
suitable for the Company's intended purposes of utilizing the same in the
Company's casino operations at the Horseshoe Bossier City, as set forth
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<PAGE> 13
in the Offering Memorandum. The Bossier Riverboat is consistent with the
description and specifications set forth in the Offering Memorandum. The Company
has obtained all licenses, permits, consents and approvals necessary (including,
without limitation, licenses, permits, consents and approval from, as
applicable, the Louisiana Gaming Control Board, the Gaming Enforcement Division
of the Louisiana State Police and the U.S. Coast Guard) so as to enable the
Bossier Riverboat to be present and operational at the Horseshoe Bossier City as
of the date hereof, including, without limitation, licenses, permits, consents
and approvals from the Louisiana Gaming Control Board, the Gaming Enforcement
Division of the Louisiana State Police, the U.S. Coast Guard, Bossier Parish and
the City of Bossier and any other governmental entity which has authority over
the operation or location or condition of the Bossier Riverboat, or over the
conduct of gaming operations thereon.
oo. There is (A) no significant unfair labor practice complaint pending
against any of the Company, its Subsidiaries or the Guarantor nor, to the best
knowledge of the Company and the Guarantor, threatened against any of them,
before the National Labor Relations Board, any state or local labor relations
board or any foreign labor relations board, and no significant grievance or
significant arbitration proceeding arising out of or under any collective
bargaining agreement is so pending against any of the Company, its Subsidiaries
or the Guarantor or, to the best knowledge of any of the Company, its
Subsidiaries or the Guarantor, threatened against any of the Company its
Subsidiaries or the Guarantor or, to the best knowledge of the Company and the
Guarantor, threatened against any of them, (B) no significant strike, labor
dispute, slowdown or stoppage pending against any of the Company, its
Subsidiaries or the Guarantor nor, to the best knowledge of the Company and the
Guarantor, threatened against any of the Company, its Subsidiaries or the
Guarantor and (C) to the best knowledge of the Company and the Guarantor, no
union representation question existing with respect to the employees of any of
the Company, its Subsidiaries or the Guarantor. To the best knowledge of the
Company and the Guarantor, no collective bargaining organizing activities are
taking place with respect to any of the Company, its Subsidiaries or the
Guarantor. None of the Company, its Subsidiaries or the Guarantor has violated
(A) any federal, state or local law or foreign law relating to discrimination in
hiring, promotion or pay of employees, (B) any applicable wage or hour laws or
(C) any provision of the Employee Retirement Income Security Act of 1974, as
amended, or the rules and regulations thereunder which would reasonably be
expected to have a Material Adverse Effect.
pp. The properties of the Company, its Subsidiaries and the Guarantor
are in good repair (reasonable wear and tear excepted).
qq. Assuming that the Transaction Documents had been executed and
delivered prior to or as of the date hereof, there exists no conditions that
would constitute a default or an event which with notice or the lapse of time,
or both, would constitute a default) under any of the Transaction Documents.
rr. The Indenture complies as to form in all material respects with the
requirements of the Trust Indenture Act and the rules and regulations of the
Commission promulgated thereunder. Assuming effectiveness of the applicable
registration statement to be
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<PAGE> 14
filed by the Issuers pursuant to the Registration Rights Agreement, the
Indenture will be duly qualified under the Trust Indenture Act.
ss. The directors and officers questionnaires provided by the Company to
the Initial Purchaser are true, correct and complete in all material respects.
tt. To the best knowledge of the Company, its Subsidiaries and the
Guarantor, the construction of the improvements at Horseshoe Bossier City and
Horseshoe Casino Center, as described in the Offering Memorandum, will be
(giving effect to any waivers or variances which may have been obtained) in
compliance with all applicable state, federal and local laws, regulations,
ordinances, standards, orders and other regulations, where the failure to comply
therewith would have a material adverse effect on the business, property,
condition (financial or otherwise) or operation of the Horseshoe Bossier City or
Horseshoe Casino Center, respectively.
uu. The Company will be treated as a partnership for U.S. Federal income
tax purposes.
Each of the Company and the Guarantor acknowledges that the Initial
Purchaser and, for purposes of the opinions to be delivered to the Initial
Purchaser pursuant to Section 8 hereof, counsel to each of the Company and the
Guarantor and counsel to the Initial Purchaser will rely upon the accuracy and
truth of the foregoing representations and hereby consents to such reliance.
3. PURCHASE, SALE AND DELIVERY OF THE NOTES
a. On the basis of the representations, warranties, covenants and
agreements herein contained, but subject to the terms and conditions herein set
forth, the Company agrees to sell to the Initial Purchaser and the Initial
Purchaser agrees to purchase from the Company the Notes at a purchase price of 9
3/8% of their principal amount, plus accrued interest, if any.
b. Payment of the purchase price for, and delivery of, the Notes shall
be made at the offices of Milbank, Tweed, Hadley & McCloy, 601 South Figueroa
Street, Los Angeles, California 90071 at 10:00 a.m. (New York City time) on
Wednesday, June 25, 1997, or such other time and date as shall be mutually
agreed between the Company and the Initial Purchaser (such time and date of such
payment and delivery being herein called the "Closing Date"). At or prior to the
Closing Date, the Company shall execute and deliver for authentication one or
more certificates in global or definitive form for the Notes in such
denominations and registered in such names as the Initial Purchaser requests
upon notice to the Company at least two business days prior to the Closing Date.
Against such delivery of the Notes, the Initial Purchaser shall pay or cause to
be paid to the Company the purchase price for the Notes. Payment shall be made
to the Company by wire transfer of immediately available funds to an account
designated by the Company.
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<PAGE> 15
c. The Initial Purchaser hereby represents, warrants and covenants to
the Company and the Guarantor that:
(I) it is either a QIB or an Accredited Investor, with such
knowledge and experience in financial and business matters as are
necessary in order to evaluate the merits and risks of an investment in
the Series A Notes;
(ii) it (A) is not acquiring the Series A Notes with a view to any
distribution thereof that would violate the Securities Act or the
securities laws of any state of the United States or any other applicable
jurisdiction and (B) will be reoffering and reselling the Series A Notes
only to QIBs in reliance on the exemption from the registration
requirements of the Securities Act provided by Rule 144A and to a limited
number of Accredited Investors that execute and deliver a letter
containing certain representations and agreements in the form attached as
Annex A to the Offering Memorandum;
(iii) no form of general solicitation or general advertising has
been or will be used by the Initial Purchaser or any of its
representatives in connection with the offer and sale of any of the Series
A Notes, including, but not limited to, articles, notices or other
communications published in any newspaper, magazine, or similar medium or
broadcast over television or radio, or any seminar or meeting whose
attendees have been invited by any general solicitation or general
advertising;
(iv) it will otherwise act in accordance with the terms and
conditions set forth in this Agreement and in the Offering Memorandum in
connection with the placement of the Notes contemplated hereby; and
(v) it understands that the Company and, for purposes of the
opinions to be delivered to the Initial Purchaser pursuant to Section 7
hereof, counsel to the Company and counsel to the Initial Purchaser will
rely upon the accuracy and truth of (a) the foregoing representations and
hereby consents to such reliance.
4. SUBSEQUENT OFFERS AND RESALES OF THE NOTES
The Initial Purchaser and the Company hereby establish and agree to
observe the following procedures in connection with the offer and resale by the
Initial Purchaser of the Notes.
a. In connection with the Exempt Resales, the Initial Purchaser will
solicit offers to buy the Series A Notes only from, and will offer to sell the
Series A Notes only to Eligible Purchasers. The Initial Purchaser (I) will offer
to sell the Series A Notes only to, and will solicit offers to buy the Series A
Notes only from (A) QIB's who in purchasing such Series A Notes will be deemed
to have represented and agreed that they are purchasing the Series A Notes for
their own accounts or accounts with respect to which they exercise sole
investment discretion and that they or such accounts are QIBs and (B) Accredited
Investors who make the
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<PAGE> 16
representations contained in, and execute and return to such Initial Purchaser,
a certificate in the form of Annex A attached to the Offering Memorandum and
(ii) that such QIBs and Accredited Investors will acknowledge and agree that
such Series A Notes will not have been registered under the Act and may be
resold, pledged or otherwise transferred only (A)(1) inside the United States to
a person whom the seller reasonably believes is a QIB in a transaction meeting
the requirements of Rule 144A, or in a transaction meeting the requirements of
Rule 144 under the Securities Act, or in accordance with another exemption from
the registration requirements of the Securities Act (and based upon an opinion
of counsel if the Company or the Guarantor so requests), (2) outside the United
States to a foreign person in a transaction meeting the requirements of Rule 904
under the Securities Act, (3) to the Company, or (4) pursuant to an effective
registration statement under the Securities Act, and (B) in each case, in
accordance with any applicable securities laws of any state of the United States
or any other applicable jurisdiction and (iii) that such QIBs and Accredited
Investors will acknowledge and agree that the holder will, and each subsequent
holder is required to, notify any purchaser of the security evidenced thereby of
the resale restrictions set forth in (ii) above.
b. The Series A Notes will be offered by the Initial Purchaser only by
approaching prospective purchasers on an individual basis. No general
solicitation or general advertising nor any other method described in Rule
502(c) under the Securities Act (as such terms are used in Regulation D under
the Securities Act) will be used in connection with the offering of the Series A
Notes.
c. The transfer restrictions and the other provisions set forth in the
Indenture, including the legend required thereby, shall apply to the Series A
Notes except as otherwise agreed by the Company and the Initial Purchaser.
Following the sale of the Series A Notes by the Initial Purchaser to Eligible
Purchasers pursuant to the terms hereof, the Initial Purchaser shall not be
liable or responsible to the Company for any losses, damages or liabilities
suffered or incurred by the Company, including any losses, damages or
liabilities under the Securities Act, arising from or relating to any subsequent
resale or transfer of any Series A Notes.
d. The Initial Purchaser will deliver to each purchaser of the Series A
Notes from the Initial Purchaser, in connection with its original distribution
of the Series A Notes, a copy of the Offering Memorandum, as amended and
supplemented, if applicable, at the date of such delivery.
e. In connection with its original distribution of the Series A Notes,
the Company agrees that, prior to any offer or resale of the Series A Notes by
the Initial Purchaser, the Initial Purchaser and Milbank, Tweed, Hadley & McCloy
("Initial Purchaser's Counsel") shall have the right to make reasonable due
diligence inquiries into the business of the Company. The Company also agrees to
provide answers to questions from each prospective Eligible Purchaser concerning
the Company (to the extent that such information can be made available to
prospective Eligible Purchasers without unreasonable effort or expense and to
the extent the provision thereof is not prohibited by applicable law or requires
the disclosure of any proprietary information or any other confidential
information) and the terms and conditions of the offering of the Series A Notes,
as provided in the Offering Memorandum.
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<PAGE> 17
5. COVENANTS OF THE COMPANY AND THE GUARANTOR
Each of the Company and the Guarantor, jointly and severally, covenants
and agrees with the Initial Purchaser as follows:
a. To advise the Initial Purchaser promptly and, if requested by the
Initial Purchaser, confirm such advice in writing, (I) after it receives notice
of the issuance by the Securities and Exchange Commission (the "Commission") or
any state securities commission, of any stop order suspending the qualification
or exemption from qualification of any Notes for offering or sale in any
jurisdiction, or the initiation of any proceeding for such purpose by the
Commission or any state securities commission or other regulatory authority,
(ii) of the initiation or threatening of any proceeding for any such purpose,
(iii) of any request by the Commission or any state securities commission or any
other regulatory authority for amending or supplementing the Preliminary
Offering Memorandum or the Offering Memorandum or for any additional
information, (iv) of the receipt by the Company or the Guarantor or any
representative or attorney of either of them of any other communication from the
Commission or any state securities commission or other regulatory authority
relating to the Company, the Guarantor, the Preliminary Offering Memorandum or
the Offering Memorandum or (v) during the time in which the Offering Memorandum
is required to be delivered in connection with Exempt Resales, of the happening
of any event that makes any statement of a material fact made in the Preliminary
Offering Memorandum, as then amended or supplemented, or the Offering
Memorandum, as then amended or supplemented, untrue or that requires the making
of any additions to or changes in the Preliminary Offering Memorandum, as then
amended or supplemented, or the Offering Memorandum in order to make the
statements therein, in the light of the circumstances under which they are made,
not misleading. Each of the Company and the Guarantor shall use its best efforts
to prevent the issuance of any stop order or order suspending the qualification
or exemption of any Notes (including the Guarantee) under any federal or state
securities or Blue Sky laws and, if at any time the commission or any state
securities commission or other regulatory authority shall issue an order
suspending the qualification or exemption of any Notes under any federal or
state securities or Blue Sky laws, each of the Company and the Guarantor shall
use its best efforts to obtain the withdrawal or lifting of such order at the
earliest possible time.
b. To promptly deliver to the Initial Purchaser such number of copies
of the Offering Memorandum and all amendments of and supplements thereto as the
Initial Purchaser may reasonably request. The Company and Guarantor consent to
the use of the Preliminary Offering Memorandum up to the time at which the
Offering Memorandum is available and the Offering Memorandum, and any amendments
and supplements thereto, by the Initial Purchaser in connection with Exempt
Resales.
c. Not to amend or supplement the Preliminary Offering Memorandum or
the Offering Memorandum prior to the Closing Date unless the Initial Purchaser
shall previously have been advised thereof and shall have consented to or not
have reasonably objected thereto in writing within a reasonable time after being
furnished a copy thereof. Each of the Company and the Guarantor shall promptly
prepare, upon the Initial Purchaser's request, any amendment
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<PAGE> 18
or supplement to the Offering Memorandum that the Initial Purchaser believe
reasonably necessary or advisable in connection with Exempt Resales.
d. If, after the date hereof and prior to consummation of any Exempt
Resale, any event shall occur as a result of which, in the judgment of either
the Company or the Guarantor or in the reasonable judgment of Initial
Purchaser's Counsel, it becomes necessary to amend or supplement the Preliminary
Offering Memorandum (prior to the availability of the Offering Memorandum) or
Offering Memorandum in order to make the statements therein, in the light of the
circumstances existing when such Preliminary Offering Memorandum or Offering
Memorandum is delivered to an Eligible Purchaser which is a prospective
purchaser, not misleading, or if it is necessary to amend or supplement the
Preliminary Offering Memorandum (prior to the availability of the Offering
Memorandum) or forthwith the prepare an appropriate amendment or supplement to
such Preliminary Offering Memorandum or Offering Memorandum so that the
statements therein as so amended or supplemented will not, in the light of the
circumstances when it is so delivered, be misleading, or so that such
Preliminary Offering Memorandum or Offering Memorandum will comply with
applicable law.
e. The Company and the Guarantor will endeavor in good faith, in
cooperation with the Initial Purchaser, to qualify the Notes for offering and
sale under the securities laws relating to the offering or sale of the Notes in
such jurisdictions as the Initial Purchaser may designate and to maintain such
qualification in effect for so long as required for the distribution thereof;
except that in no event shall the Company and the Guarantor be obligated in
connection therewith to qualify as a foreign corporation or to execute a general
consent to service of process.
f. The Company will apply the proceeds from the sale of the Series A
Notes as set forth under the caption "Use of Proceeds" in the Offering
Memorandum.
g. Each of the Company and the Guarantor will use its best efforts to
cause the Notes to be designated Private Offerings, Resales and Trading through
Automated Linkages ("PORTAL") market securities in accordance with the rules and
regulations adopted by the National Association of Securities Dealers, Inc.,
relating to trading in the PORTAL market.
h. The Company and the Guarantor will comply with all of the agreements
(to the extent each of the Company and the Guarantor is a party thereto) set
forth in the Registration Rights Agreement, the Indenture and in the
representation letter of the Company to The Depository Trust Company ("DTC")
relating to the approval of the Notes by DTC for "book-entry" transfer.
i. During the period of 180 days from the date hereof, the Company will
not, without prior written consent of the Initial Purchaser or as permitted in
the Indenture, issue, sell, offer or contract to sell, grant any option for the
sale of, or otherwise dispose of, directly or indirectly, any debt securities in
any such case for cash, other than the Company's sale of Notes hereunder.
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<PAGE> 19
j. None of the Company, the Guarantor, their respective affiliates (as
defined in Rule 501(b) of the Securities Act) or any person acting on their
behalf (other than the Initial Purchaser and its affiliates) will (I) distribute
prior to the Closing Date any offering material in connection with the offering
or sale of the Notes other than the Preliminary Offering Memorandum and the
Offering Memorandum and any amendments and supplements to the Offering
Memorandum prepared in compliance with Section 5(C) hereof or (ii) solicit any
offer to buy or offer to sell the Notes by means of any form of general
solicitation or general advertising (as those terms are used in Regulation D
under the Securities Act) or in any manner involving a public offering within
the meaning of Section 4(2) of the Securities Act.
k. None of the Company, the Guarantor or any of their respective
affiliates (as defined in Rule 501(b) of the Securities Act) or any person
acting on their behalf will offer, sell or solicit efforts to buy or otherwise
negotiate in respect of any security (as defined in the Securities Act) of the
Company in a manner that would require the registration of the Series A Notes
under the Securities.
l. During the period from the Closing Date to two years after the
Closing Date, the Company will not, and will not permit any of its "affiliates"
(as defined in Rule 144 under the Securities Act) to, resell any of the Notes
that have been reacquired by them, except for Notes purchased by the Company or
any of its affiliates and resold in a transaction registered under the
Securities Act or are exempt from such registration requirements under the
Securities Act.
m. Each of the Company and the Guarantor will, so long as the Notes are
outstanding and are "restricted securities" within the meaning of Rule 144(a)(3)
under the Securities Act, either (I) file reports and other information with the
Commission under Section 13 or 15(d) of the Exchange Act, or (ii) in the event
it is not subject to Section 13 or 15(d) of the Exchange Act, make available to
holders of the Notes and prospective purchasers of the Notes designated by such
holders upon a request of such prospective purchasers, the information required
to be delivered pursuant to Rule 144A(d)(4) under the Securities Act to permit
compliance with Rule 144A in connection with resales of the Notes.
n. Each of the Company and the Guarantor will use its best efforts to
cause the Notes to be eligible for clearance and settlement through the DTC.
o. Each of the Notes will bear the legend contained in "Notice to
Investors" in the Offering Memorandum for the time period and upon the other
terms stated therein, except after such Note is resold pursuant to a
registration statement effective under the Securities Act.
p. To perform its obligations pursuant to the Registration Rights
Agreement.
q. Not to insist upon, plead or in any manner whatsoever claim or take
the benefit or advantage of any usury law wherever enacted, now or at any time
hereafter in force, that may affect the covenants or the performance of the
Indenture.
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<PAGE> 20
r. Not to (I) take, directly or indirectly, any action designed to
cause or result in, or that has constituted or which might reasonably be
expected to constitute, the stabilization or manipulation of the price of any
security of the Company or the Guarantor to facilitate the sale or resale of any
of the Series A Notes or (ii) sell, bid for, purchase or pay anyone other than
the Initial Purchaser any compensation for soliciting purchases of, any of the
Series A Notes or pay or agree to pay to any person any compensation for
soliciting another to purchase any other securities of the Company.
6. PAYMENT OF EXPENSES
Whether or not the transactions contemplated in this Agreement are
consummated or this Agreement becomes effective or is terminated, the Company
and the Guarantor hereby agree, jointly and severally, to pay all costs,
expenses, fees and taxes incident to and in connection with this Agreement and
the transactions contemplated hereby and by the other Transaction Documents,
including without limitation all costs, expenses, fees and taxes relating to:
(I) preparing, printing, duplicating, filing and distributing the Preliminary
Offering Memorandum and the Offering Memorandum (including, without limitation,
financial statements and exhibits) and any amendments or supplements thereto
(including, without limitation, fees and expenses of the Company's accountants
and counsel), (ii) preparing, printing (including, without limitation, word
processing and duplication costs) and delivery of this Agreement, the other
Transaction Documents and all agreements, memoranda, correspondence and other
documents prepared and delivered in connection herewith and with the Exempt
Resales, (iii) the issuance, transfer and delivery of the Notes to the Initial
Purchaser, including any transfer or other taxes payable thereon, (iv) the
qualification of the Notes under state or foreign securities or Blue Sky laws,
including the costs of printing and mailing a preliminary and final "Blue Sky
Memorandum" and the reasonable fees of the Initial Purchaser's Counsel and such
counsel's disbursements and expenses in relation thereto, (v) furnishing such
copies of the Preliminary Offering Memorandum and the Offering Memorandum, and
all amendments and supplements thereto, as may be reasonably requested for use
in connection with the Exempt Resales, (vi) the preparation of certificates for
the Notes (including, without limitation, the printing or engraving thereof),
(vii) all expenses and listing fees in connection with the application for
quotation of the Notes in the National Association of Securities Dealers, Inc.
Automated Quotation System PORTAL "PORTAL"), (ix) all fees and expenses
(including fees and expenses of counsel) of the Company and the Guarantor in
connection with approval of the Notes by DTC for "book-entry" transfer, (x) the
performance by the Company and the Guarantor of their other obligations under
this Agreement and the other Transaction Documents, (xi) rating the Notes by
rating agencies and (xi) the fees and expenses of the Trustee and its counsel
pursuant to the Indenture.
7. CONDITIONS OF INITIAL PURCHASER'S OBLIGATIONS
The obligations of the Initial Purchaser to purchase and pay for the Notes
as provided herein, shall be subject to the accuracy of the representations and
warranties of the Company and the Guarantor herein contained, as of the date
hereof and as of the Closing Date, to the absence from any certificates,
opinions, written statements or letters furnished to the Initial Purchaser or to
Initial Purchaser's Counsel pursuant to this Section 7 of any material
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<PAGE> 21
misstatement or omission, to the performance by each of the Company and the
Guarantor of its obligations hereunder, and to the following additional
conditions:
a. At the Closing Date the Initial Purchaser shall have received an
opinion (customary for transactions such as this Offering and in form and
substance satisfactory to the Initial Purchaser and Initial Purchaser's Counsel)
of Riordan & McKinzie, counsel for the Company and the Guarantor, of Adams &
Reese, Louisiana counsel to the Company, Eaton & Cottrell, Mississippi counsel
to the Company, and Richards & O'Neil, New York counsel to the Company, each
addressed to the Initial Purchaser and dated the Closing Date.
b. All proceedings taken in connection with the sale of the Notes as
herein contemplated shall be satisfactory in form and substance to the Initial
Purchaser and to Initial Purchaser's Counsel, and the Initial Purchaser shall
have received from said Initial Purchaser's Counsel a favorable opinion, dated
the Closing Date with respect to the issuance and sale of the Notes, the
Offering Memorandum and such other related matters as the Initial Purchaser may
reasonably require, and the Company shall have furnished to Initial Purchaser's
Counsel such documents as they request for the purpose of enabling them to pass
upon such matters.
c. (I) As of the date hereof and as of the Closing Date, the
representations and warranties of the Company and the Guarantor set forth in
Section 2 hereof are accurate, (ii) as of the Closing Date, the obligations of
the Company to be performed hereunder on or prior thereto shall have been duly
performed, (iii) subsequent to the respective dates as of which information is
given in the Offering Memorandum, the Company and its Subsidiaries shall not
have sustained any material loss or interference with its business or properties
from fire, flood, hurricane, accident or other calamity, whether or not covered
by insurance, or from any labor dispute or any legal or governmental proceeding,
and there has not been any Material Adverse Change, or any development involving
a prospective Material Adverse Change, (iv) (A) as of the Closing Date, the
Offering Memorandum shall not contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading and (B) since the date of the Offering
Memorandum no event shall have occurred as a result of which it is necessary to
amend or supplement the Offering Memorandum in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading and (v) no action shall have been taken and, to the best knowledge of
each of the Company and the Guarantor, no statute, rule, regulation or order
shall have been enacted, adopted or issued by any governmental agency which
would, as of the Closing Date, have a Material Adverse Effect; no action, suit
or proceeding shall have been commenced and be pending against or affecting or,
to the best knowledge of each of the Company and the Guarantor, threatened
against, the Company, its Subsidiaries or the Guarantor, before any court or
arbitrator or any governmental body, agency or official that, if adversely
determined, would result in a Material Adverse Effect; and no stop order
preventing the use of the Offering Memorandum, or any amendment or supplement
thereto or any order asserting that any of the transactions contemplated by this
Agreement or subject to the registration requirements of the Securities Act
shall have been issued. The Initial Purchaser shall have received a certificate,
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<PAGE> 22
in form and substance satisfactory to the Initial Purchaser, confirming, as of
the Closing Date, the matters set forth in this paragraph (d).
d. At the time this Agreement is executed and at the Closing Date, you
shall have received a comfort letter from Arthur Andersen, LLP, independent
accountants for the Company, dated, respectively, as of the date of this
Agreement and as of the Closing Date, addressed to the Initial Purchaser in form
and substance satisfactory to the Initial Purchaser.
e. Prior to the Closing Date, the Company shall have furnished to the
Initial Purchaser or the Initial Purchaser's Counsel such further information,
certificates and documents as the Initial Purchaser or the Initial Purchaser's
Counsel may reasonably request.
f. At the Closing Date, the Notes shall have been approved for
quotation in the PORTAL market.
g. The Company, to the extent applicable, the Guarantor and each of the
other parties thereto (other than the Initial Purchaser) shall have executed and
delivered the Transaction Documents and the Initial Purchaser shall have
received fully executed copies thereof. Assuming the execution and delivery by
the Initial Purchaser of the Transaction Documents, such documents shall be in
full force and effect. The Company shall have received the requisite
governmental and regulatory approval in connection with each of the Transaction
Documents and the transactions contemplate by the Offering Memorandum to be
completed on or before the Closing Date.
h. The Initial Purchaser shall have received (I) certificate of the
Secretaries of the Company, each of its Subsidiaries and the Guarantor, dated
the Closing Date and in form and substance satisfactory to the Initial
Purchaser, certifying as true, accurate and complete, the by-laws, resolutions
with respect to the transactions contemplated herein and incumbency of certain
officers; and (ii) certified articles of organization or formation issued as of
a recent date by the Secretary of State of the state of organization of the
Company and the Guarantor; and (iii) appropriate certificates of qualification
to do business and of good standing, issued on a recent date by the Secretary of
State of each jurisdiction, if any, in which the failure of the Company, any of
its Subsidiaries or the Guarantor, as the case may be, to be qualified to do
business would have a Material Adverse Effect.
i. On the Closing Date, the Initial Purchaser shall have received
certificates of solvency, giving effect to the offering of the Series A Notes
contemplated hereby, signed by the chief executive officer and chief financial
officer of each of the Company and the Guarantor substantially in the form
previously approved by the Initial Purchaser.
k. The Company shall have received all necessary consents, approvals,
authorizations, orders, qualifications, licenses and permits from the gaming
authorities of the State of Mississippi. It is understood for the purposes of
this paragraph (k) only, this paragraph (k) is a condition precedent to the
obligations under this Agreement of both the Company and the Purchaser.
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<PAGE> 23
If any of the conditions specified in this Section 7 shall not have been
fulfilled when and as required by this Agreement, or if any of the certificates,
opinions, written statements or letters furnished to you or to the Initial
Purchaser's Counsel pursuant to this Section 7 shall not be reasonably
satisfactory in form and substance to the Initial Purchaser and to the Initial
Purchaser's Counsel, all obligations of the Initial Purchaser hereunder may be
canceled by you at, or at any time prior to, the Closing Date. Notice or such
cancellation shall be given to the Company in writing, or by telephone, telex or
telegraph, confirmed in writing.
8. INDEMNIFICATION
a. The Company and the Guarantor, jointly and severally, agree to
indemnify and hold harmless each of the Initial Purchaser, each person, if any,
who controls the Initial Purchaser within the meaning of Section 15 of the
Securities Act or Section 20(a) of the Exchange Act and the respective officers,
directors, partners, employees, representatives and agents of the Initial
Purchaser or controlling person, against any and all losses, liabilities,
claims, damages and expenses whatsoever as incurred (including but not limited
to attorneys' fees and all expenses whatsoever incurred in investigating,
preparing or defending against any litigation, commenced or threatened, or any
claim whatsoever, and any and all amounts paid in settlement of any claim or
litigation), joint or several, to which they or any of them may become subject
under the Securities Act, the Exchange Act or otherwise, insofar as such losses,
liabilities, claims, damages or expenses (or actions in respect thereof) arise
out of or are based upon any untrue statement or alleged untrue statement of a
material fact contained in the Offering Memorandum or the Preliminary Offering
Memorandum or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading or arise out of or are based upon any
inaccuracy in the representations and warranties of the Company contained herein
or any failure of the Company to perform its obligations hereunder or under
applicable law; and will reimburse the Initial Purchaser and each such
controlling person and the respective officers, directors, partners, employees,
representatives and agents for any legal and other expenses as are reasonably
incurred by the Initial Purchaser or such controlling person in connection with
investigating, defending, selling, compromising or paying any such loss, claim,
damage, liability, expense or action; provided, however, that the Company will
not be liable in any such case to the extent but only to the extent that any
such loss, liability, claim, damage or expense arises out of or is based upon
any such untrue statement or alleged untrue statement or omission or alleged
omission made therein in reliance upon and in conformity with written
information furnished to the Company by or on behalf of the Initial Purchaser
expressly for use therein. This indemnity agreement will be in addition to any
liability which the Company may otherwise have, including under this Agreement.
b. The Initial Purchaser agrees to indemnify and hold harmless each of
the Company, the Guarantor, the officers and the directors of the Company, the
Guarantor and each other person, if any, who controls the Company within the
meaning of Section 15 of the Securities Act or Section 20(a) of the Exchange
Act, against any loses, liabilities, claims, damages and expenses whatsoever as
incurred (including but not limited to attorneys' fees and any and all expenses
whatsoever incurred in investigating, preparing or defending against any
-23-
<PAGE> 24
litigation, commenced or threatened, or any claim whatsoever, and any and all
amounts paid in settlement of any claim or litigation), jointly or severally, to
which they or any of them may become subject under the Securities Act, the
Exchange Act or otherwise, insofar as such losses, liabilities, claims, damages
or expenses (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of a material fact contained in the
Offering Memorandum or the Preliminary Offering Memorandum, or in any amendment
thereof or supplement thereto, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, in each case to the
extent, but only to the extent, that any such loss, liability, claim, damage or
expense arises out of or is based upon any such untrue statement or alleged
untrue statement or omission or alleged omission made therein in reliance upon
and in conformity with written information furnished to the Company by or on
behalf of the Initial Purchaser expressly for use therein and will reimburse the
Company, the Guarantor, or any such director, officer, or controlling person for
any legal and other expense reasonably incurred by the Company, or any such
director, officer or controlling person in connection with investigating,
defending, settling, compromising or paying any such loss, claim, damage,
liability, expense or action; provided, however, that in no case shall the
Initial Purchaser be liable or responsible for any amount in excess of the
selling concession applicable to the Notes purchased by the Initial Purchaser
hereunder. This indemnity will be in addition to any liability which the Initial
Purchaser may otherwise have, including under this Agreement. The Company and
the Guarantor acknowledge that the statements set forth in the first paragraph
under the caption "Plan of Distribution" in the Offering Memorandum constitutes
the only information furnished in writing by or on behalf of the Initial
Purchaser expressly for use in the Offering Memorandum or amendment thereof or
supplement thereto, as the case may be.
c. Promptly after receipt by an indemnified party, under subsection (a)
or (b) above of notice of the commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made against the indemnifying
party, under such subsection, notify each party against whom indemnification is
to be sought in writing of the commencement thereof (but the failure so to
notify an indemnifying party shall not relieve it from any liability which it
may have under this Section 8 except to the extent that it has been prejudiced
in any material respect by such failure). In case any such action is brought
against any indemnified party, and it notifies an indemnifying party of the
commencement thereof, the indemnifying party will be entitled to participate
therein, and it may elect by written notice delivered to the indemnified party,
promptly after receiving the aforesaid notice from such indemnified party, to
assume the defense thereof with counsel reasonably satisfactory to such
indemnified party. Notwithstanding the foregoing, the indemnified party or
parties shall have the right to employ its or their own counsel in any such
case, but the fees and expenses of such counsel shall be at the expense of such
indemnified party or parties unless (I) the employment of such counsel shall
have been authorized in writing by one of the indemnifying parties in connection
with the defense of such action, (ii) the indemnifying parties shall not have
employed counsel to take charge of the defense of such action within a
reasonable time after notice of commencement of the action, or (iii) such
indemnified party or parties shall have reasonably concluded that there may be
defenses available to it or them which are different from or additional to those
available to one or all of the indemnifying parties (in which case the
indemnifying parties shall not have the right to direct
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<PAGE> 25
the defense of such action on behalf of the indemnified party or parties) in any
of which events such fees and expenses shall be borne by the indemnifying
parties; provided, however, that the indemnifying party under subsection (a) or
(b) above shall only be liable for the legal expenses of one counsel (and any
local counsel) for all indemnified parties and that all such fees and expenses
of counsel shall be reimbursed as they are incurred. Anything in this subsection
to the contrary notwithstanding, an indemnifying party shall not be liable for
any settlement of any claim or action effected without its written consent;
provided, however, that such consent was not unreasonably withheld.
9. CONTRIBUTION
In order to provide for contribution in circumstances in which the
indemnification provided for in Section 8 hereof is for any reason held by a
court to be unavailable to any indemnifying party, the Company, the Guarantor
and the Initial Purchaser shall contribute to the aggregate losses, claims,
damages, liabilities and expenses of the nature contemplated by such
indemnification provision (including any investigation, legal and other expenses
incurred in connection with, and any amount paid in settlement of, any action,
suit or proceeding or any claims asserted, but after deducting in the case of
losses, claims, damages, liabilities and expenses suffered by the Company any
contribution received by the Company from persons other than the Initial
Purchaser, who may also be liable for contribution, including persons who
control the Company within the meaning of Section 15 of the Securities Act or
Section 20(a) of the Exchange Act), and each officer and manager of the Company
as incurred to which the Company, the Guarantor and the Initial Purchaser may be
subject, in such proportions as is appropriate to reflect the relative benefits
received by the Company, and the Guarantor, on the one hand, and the Initial
Purchaser, on the other hand, from the offering of the Notes or, if such
allocation is not permitted by applicable law or indemnification, in such
proportion as is appropriate to reflect not only the relative benefits referred
to above but also the relative fault of the Company and the Guarantor, on the
one hand, and the Initial Purchaser, on the other hand, in connection with the
statements or omissions or inaccuracies in the representations and warranties
herein which resulted in such losses, claims, damages, liabilities or expenses,
as well as any other relevant equitable considerations. The relative benefits
received by the Company and the Guarantor, on the one hand, and the Initial
Purchaser, on the other hand, shall be deemed to be in the same proportion as
(x) the total proceeds from the offering (net of selling concessions but before
deducting expenses) received by the Company and (y) the selling concessions
received by the Initial Purchaser, respectively. The relative fault of the
Company and the Initial Purchaser shall be determined by reference to, among
other things, whether the untrue or alleged untrue statements of a material fact
or the omission or alleged omission to state a material fact or the inaccurate
or the alleged inaccurate representation or warranty relates to information
supplied by the Company and the Guarantor, on the one hand, or the Initial
Purchaser, on the other hand, and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission. The Company, the Guarantor and the Initial Purchaser agree that it
would not be just and equitable if contribution pursuant to this Section 9 were
determined by pro rata allocation or by any other method of allocation which
does not take account of the equitable considerations referred to above.
Notwithstanding the provisions of this Section 9, (I) in no case shall the
Initial Purchaser be liable or responsible
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<PAGE> 26
for any amount in excess of the selling concession applicable to the Notes
purchased by the Initial Purchaser hereunder and (ii) no person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. Notwithstanding the provisions of
this Section 9, the Initial Purchaser shall not be required to contribute any
amount in excess of the amount by which the selling concession for the Notes
sold hereunder and distributed to the public were offered to the public exceeds
the amount of any damages that the Initial Purchaser has otherwise been required
to pay by reason of such or alleged untrue statement or omission or alleged
omission. For purposes of this Section 9, each person, if any, who controls the
Initial Purchaser within the meaning of Section 15 of the Securities Act or
Section 20(a) of the Exchange Act shall have the same rights to contribution as
the Initial Purchaser, and each person, if any, who controls the Company within
the meaning of Section 15 of the Securities Act or Section 20(a) of the Exchange
Act, each officer and each manager of the Company shall have the same rights to
contribution as the Company, subject in each case to clauses (I) and (ii) of
this Section 9. Any party entitled to contribution will, promptly after receipt
of notice of commencement of any action, suit or proceeding against such party
in respect of which a claim for contribution may be made against another party
or parties, notify each party or parties from whom contribution may be sought,
but the omission to so notify such party or parties shall not relieve the party
or parties from whom contribution may be sought from any obligation it or they
may have under this Section 9 or otherwise.
10. DEFAULT BY THE INITIAL PURCHASER
If the Initial Purchaser shall fail at the Closing Date to purchase the
Notes it is obligated to purchase under this Agreement, then this Agreement
shall terminate subject to the provisions of Section 11 hereof. Nothing in this
Section shall relieve the Initial Purchaser from its liability to reimburse the
Company for its costs, expenses and damages resulting from the Initial
Purchaser's default.
11. SURVIVAL OF REPRESENTATIONS AND AGREEMENTS
All representations and warranties, covenants and agreements of the
Initial Purchaser, the Company and the Guarantor contained in this Agreement,
including the agreements contained in Section 6, the indemnity agreements
contained in Section 8 and the contribution agreements contained in Section 9,
shall remain operative and in full force and effect regardless of any
investigation made by or on behalf of the Initial Purchaser or any controlling
person thereof or on behalf of the Company, any of its officers and managers or
any controlling person thereof, and shall survive delivery of and payment for
the Notes to and by the Initial Purchaser. The representations contained in
Sections 2 and 3(C) and the agreements contained in Sections 6, 8, 9 and 12(C)
hereof shall survive the termination of this Agreement, including termination
pursuant to Section 10 or 12 hereof.
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<PAGE> 27
12. TERMINATION
a. The Initial Purchaser shall have the right to terminate this
Agreement at any time prior to the Closing Date, without liability on the
Initial Purchaser's part to the Company and the Guarantor, if (I) any domestic
or international event or act or occurrence has materially disrupted, or in your
opinion will in the immediate future materially disrupt, the United States or
international securities markets, (ii) if trading on the New York Stock Exchange
or the Nasdaq Stock Market shall have been suspended or materially limited;
(iii) if a banking moratorium has been declared by any United States federal or
New York State authority or if any new restriction materially adversely
affecting the sale of the Notes shall have become effective; (iv)(A) if the
United States becomes engaged in hostilities or there is an escalation of
hostilities involving the United States or there is a declaration of a national
emergency or war by the United States (B) if there shall have been such change
in political, financial or economic conditions if the effect of any such event
in (A) or (B) in your good faith judgment makes it impracticable or inadvisable
to proceed with the offering, sale and delivery of the Notes on the terms
contemplated by the Offering Memorandum; (v) any conditions of the obligations
of the Initial Purchaser hereunder a provided in Section 7 is not fulfilled when
and as required in any material respect; (vi) any Material Adverse Change or any
development involving a prospective Material Adverse Change shall have occurred
since the respective dates as of which information is given in the Offering
Memorandum in the condition (financial or otherwise), business, properties,
prospects, net worth or results of operations of the Company whether or not
arising in the ordinary course of business other than as set forth in the
Offering Memorandum; (vii) any downgrading shall have occurred in the rating of
the Company's or the Guarantor's debt securities by any "nationally recognized
statistical rating organization" (as defined for purposes of Rule 436(g) under
the Securities Act or any such organization shall have publicly announced, or
shall have notified the Company or the Guarantor, that it has under surveillance
or review, with possible negative implications, its ruling of any of the debt
securities of the Company or the Guarantor; (viii) there has been an enactment,
publication, decree or other promulgation of any federal or state statute,
regulation, rule or order of any court or other governmental authority which in
your opinion materially and adversely affects, or will materially and adversely
affect, the business or operations of the Company, or (ix) if any action has
been taken by any federal, state, local or foreign government or agency in
respect of its monetary or fiscal affairs which in your good faith judgement has
a material adverse effect on the financial markets in the United States and
would make it impracticable or inadvisable to market the Series A Notes.
b. Any notice of termination pursuant to this Section 12 shall be by
telephone, telex, or telegraph, confirmed in writing by letter.
c. If this Agreement shall be terminated pursuant to any of the
provisions hereof (otherwise than pursuant to Section 10 hereof), or if the sale
of the Notes provided for herein is not consummated because any condition to the
obligations of the Initial Purchaser set forth herein is not satisfied or
because of any refusal, inability or failure on the part of the Company of the
Guarantor to perform any agreement herein or comply with any provision hereof,
the Company or the Guarantor will, subject to demand by you, reimburse the
Initial
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<PAGE> 28
Purchaser for all out-of-pocket expenses (including the fees and expenses of
their counsel), incurred by the Initial Purchaser in connection herewith.
13. NOTICE
All communications hereunder, except as may be otherwise specifically
provided herein, shall be in writing and, if sent to the Initial Purchaser,
shall be mailed, delivered, or telexed or telegraphed and confirmed in writing,
to Wasserstein Perella Securities, Inc., 31 West 52nd Street, New York, New York
10019-6163, Attention: Andrew Schupak with a copy to Milbank, Tweed, Hadley &
McCloy, 601 South Figueroa Street, 30th Floor, Los Angeles, California 90017,
Attention: Eric H. Schunk, Esq.; if sent to the Company, shall be mailed,
delivered, or telegraphed and confirmed in writing to the Company, 4024
Industrial Road, Las Vegas, Nevada 89103, Attention: Paul R. Alenis with a copy
to Riordan & McKinzie, 695 Town Center Drive, Suite 1500, Costa Mesa, California
92626, Attention: James H. Schnell, Esq.
14. PARTIES
This Agreement shall inure to the benefit of, and shall be binding upon,
the Initial Purchaser, the Company and the Guarantor and the controlling
persons, directors, officers, representatives, partners, employees, and agents
referred to in Section 8 and 9, and their respective successors and assigns, and
no other person shall have or be construed to have any legal or equitable right,
remedy or claim under or in respect of or by virtue of this Agreement or any
provision herein contained. The term "successors and assigns" shall not include
a purchaser, in its capacity as such, of Notes from any of the Initial
Purchaser.
15. COUNTERPARTS
This Agreement may be executed in any number of counterparts and by the
parties hereto in separate counterparts, each of which when so executed shall be
deemed to be an original and all of which taken together shall constitute one
and the same agreement.
16. SEVERABILITY
Any determination that any provision of this Agreement may be, or is,
unenforceable shall not affect the enforceability of the remainder of this
Agreement.
17. GOVERNING LAW
This Agreement shall be governed by and construed in accordance with the
laws of the State of New York, but without regard to principles of conflicts of
law.
[SIGNATURES ON FOLLOWING PAGE]
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<PAGE> 29
If the foregoing correctly sets forth the understanding between you and
the Company and the Guarantor, please to indicate in the space provided below
for that purpose, whereupon this letter shall constitute a binding agreement
among us.
Very truly yours,
HORSESHOE GAMING, L.L.C.
By: HORSESHOE GAMING, INC., Manager
By: /s/ PAUL R. ALANIS
------------------------------------
Name: Paul R. Alanis
Title: President
ROBINSON PROPERTY GROUP, LIMITED
PARTNERSHIP
By: HORSESHOE GP, INC., General Partner
By: /s/ PAUL R. ALANIS
------------------------------------
Name: Paul R. Alanis
Title: President
Accepted as of the date first above written
WASSERSTEIN PERELLA SECURITIES, INC.
By: /s/ JAMES C. KINGSBERY
- ------------------------------------
Name: James C. Kingsbery
Title: Treasurer
<PAGE> 1
EXHIBIT 4.43
CUSIP NO.: _______
THESE NOTES ARE SUBJECT TO SUBORDINATION IN THE MANNER SET
FORTH IN THE INDENTURE REFERRED TO HEREIN.
SEE REVERSE FOR TRANSFER RESTRICTIONS
HORSESHOE GAMING, L.L.C.
9 3/8% SERIES B SENIOR SUBORDINATED NOTE DUE 2007
<TABLE>
<S> <C>
$ ____________________________ New York, New York
Note No. _____________________ ______________, 199__
Interest Payment Dates June 15 and December 15
Record Dates: June 1 and December 1
</TABLE>
FOR VALUE RECEIVED, the undersigned HORSESHOE GAMING, L.L.C., a Delaware
limited liability company (the "Company"), promises to pay to __________, or its
registered assigns, the principal sum of $ (or so much thereof as shall
not have been prepaid) on June 15, 2007.
This is one of the Notes dated mentioned in the within-mentioned
Indenture.
HORSESHOE GAMING, L.L.C.
By: HORSESHOE GAMING,
INC., its Manager
U.S. TRUST COMPANY OF TEXAS, N.A., By: _____________________________
Trustee Paul Alanis
President
By: _____________________________
Authorized Signatory
<PAGE> 2
(REVERSE SIDE OF NOTE)
HORSESHOE GAMING, L.L.C.
9 3/8% Series A Senior Subordinated Note Due 2007
Unless this certificate is presented by an authorized representative of
The Depository Trust Company, a New York corporation ("DTC"), to the Issuers or
their agent for registration of transfer, exchange or payment, and any
certificate issued is registered in the name of Cede & Co. or in such other name
as is requested by an authorized representative of DTC (and any payment is made
to Cede & Co. or to such other entity as is requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
hereof, Cede & Co., has an interest herein.(1)
THIS SECURITY WAS ISSUED WITH "ORIGINAL ISSUE DISCOUNT." THE TOTAL
AMOUNT OF ORIGINAL ISSUE DISCOUNT IS ____% OF ITS PRINCIPAL AMOUNT, THE ISSUE
DATE IS __________, 1997 AND THE YIELD TO MATURITY IS 9.390% COMPOUNDED
SEMIANNUALLY.
Unless otherwise indicated herein, capitalized terms used herein shall
have the meanings assigned to them in the Indenture (referred to below) and if
no meaning is assigned therein, the meanings assigned to them in the
Registration Rights Agreement (as defined in the Indenture).
1. Interest.
Horseshoe Gaming, L.L.C., a Delaware limited liability company
(hereinafter called the "Company," which term includes any successors under the
Indenture hereinafter referred to), promises to pay interest on the principal
amount of this Note at the rate of 9-3/8% per annum from __________, 1997 to
maturity (plus Liquidated Damages, if any, required to be paid pursuant to the
terms of the Registration Rights Agreement).
The Company will pay interest semi-annually on June 15 and December 15
of each year (each, an "Interest Payment Date"), commencing on the first June 15
or December 15 following the issuance of the Notes with respect to which
interest is payable. Interest on the Notes will accrue from the most recent date
on which interest has been paid or, if no interest has been paid on the Notes,
from the date such Notes are issued. Interest will be computed on the basis of a
360-day year consisting of twelve 30-day months.
- ----------
(1) This paragraph is to be included only if the Note is in global form.
2
<PAGE> 3
2. Method of Payment.
The Company shall pay interest on the Notes (except defaulted interest)
to the persons who are the registered Holders at the close of business on the
June 1st or December 1st immediately preceding the Interest Payment Date.
Holders must surrender Notes to a Paying Agent to collect principal payments.
Except as provided below, the Company shall pay principal, interest, premium and
Liquidated Damages, if any, in such coin or currency of the United States of
America as at the time of payment shall be legal tender for payment of public
and private debts ("U.S. Legal Tender"). However, the Company may pay principal
and interest by wire transfer of Federal funds, or interest by its check payable
in such U.S. Legal Tender. The Company may deliver any such interest payment to
the Paying Agent or the Company may mail any such interest payment to a Holder
at the Holder's registered address.
3. Payment Agent and Registrar.
Initially, U.S. Trust Company of Texas, N.A. (the "Trustee") will act as
Paying Agent and Registrar. The Company may change any Paying Agent, Registrar
or co-Registrar without notice to the Holders. The Company or any of its
Subsidiaries may, subject to certain exceptions, act as Paying Agent, Registrar
or co-Registrar.
4. Indenture.
The Company issued the Notes under an Indenture, dated as of June 15,
1997 (the "Indenture"), among the Company, the Guarantor named therein and the
Trustee. The terms of the Notes include those stated in the Indenture and those
made part of the Indenture by reference to the Trust Indenture Act of 1939, as
amended, as in effect on the date of the Indenture. The Notes are subject to all
such terms, and Holders of the Notes are referred to the Indenture and said Act
for a statement thereof. The Notes are general unsecured obligations of the
Company limited to $160,000,000 in aggregate principal amount.
5. Subordination.
The payment of principal of, and premium, interest and Liquidated
Damages, if any, on the Notes shall be subordinated in right of payment as set
forth in the Indenture, to the prior payment in full of all Senior Debt, whether
outstanding on the date of the Indenture or thereafter incurred.
The payment of principal, of premium, if any, interest on, and
Liquidated Damages, if any, with respect to the Notes is unconditionally
guaranteed on a subordinated basis by the Guarantor and any Additional
Guarantors, as more fully set forth in the Indenture. The Notes, the Guarantee
and any Additional Guarantees will be subordinated to all existing and future
Senior Debt of the Company, the Guarantor and any Additional Guarantors,
respectively.
3
<PAGE> 4
6. Optional Redemption.
The Notes may be redeemed in whole or in part, from time to time, on or
after June 15, 2002, at the redemption prices (expressed as a percentage of the
principal amount thereof) set forth below, plus 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>
The Notes may also be redeemed as follows: (a) at any time, or from time
to time, prior to June 15, 2000, the Company shall have the option to redeem up
to an aggregate of 30% of the principal amount of the Notes originally issued
pursuant to the terms of the Indenture with the Net Cash Proceeds of one or more
Public Equity Offerings for Cash at 110% of principal, plus accrued and unpaid
interest and Liquidated Damages, if any, to the Redemption Date, which option
shall be exercisable within ninety (90) days following the consummation of any
such Public Equity Offering; and (b) pursuant to a Regulatory Redemption
pursuant to Section 3.2 of the Indenture.
Any redemption of the Notes will comply with Article III of the
Indenture. Except as provided in this Section and pursuant to the Indenture, the
Notes may not otherwise be redeemed at the option of the Company.
7. Mandatory Redemption.
Except as set forth in Paragraph 8 below, the Company shall not be
required to make mandatory redemption or sinking fund payments with respect to
the Notes.
8. Repurchase at Option of Holder.
(a) If there is a Change of Control, the Company shall be required to
offer to purchase on the Change of Control Payment Date all outstanding 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 Change of Control Payment
Date. Holders will receive a Change of Control Offer from the Company prior to
any related Change of Control Payment Date and may
4
<PAGE> 5
elect to have such Notes purchased by completing the form entitled "Option of
Holder to Elect Purchase" appearing below.
(b) The Indenture imposes certain limitations on the ability of the
Company or any of its Subsidiaries to sell assets or to incur an Event of Loss.
In the event the Net Cash Proceeds from an Asset Sale or Event of Loss exceed
certain amounts, as specified in the Indenture, the Company will be required
either to reinvest the proceeds of such Asset Sale or Event of Loss in its
business or to make an offer to retire Indebtedness of the Company, which may
include an offer to purchase each Holder's Notes at 100% of the principal amount
thereof, plus accrued interest, if any, to the purchase date.
9. Gaming Laws.
The rights of the Holder of this Note and any owner of any beneficial
interest in this Note are subject to the Gaming Laws and the jurisdiction and
requirements of the Gaming Authorities and the further limitations and
requirements set forth in the Indenture.
10. Notice of Redemption.
Notice of redemption will be sent by first class mail, postage prepaid,
at least thirty (30) days but not more than sixty (60) days prior to the
Redemption Date to each Holder whose Notes are to be redeemed (unless a shorter
notice shall be required by any Governmental Authority) at such Holder's last
address as then shown upon the Company's registry books. Notes may be redeemed
in part in multiples of $1,000 only.
Except as set forth in the Indenture, from and after any Redemption
Date, if monies for the redemption of the Notes called for redemption shall have
been deposited with the Paying Agent on or before such Redemption Date, the
Notes called for redemption will cease to bear interest and the only right of
the Holders of such Notes will be to receive payment of the Redemption Price,
plus any accrued and unpaid interest and Liquidated Damages, if any, to the
Redemption Date.
11. Denominations; Transfer; Exchange.
The Notes are in registered form, without coupons, in denominations of
$1,000 and integral multiples of $1,000. A Holder may register the transfer or
exchange of Notes in accordance with the Indenture. The Registrar and the
Trustee may require a Holder, among other things, to furnish appropriate
endorsements and transfer documents and to pay any taxes and fees required by
law or permitted by the Indenture. Except for Regulatory Redemption pursuant to
Section 3.2 of the Indenture or upon an order of any Gaming Authority, the
Registrar shall not be required to register the transfer or exchange of (a) any
Definitive Note selected for redemption in whole or in part pursuant to Article
III of the Indenture, except the unredeemed portion of any Definitive Note being
redeemed in part, or (b) any Note for a period beginning fifteen (15) Business
Days before the mailing of a notice of an offer to repurchase pursuant to
Article XI or
5
<PAGE> 6
Section 4.14 of the Indenture or a notice of the Company's intent to redeem
Notes pursuant to Article III of the Indenture and ending at the close of
business on the day of such mailing.
12. Persons Deemed Owners.
The registered Holder of a Note may be treated as the owner of the Note
for all purposes.
13. Unclaimed Money.
If money for the payment of principal, interest or Liquidated Damages,
if any, remains unclaimed for two years, the Trustee and the Paying Agent(s)
will pay the money back to the Company at its written request. After that, all
liability of the Trustee and such Paying Agent(s) with respect to such money
shall cease.
14. Discharge Prior to Redemption or Maturity.
If the Company irrevocably deposits with the Trustee, in trust, for the
benefit of the Holders, U.S. Legal Tender or 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 selected by the
Trustee, to pay the principal of, premium, if any, interest and Liquidated
Damages, if any, on the Notes to redemption or maturity and complies with the
other provisions of the Indenture relating thereto, the Company and the
Guarantor will be discharged from certain provisions of the Indenture and the
Notes (including the financial covenants, but excluding their obligation to pay
the principal of, premium, if any, and interest on the Notes). Upon satisfaction
of certain additional conditions set forth in the Indenture, the Company may
elect to have its and the Guarantor's obligations discharged with respect to
outstanding Notes by defeasing the Notes, as more fully described in Article
VIII of the Indenture.
15. Amendment; Supplement; Waiver.
Subject to certain exceptions, the Indenture or the Notes may be amended
or supplemented with the written consent of the Holder or Holders of not less
than a majority in aggregate principal amount of the Notes then outstanding.
Subject to Section 6.8 of the Indenture, the Holder or Holders of a majority in
principal amount of then outstanding Notes may waive compliance by the Company
or the Guarantor with any provision of the Indenture or the Notes.
Notwithstanding the foregoing, and subject to the provisions of Section 9.2 of
the Indenture, without the consent of the Holders of at least sixty-six and
two-thirds percent (66- 2/3%) of the aggregate principal amount of then
outstanding Notes, no such amendment, supplemental indenture or waiver shall
change any provision of Article VI or Article XII of the Indenture or (except
for Stated Maturity) change any Maturity Date of any Note. The consent of the
Holder of each outstanding Note affected thereby shall be required for certain
amendments, supplemental indentures or waivers, including, without limitation,
any such amendment, supplemental indenture or waiver that reduces the principal
amount of Notes, reduces the rate or
6
<PAGE> 7
extends the time for payment of interest on any Note, reduces the principal
amount of any Note or reduces the Purchase Price, changes the Stated Maturity,
alters the redemption provisions of Article III in a manner that adversely
affects the rights of any Holder of Notes or makes certain other specified
changes to the terms of the Notes. Without notice to or consent of any Holder,
the parties thereto may under certain circumstances amend or supplement the
Indenture or the Notes to, among other things, cure any ambiguity, defect or
inconsistency, or make any other change that does not adversely affect the
rights of any Holder of a Note.
16. Defaults and Remedies.
If an Event of Default occurs and is continuing (other than an Event of
Default relating to certain events of bankruptcy, insolvency or reorganization),
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 not less
than 25% in aggregate principal amount of Notes then outstanding may declare all
principal and interest thereon to be due and payable immediately in the manner
and with the effect provided in the Indenture. Holders of Notes may not enforce
the Indenture or the Notes except as provided in the Indenture. The Trustee may
require indemnity satisfactory to it before the Trustee enforces the Indenture
or the Notes. Subject to certain limitations, Holders of not less than a
majority in aggregate principal amount of the Notes then outstanding may direct
the Trustee in its exercise of any trust or power. The Trustee may withhold from
Holders of Notes notice of any continuing Default or Event of Default (except a
Default in payment of principal or interest), if it determines that withholding
notice is in their interest.
17. Trustee Dealings with Company.
The Trustee under the Indenture, in its individual or any other
capacity, may make loans to, accept deposits from, and perform services for the
Company or its Affiliates, and may otherwise deal with the Company or its
Affiliates as if it were not the Trustee.
18. Successors.
When a successor assumes all the obligations of its predecessor under
the Notes and the Indenture, the predecessor will be released from those
obligations.
19. No Recourse Against Others.
No direct or indirect equityholder, employee, officer or director, as
such, past, present or future of the Company or any successor entity shall have
any personal liability in respect of the Obligations of the Company under this
Indenture or the Notes by reason of his, her or its status as such equityholder,
employee, officer or director. Each Holder by accepting a Note waives and
releases all such liability. Such waiver and release are part of the
consideration for the issuance of the Notes.
7
<PAGE> 8
20. Authentication.
This Note shall not be valid until the Trustee or authenticating agent
signs the certificate of authentication on the other side of this Note.
21. Abbreviations and Defined Terms.
Customary abbreviations may be used in the name of a Holder of a
security or an assignee, such as TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
22. CUSIP Numbers.
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Company will cause CUSIP numbers to be
printed on the Notes as a convenience to the Holders of the Notes. No
representation is made as to the accuracy of such numbers as printed on the
Notes and reliance may be placed only on the other identification numbers
printed hereon.
23. Additional Rights of Holders of Transfer Restricted Notes.
In addition to the rights provided to Holders of Notes under the
Indenture, Holders of Transfer Restricted Notes shall have all the rights set
forth in the Registration Rights Agreement.
24. Governing Law.
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS
OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN THE
STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. THE COMPANY
AND THE GUARANTOR HEREBY IRREVOCABLY SUBMIT TO THE JURISDICTION OF ANY NEW YORK
STATE COURT SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK OR ANY
FEDERAL COURT SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK IN
RESPECT OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
NOTE, AND IRREVOCABLY ACCEPT FOR THEMSELVES AND IN RESPECT OF THEIR PROPERTY,
GENERALLY AND UNCONDITIONALLY, JURISDICTION OF THE AFORESAID COURTS. THE COMPANY
AND THE
8
<PAGE> 9
GUARANTOR IRREVOCABLY WAIVE, TO THE FULLEST EXTENT THEY MAY EFFECTIVELY
DO SO UNDER APPLICABLE LAW, TRIAL BY JURY AND ANY OBJECTION WHICH THEY
MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OR THAT ANY SUCH
SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN
AN INCONVENIENT FORUM. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE
TRUSTEE OR ANY HOLDER TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY
LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE
COMPANY IN ANY OTHER JURISDICTION.
The Company shall furnish to any Holder of a Note upon written request
and without charge a copy of the Indenture. Requests may be made to: Horseshoe
Gaming, L.L.C., 4024 Industrial Road, Las Vegas, Nevada 89103, Attention:
Secretary.
9
<PAGE> 10
GUARANTEE
[Name of Guarantor], a ____________________________, hereby
unconditionally guarantees to the Holder of the Note upon which this Guarantee
is endorsed the due and punctual payment, as set forth in the Indenture pursuant
to which such Note and this Guarantee were issued, of the principal of, premium
(if any) and interest on such Note and related costs and expenses and all other
items set forth in Section 12.1 when and as the same shall become due and
payable for any reason according to the terms of such Note and Article XII of
the Indenture. The Guarantee of the Note upon which this Guarantee is endorsed
will not become effective until the Trustee signs the certificate of
authentication on such Note.
[______________________________]
By: _______________________________
Name: _______________________
Title: ______________________
10
<PAGE> 11
FORM OF ASSIGNMENT
I or we assign $_________ aggregate principal amount of this Note to
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print or type name, address and zip code of assignee)
Please insert Social Security or other identifying number of assignee
_____________________________________________________________________ and hereby
irrevocably appoint ________________________________ agent to transfer this Note
on the books of the Company. The agent may substitute another to act for him.
Dated: _______________________ Signed: _____________________________________
(Sign exactly as name appears on
the other side of this Note)
11
<PAGE> 12
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the Company pursuant
to any of the following provisions of the Indenture, check the appropriate box:
[ ] Section 4.14 [ ] Section 11.1
If you want to elect to have only part of this Note purchased by the
Company pursuant to Section 4.14 or 11.1 of the Indenture, as the case may be,
state the principal amount you want to be purchased: $
Date: ________________________ Signature: __________________________________
(Sign exactly as your name appears
on the other side of this Note)
12
<PAGE> 13
SCHEDULE OF EXCHANGES OF DEFINITIVE NOTES(2)
The following exchanges of a part of this Global Note for Definitive
Notes have been made:
<TABLE>
<CAPTION>
PRINCIPAL SIGNATURE OF
AMOUNT OF AMOUNT OF AMOUNT OF THIS AUTHORIZED
DECREASE IN INCREASE IN GLOBAL NOTE OFFICER OF
PRINCIPAL PRINCIPAL FOLLOWING SUCH TRUSTEE OR
DATE OF AMOUNT OF THIS AMOUNT OF THIS DECREASE (OR NOTES
EXCHANGE GLOBAL NOTE GLOBAL NOTE INCREASE) CUSTODIAN
- -------------------- ---------------------- ---------------------- ---------------------- ---------------------
<S> <C> <C> <C> <C>
</TABLE>
- --------
(2) Schedule required for global notes only.
13
<PAGE> 14
CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR
REGISTRATION OF TRANSFER OF NOTES
Re: 9 3/8% SENIOR SUBORDINATED NOTES DUE 2007 OF HORSESHOE GAMING,
L.L.C.
This Certificate relates to $______ principal amount of Notes
held in (check applicable space) ___________ book-entry or ____________
definitive form by _________________(the "Transferor").
The Transferor (check applicable box):
[ ] has requested the Trustee by written order to deliver in exchange
for its beneficial interest in the Global Note held by the
Depository a Note or Notes in definitive, registered form of
authorized denominations and an aggregate principal amount equal
to its beneficial interest in such Global Note (or the portion
thereof indicated above); or
[ ] has requested the Trustee by written order to exchange or register
the transfer of a Note or Notes.
In connection with such request and in respect of each such Note, the
Transferor does hereby certify that Transferor is familiar with the Indenture
relating to the above-captioned securities and as provided in Section 2.6 of
such Indenture, the transfer of this Note does not require registration under
the Securities Act (as defined below) because (check applicable box):
[ ] Such Note is being acquired for the Transferor's own account without
transfer (in satisfaction of Section 2.6(a)(ii)(A) or Section
2.6(d)(i)(A) of the Indenture).
[ ] Such Note is being transferred to a "qualified institutional buyer"
(as defined in Rule 144A under the Securities Act of 1933, as
amended (the "Securities Act")), in reliance on Rule 144A (in
satisfaction of Section 2.6(a)(ii)(B), Section 2.6(b)(i) or
Section 2.6.(d)(i)(B) of the Indenture).
[ ] Such Note is being transferred pursuant to an effective registration
statement under the Securities Act.
[ ] Such Note is being transferred in reliance on and in compliance with
an exemption from the registration requirements of the
Securities Act (other than Rule 144A), including, without
limitation, (i) to an "accredited investor" within the meaning
of Rule 501(a) under the Securities Act (in satisfaction of
Section 2.6(a)(ii)(B) or Section 2.6(d)(i)(B) of the
14
<PAGE> 15
Indenture), (ii) in accordance with Rule 144 in satisfaction of
Section 2.6(a)(ii)(B) or Section 2.6(d)(i)(B) of the Indenture
or (iii) in accordance with Regulation S under the Securities
Act in satisfaction of Section 2.6(a)(ii)(B) or Section
2.6(d)(i)(B) of the Indenture. If requested, an Opinion of
Counsel to the effect that such transfer does not require
registration under the Securities Act accompanies this
Certificate (in satisfaction of Section 2.6(a)(ii)(B) or Section
2.6(d)(i)(B) of the Indenture).
(INSERT NAME OF TRANSFEROR)
By: _________________________________
Date: _______________________________
15
<PAGE> 1
EXHIBIT 4.44
HORSESHOE GAMING, L.L.C.,
Issuer,
THE GUARANTOR NAMED HEREIN
and
U.S. Trust Company of Texas, N.A.,
Trustee
INDENTURE
Dated as of June 15, 1997
UP TO
$160,000,000
9 3/8% Series A Senior Subordinated Notes Due 2007
and
UP TO
$160,000,000
9 3/8% Series B Senior Subordinated Notes Due 2007
<PAGE> 2
HORSESHOE GAMING, L.L.C.
Reconciliation and tie between Trust Indenture Act of 1939 and Indenture, dated
as of June 15, 1997.
<TABLE>
<CAPTION>
Trust Indenture Act Section Indenture Section
<S> <C>
Section 310(a)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.10
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.10
(a)(3) . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
(a)(4) . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
(a)(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.10
(b) . . . . . . . . . . . . . . . . . . . . . . . . . 7.8, 7.10, 15.2
(c) . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
Section 311(a) . . . . . . . . . . . . . . . . . . . . . . . . . . 7.11
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.11
(c) . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
Section 312(a) . . . . . . . . . . . . . . . . . . . . . . . . . . 2.5
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.3
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.3
Section 313(a) . . . . . . . . . . . . . . . . . . . . . . . . . . 7.6
(b)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.6
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.6,15.2
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.6
Section 314(a) . . . . . . . . . . . . . . . . . . . . . . . . 4.8,15.2
(c)(1) . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
(c)(2) . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
(c)(3) . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . Article XIII
(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.5
(f) . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
Section 315(a) . . . . . . . . . . . . . . . . . . . . . . . . . 7.1(b)
(b) . . . . . . . . . . . . . . . . . . . . . . . . . .7.5, 7.6, 13.2
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.1(a)
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . 6.12, 7.1(c)
(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.13
Section 316(a)(last sentence) . . . . . . . . . . . . . . . . . . . . . . . . . 2.9
(a)(1)(A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.11
(a)(1)(B) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.12
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.8
</TABLE>
-i-
<PAGE> 3
<TABLE>
<S> <C>
Section 317(a)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.3
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.4
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.4
Section 318(a) . . . . . . . . . . . . . . . . . . . . . . . . . . 15.1
</TABLE>
___________________
Note: This reconciliation and tie shall not, for any purpose, be
deemed to be a part of the Indenture.
-ii-
<PAGE> 4
CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.2 Incorporation by Reference of TIA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 1.3 Rules of Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
ARTICLE II
THE SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 2.1 Form and Dating . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 2.2 Execution and Authentication . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 2.3 Registrar and Paying Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 2.4 Paying Agent to Hold Assets in Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 2.5 Holder Lists . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 2.6 Transfer and Exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 2.7 Replacement Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 2.8 Outstanding Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 2.9 Treasury Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 2.10 Temporary Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 2.11 Cancellation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 2.12 Defaulted Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
ARTICLE III
REDEMPTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 3.1 Right of Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 3.2 Regulatory Redemption Pursuant to Gaming Laws . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 3.3 Notices to Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 3.4 Selection of Notes to Be Redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 3.6 Effect of Notice of Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 3.7 Effect of Deposit by the Company with the Paying Agent . . . . . . . . . . . . . . . . . . . . 42
Section 3.8 Notes Redeemed in Part . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 3.9 Mandatory Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
ARTICLE IV
COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 4.1 Payment of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 4.2 Maintenance of Office or Agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 4.3 Limitation on Restricted Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 4.4 Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 4.5 Payment of Taxes and Other Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 4.6 Maintenance of Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
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Section 4.7 Compliance Certificates; Notice of Default . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 4.8 Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 4.9 Waiver of Stay, Extension or Usury Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 4.10 Limitation on Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 4.11 Limitation on Incurrence of Additional Indebtedness and Disqualified Capital . . . . . . . . . 50
Section 4.12 Limitation on Dividends and Other Payment Restrictions Affecting Subsidiaries . . . . . . . . . 52
Section 4.13 Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 4.14 Limitation on Sale of Assets and Subsidiary Capital; Event of Loss . . . . . . . . . . . . . . 53
Section 4.15 Limitation on Lines of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Section 4.16 Limitation on Status as Investment Company . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Section 4.17 Additional Subsidiary Guarantors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Section 4.18 Limitation on Other Senior Subordinated Debt . . . . . . . . . . . . . . . . . . . . . . . . . 58
ARTICLE V
SUCCESSOR CORPORATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Section 5.1 Limitation on Consolidation, Merger and Sale of Assets . . . . . . . . . . . . . . . . . . . . 58
Section 5.2 Successor Corporation Substituted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
ARTICLE VI
EVENTS OF DEFAULT AND REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Section 6.1 Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Section 6.2 Acceleration of Maturity Date, Rescission and Annulment . . . . . . . . . . . . . . . . . . . . 62
Section 6.3 Collection of Indebtedness and Suits for Enforcement by Trustee . . . . . . . . . . . . . . . . 64
Section 6.4 Trustee May File Proofs of Claim . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Section 6.5 Trustee May Enforce Claims Without Possession of Notes . . . . . . . . . . . . . . . . . . . . 65
Section 6.6 Priorities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
Section 6.7 Limitation on Suits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
Section 6.8 Unconditional Right of Holders to Receive Principal, Premium and Interest . . . . . . . . . . . 67
Section 6.9 Rights and Remedies Cumulative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Section 6.10 Delay or Omission Not Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Section 6.11 Control by Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Section 6.12 Waiver of Past Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Section 6.13 Undertaking for Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Section 6.14 Restoration of Rights and Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
ARTICLE VII
TRUSTEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Section 7.1 Duties of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Section 7.3 Individual Rights of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
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Section 7.4 Trustee's Disclaimer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
Section 7.5 Notice of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
Section 7.6 Reports by Trustee to Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
Section 7.7 Compensation and Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
Section 7.8 Replacement of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
Section 7.9 Successor Trustee by Merger, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
Section 7.10 Eligibility; Disqualification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
Section 7.11 Preferential Collection of Claims against Company . . . . . . . . . . . . . . . . . . . . . . . 74
ARTICLE VIII
LEGAL DEFEASANCE AND COVENANT DEFEASANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
Section 8.1 Option to Effect Legal Defeasance or Covenant Defeasance . . . . . . . . . . . . . . . . . . . 75
Section 8.2 Legal Defeasance and Discharge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
Section 8.3 Covenant Defeasance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
Section 8.4 Conditions to Legal or Covenant Defeasance . . . . . . . . . . . . . . . . . . . . . . . . . . 76
Section 8.5 Deposited U.S. Legal Tender and U.S. Government Obligations to be Held in Trust; Other
Miscellaneous Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
Section 8.6 Repayment to the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
Section 8.7 Reinstatement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
Section 8.8 Termination of Obligations Upon Cancellation of the Notes . . . . . . . . . . . . . . . . . . . 78
ARTICLE IX
AMENDMENTS, SUPPLEMENTS AND WAIVERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
Section 9.1 Supplemental Indentures Without Consent of Holders . . . . . . . . . . . . . . . . . . . . . . 79
Section 9.2 Amendments, Supplemental Indentures and Waivers with Consent of Holders . . . . . . . . . . . . 80
Section 9.3 Compliance with TIA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
Section 9.4 Revocation and Effect of Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
Section 9.5 Notation on or Exchange of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
Section 9.6 Trustee to Sign Amendments, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
ARTICLE X
MEETINGS OF HOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
Section 10.1 Purposes for Which Meeting May Be Called . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
Section 10.2 Manner of Calling Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
Section 10.3 Call of Meetings by Company or Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
Section 10.4 Who May Attend and Vote at Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
Section 10.5 Regulations May Be Made by Trustee; Conduct of the Meeting; Voting Rights; Adjournment . . . . 84
Section 10.6 Voting at the Meeting and Record to Be Kept . . . . . . . . . . . . . . . . . . . . . . . . . . 85
Section 10.7 Exercise of Rights of Trustee or Holders May Not Be Hindered or Delayed by Call of Meeting . . 86
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ARTICLE XA
SUBORDINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
Section 10A.1 Agreement to Subordinate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
Section 10A.2 Liquidation; Dissolution; Bankruptcy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
Section 10A.3 Default on Designated Senior Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
Section 10A.4 Acceleration of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
Section 10A.5 When Distribution Must be Paid Over . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
Section 10A.6 Notice By the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
Section 10A.7 Subrogation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
Section 10A.8 Relative Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
Section 10A.9 Subordination May Not Be Impaired By the Company . . . . . . . . . . . . . . . . . . . . . . . 89
Section 10A.10 Distribution or Notice to Representative . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
Section 10A.11 Rights of Trustee and Paying Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
Section 10A.12 Authorization To Effect Subordination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
Section 10A.13 Legend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
Section 10A.14 No Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
Section 10A.15 Guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
ARTICLE XI
RIGHT TO REQUIRE REPURCHASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
Section 11.1 Repurchase of Notes at the Option of the Holder Upon a Change of Control . . . . . . . . . . . 92
ARTICLE XII
GUARANTEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
Section 12.2 Execution and Delivery of Guarantee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
Section 12.3 Certain Bankruptcy Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
Section 12.4 Release of Guarantor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
ARTICLE XIII
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
Section 13.1 TIA Controls . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
Section 13.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
Section 13.3 Communications by Holders with Other Holder . . . . . . . . . . . . . . . . . . . . . . . . . . 98
Section 13.4 Certificate and Opinion as to Conditions Precedent . . . . . . . . . . . . . . . . . . . . . . 98
Section 13.5 Statements Required in Certificate or Opinion . . . . . . . . . . . . . . . . . . . . . . . . . 99
Section 13.6 Rules by Trustee, Paying Agent, Registrar . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
Section 13.7 Legal Holidays . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
Section 13.8 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100
Section 13.9 No Adverse Interpretation of Other Agreements . . . . . . . . . . . . . . . . . . . . . . . . 100
Section 13.10 No Recourse Against Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100
Section 13.11 Successors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
Section 13.12 Duplicate Originals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
Section 13.13 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
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Section 13.14 Table of Contents, Headings, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
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This INDENTURE, dated as of June 15, 1997, is by and among Horseshoe
Gaming, L.L.C., a Delaware limited liability company (the "Company"), the
Robinson Property Group, Limited Partnership, a Mississippi limited partnership
("RPG" or the "Guarantor"), and U.S. Trust Company of Texas, N.A., as Trustee
(the "Trustee"). Each party hereto agrees as follows for the benefit of the
other parties hereto and for the equal and ratable benefit of the Holders of
the Company's 9 3/8% Senior Subordinated Notes Due 2007 (the "Series A Notes")
and the Company's 9 3/8% Senior Subordinated Notes Due 2007 to be issued in
exchange for the Series A Notes pursuant to the terms of the Registration
Rights Agreement (as hereafter defined) (the "Series B Notes" and, together
with the Series A Notes, the "Notes"):
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.1 Definitions.
"Acceleration Notice" shall have the meaning specified in Section 6.2.
"Acceptance Amount" shall have the meaning specified in Section
4.14(f).
"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.
"Acquisition" means the purchase or other acquisition of any person or
substantially all the assets of any person by any other person, whether by
purchase of Capital or assets, merger, consolidation or other transfer, and
whether or not for consideration.
"Additional Guarantor" shall have the meaning specified in Section
4.17.
"Adjusted Consolidated EBITDA" means, with respect to the Company, for
any period, the Consolidated EBITDA of the Company, minus the product of (i)
the Consolidated EBITDA for such period of each Consolidated Subsidiary which
is not wholly- owned by the Company and (ii) the percentage of the Capital of
such Consolidated Subsidiary which, during such period, is not owned by the
Company.
"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 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,
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without limitation, Jack 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.
"Affiliate Transaction" shall have the meaning specified in Section
4.10.
"Agent" means any Registrar, Paying Agent or co-Registrar.
"Applicable Capital Gains Tax Rate" in respect of each of the Company
or any of its Subsidiaries shall mean for each such entity calculated
separately an amount equal to the sum of (i) the highest marginal federal
capital gains tax rate applicable to any Equity Holder of the Company, plus
(ii) an amount equal to the sum of the highest marginal state and local capital
gains tax rates applicable to any Equity Holder of the Company, multiplied by a
factor equal to 1 minus such highest marginal federal capital gains tax rate.
"Applicable Income Tax Rate" in respect of each of the Company or any
of its Subsidiaries shall mean for each such entity calculated separately, an
amount equal to the sum of (i) the highest marginal federal income tax rate
applicable to any Equity Holder of the Company, plus (ii) an amount equal to
the sum of the highest marginal state and local income tax rates applicable to
any Equity Holder of the Company, multiplied by a factor equal to 1 minus such
highest marginal federal income tax rate.
"Asset Sale" shall have the meaning specified in Section 4.14(a).
"Asset Sale Event of Loss Offer" shall have the meaning specified in
Section 4.14(e).
"Asset Sale Event of Loss Offer Amount" shall have the meaning
specified in Section 4.14(c).
"Asset Sale Event of Loss Offer Price" shall have the meaning
specified in Section 4.14(e).
"Asset Sale Event of Loss Purchase Date" shall have the meaning
specified in Section 4.14(e).
"Asset Sale Event of Loss Put Date" shall have the meaning specified
in Section 4.14(e)(5).
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"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.
"Bankruptcy Law" means Title 11, U.S. Code or any similar Federal,
state or foreign law for the relief of debtors.
"Beneficial Owner" for purposes of the definition of Change of Control
has the meaning attributed to it in Rules 13d-3 and 13d-5 under the Exchange
Act, whether or not applicable, except that a "person" shall be deemed to have
"beneficial ownership" of all shares that any such person has the right to
acquire, whether such right is exercisable immediately or only after the
passage of time.
"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 the Managers of such person authorized, with respect to any
particular matter, to exercise the power of the Managers.
"Board Resolution" means with respect to any person, a duly adopted
resolution of the Board of Managers, Board of Directors or general partner or
partners, as applicable, of such person.
"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" means U.S. Legal Tender.
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"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 United
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 five hundred million dollars
($500,000,000), and time deposits and certificates of 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 five million dollars ($5,000,000), (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 (10)
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 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.
"Change of Control" means (i) prior to the completion of a bona fide
underwritten initial public offering by the Company, the failure at any time of
Excluded Persons as a group to own and control at least 40% of the issued and
outstanding Capital of the Company; (ii) after the completion of a bona fide
underwritten initial public offering by the Company, the acquisition, in one or
more transactions, of beneficial ownership by (A) any person or entity (other
than an Excluded Person) or (B) any group of persons or entities (excluding any
group in which Excluded Persons beneficially own in the aggregate at least 75%
of the equity and voting interests beneficially owned by the group) who
constitute a group (within the meaning of Section 13(d)(3) of the Exchange
Act), in either case, of Capital of the Company such that, as a result of such
acquisition, such person, entity or group beneficially owns (within the meaning
of Rule 13d-3 under the Exchange Act), directly or indirectly, 30% or more of
the voting power of the Capital of the Company entitled to vote in the election
of directors, managers, general partners or other similar governing bodies of
the Company then outstanding; provided, however, that no Change of Control
shall be deemed to have occurred if (A) Excluded Persons beneficially own, in
the aggregate, at such time, a greater percentage of the total voting power of
the Capital of
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<PAGE> 13
the Company entitled to vote in the election of directors, managers, general
partners or other similar governing bodies of the Company than such other
person, entity or group or (B) at the time of such acquisition, Excluded
Persons (or any of them) possess the ability (by contract or otherwise) to
elect, or cause the election, of a majority of the members of the Company's
Board of Managers; (iii) any merger or consolidation of the Company with or
into any person or any sale, transfer or other conveyance, whether direct or
indirect, of all or substantially all of the assets of the Company, on a
consolidated basis, in one transaction or a series of related transactions, if
immediately after giving effect to such transaction or transactions, any person
or group (other than Excluded Persons or groups including Excluded Persons to
the extent contemplated by clause (i) or (ii) above, whichever is then
applicable) is or becomes the Beneficial Owner, directly or indirectly, of more
than the percentage of the Capital of the Company contemplated by clause (i) or
(ii) above, whichever is then applicable; or (iv) during any period of 12
consecutive months after the Issue Date, individuals who at the beginning of
any such 12- month period constituted the Board of Managers of the Company
(together with any new Managers whose election by such Board or whose
nomination for election by the Members of the Company was approved by a vote of
a majority of the Managers then still in office who were either Managers at the
beginning of such period or whose election or nomination for election was
previously so approved), cease for any reason to constitute a majority of the
Managers of the Company then in office.
"Change of Control Offer" shall have the meaning specified in Section
11.1.
"Change of Control Offer Period" shall have the meaning specified in
Section 11.1.
"Change of Control Offer Price" shall have the meaning specified in
Section 11.1.
"Change of Control Payment Date" shall have the meaning specified in
Section 11.1.
"Change of Control Put Date" shall have the meaning specified in
Section 11.1.
"Company" means the party named as such in this Indenture until a
successor replaces it pursuant to this Indenture and thereafter means such
successor.
"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
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<PAGE> 14
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 Expense, (ii) Consolidated Depreciation and Amortization Expense,
(iii) Consolidated Fixed Charges, (iv) Consolidated Preopening Expenses and (v)
the minority interest in income of Consolidated Subsidiaries and adjusted to
deduct therefrom the minority interest in the losses of Consolidated
Subsidiaries; provided that for purposes of this clause (v) there shall be
excluded from the definitions 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
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<PAGE> 15
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
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<PAGE> 16
(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 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 expenses, 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.
"Covenant Defeasance" shall have the meaning specified in Section 8.3.
"Credit Facility" means the credit agreement, dated as of October 10,
1995 among the Company, RPG and the Credit Facility Purchasers, and any other
credit arrangements that are either Pari Passu with the Credit Facility or
subordinated to the Senior Notes that together (subject to the succeeding
sentence) provide for no greater than an aggregate principal balance of one
hundred fifty million dollars ($150,000,000) 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
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<PAGE> 17
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 Section 4.11 hereof 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" shall mean the purchasers of the Credit
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.
"Current Market Price" on any date means the arithmetic mean of the
Quoted Price of the Notes for the twenty (20) consecutive trading days
commencing thirty (30) days before such date.
"Custodian" means any receiver, trustee, assignee, liquidator,
sequestrator or similar official under any Bankruptcy Law.
"Default" means any event which is, or after notice or passage of time
or both would be, an Event of Default.
"Defaulted Interest" shall have the meaning specified in Section 2.12.
"Definitive Notes" means Notes that are in the form of the Note
attached hereto as Exhibit A but without the paragraphs referred to in footnote
1 and footnote 2 and without the additional schedule referred to in footnote 3.
"Delayed Permitted Tax Distributions" shall have the meaning set forth
in Section 4.3(c)(i).
"Depositing Subsidiary" shall have the meaning set forth in Section
4.3(b)(ii).
"Depository" means, with respect to the Notes issuable or issued in
whole or in part in global form, the person specified in Section 2.3 as the
Depository with respect to the Notes, until the successor shall have been
appointed and becomes such pursuant to the applicable provisions of this
Indenture, and, thereafter, "Depository" shall mean or include such successor.
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<PAGE> 18
"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 pursuant to the Indenture the principal
amount of which is $25 million or more and which has been designated by the
Managers as "Designated Senior Debt."
"Disqualified Capital" means (a) except as provided in clause (b)
below, 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 Section 4.11, 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.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any successor statute.
"Equity Holder" means (a) with respect to a limited liability company,
each member of such limited liability company and (b) with respect to a
partnership, each partner of such partnership.
"Event of Default" shall have the meaning specified in Section 6.1.
"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 Series A Notes and Guarantee thereof for the Series B Notes and
Guarantee thereof made pursuant to the Registration Rights Agreement.
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<PAGE> 19
"Exchange Offer Registration Statement" shall mean the registration
statement filed by the Company and the Guarantor pursuant to the Registration
Rights Agreement with respect to the Exchange Offer.
"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) Jack 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.
"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. Section 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.
"Gaming Licenses" means every material license, material franchise, or
other material authorization required to own, lease, operate or otherwise
conduct or manage riverboat, dockside or land based gaming in any state or
jurisdiction in which the Company or any Subsidiary conducts business now or in
the future and any applicable liquor licenses.
"Global Note" means a Note that contains the paragraphs referred to in
footnote 1 and the additional schedule referred to in footnote 3 to the form of
Note attached hereto as Exhibit A.
"Governmental Authority" means any agency, authority, board, bureau,
commission, department, office or instrumentality of any nature whatsoever of
the United States or a foreign
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<PAGE> 20
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.
"Guarantee" shall have the meaning provided in Section 12.1(a).
"Guarantor" shall mean RPG and any Additional Guarantor Subsidiary
pursuant to Section 4.17.
"HE" means Horseshoe Entertainment, a Louisiana Limited Partnership.
"Holder" means the person in whose name a Note is registered on the
Registrar's books.
"Horseshoe Casinos" means the casinos and their related facilities
owned and operated, directly or indirectly, by the Company and its Subsidiaries
and located in Tunica County, Mississippi or Bossier City, Louisiana.
"incur" shall have the meaning specified in Section 4.11.
"Incurrence Date" shall have the meaning specified in Section 4.11.
"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 ninety (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 adapted 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, refinancings and refundings (whether direct or indirect)
of, or amendments, modifications or supplements to, any
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<PAGE> 21
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.
"Indenture" means this Indenture, as amended or supplemented from time
to time in accordance with the terms hereof.
"Intercompany Note" means a note issued by a Subsidiary to the Company
or to another Subsidiary of the Company to evidence Indebtedness by such
Subsidiary to the Company or to such other Subsidiary; provided that if such
Intercompany Note is funded from the Indebtedness of the intercompany lender
under such note, the terms of such note shall be no less favorable to the
intercompany lender thereunder than the terms of the Indebtedness which the
intercompany lender used to fund such note.
"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.
"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 Section 4.11, 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
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<PAGE> 22
Subsidiary to another Subsidiary, such loan is 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 this
Indenture.
"Legal Defeasance" shall have the meaning specified in Section 8.2.
"Legal Holiday" shall have the meaning specified in Section 13.7.
"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.
"Maturity Date" when used with respect to any Note, means the date on
which the principal of such Note becomes due and payable as therein or herein
provided, whether at Stated Maturity, a Change of Control Payment Date or an
Asset Sale Event of Loss Purchase Date or by declaration of acceleration, call
for redemption or otherwise.
"Minimum Accumulation Date" shall have the meaning specified in
Section 4.14.
"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
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
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<PAGE> 23
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.
"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.
"Non-Tax Distribution Event" shall mean the occurrence of any one of
the following events: (i) a Default or Event of Default described in Section
6.1(1), (2), (4), (5), (6), (7), (8) or (9) shall have occurred or (ii) the
Notes shall have become or been declared immediately due and payable.
"Note Purchase Agreement" shall mean the Note Purchase Agreement,
dated as of June 18, 1997, among the Company, RPG and the purchaser named
therein, pursuant to which, together with this Indenture, Notes are being
issued.
"Notes" or "Securities" means, prior to the consummation of the
Exchange Offer, the 9 3/8% Series A Senior Subordinated Notes Due 2007 issued
in accordance with this Indenture, and after the consummation of the Exchange
Offer, such Series A Notes as remain outstanding (if any) and the Series B
Notes, in each case as amended or modified from time to time in accordance with
the terms hereof, issued under this Indenture.
"Notes Custodian" means the Trustee, as custodian with respect to the
Notes in global form, or any successor entity thereto.
"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 this 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.
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<PAGE> 24
"Offer to Purchase" means any Change of Control Offer or Asset Sale
Event of Loss Offer.
"Offering Memorandum " means the offering memorandum of the Company,
dated June 18, 1997.
"Officer" means, with respect to an entity, the Chief Executive
Officer, the President, any Vice President, the Chief Financial Officer, the
Treasurer, the Controller, or the Secretary or Assistant Secretary of such
entity or its manager or general partner, as the case may be.
"Officers' Certificate" means with respect to the Company or the
Guarantor, a certificate signed by two Officers of the Company or the Guarantor
and otherwise complying with the requirements of Sections 13.4 and 13.5.
"Opinion of Counsel" means a written opinion from legal counsel to the
Company complying with the requirements of Sections 13.4 and 13.5. Unless
otherwise required by this Indenture, the counsel may be in-house counsel to
the Company.
"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 this Indenture and as more fully described in Section 2.3 hereto.
"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 five million dollars ($5,000,000);
(b) The Company may incur Indebtedness to any Subsidiary, and any
Subsidiary may incur Indebtedness, or issue Disqualified Capital, to any other
Subsidiary or to the Company, including, without limitation, the Guarantee;
provided, however, that such obligations (other than
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<PAGE> 25
guarantees with respect to which no payment has been made by the guarantor
thereunder) 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
Note), shall be subordinated in all respects to the Company's Obligations
pursuant to the Notes, the Guarantor's Obligations pursuant to the Guarantee of
the Company's Obligations under the Notes and the obligations of any Subsidiary
to the Company under any Intercompany Note issued pursuant to the Senior Notes
or the Credit Facility, as the case may be;
(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 sixty (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,
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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 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 Section 4.11 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;
(e) 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);
(f) any Liens with respect to judgments and attachments not giving
rise to an Event of Default;
(g) 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);
(h) 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);
(i) Liens arising from filing of precautionary UCC financing
statements relating solely to leases not prohibited by this Indenture;
(j) any Lien in favor of the Company or any Subsidiary thereof; and
(k) 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" shall have the meaning ascribed thereto
in Section 4.3(c).
"Person" or "person" means any individual, corporation, partnership,
association, limited liability company, limited liability partnership, trust,
estate or other entity.
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<PAGE> 27
"Property" or "property" means any right or interest in or to property
or assets of any kind whatsoever, whether real, personal or mixed and whether
tangible, intangible, contingent, indirect or direct.
"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
two hundred seventy (270) days following such acquisition.
"Purchase Price" means any Change of Control Offer Price or Asset Sale
Event of Loss Offer Price.
"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 for 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 RPG
to the Company in the aggregate amount of one hundred fifty million
($150,000,000).
"Record Date" means a Record Date specified in the Notes whether or
not such Record Date is a Business Day.
"Redemption Date" when used with respect to any Note to be redeemed,
means the date fixed for such redemption pursuant to Article III of this
Indenture and Paragraph 5 in the form of Note attached hereto as Exhibit A.
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<PAGE> 28
"Redemption Price" when used with respect to any Note to be redeemed
pursuant to Section 3.1(b), means the Redemption Price for such redemption set
forth in this Indenture, which shall include, if applicable, accrued and unpaid
interest.
"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 this 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 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.
"Registrar" shall have the meaning specified in Section 2.3.
"Registration Rights Agreement" means the Exchange and Registration
Rights Agreement by and among the Company, RPG and the purchaser 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, in accordance with Section 3.2.
"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
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<PAGE> 29
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 fifteen (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 repurchase, redemption, retirement or other acquisition for
value of Capital then outstanding of such person or any Subsidiary of such
person, (c) any repurchase, redemption, retirement or other acquisition for
value of, or any defeasance of, any Subordinated Indebtedness then outstanding,
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 an 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 Jack 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 five million dollars
($5,000,000) 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 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 Section 4.14; and
(v) Investments received as part of the settlement of litigation or in
satisfaction of extensions of credit to any Person otherwise
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<PAGE> 30
permitted under this Indenture pursuant to the reorganization, bankruptcy or
liquidation of such Person.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the SEC promulgated thereunder.
"Senior Debt" means (i) any Indebtedness under the Credit Facility,
(ii) any Indebtedness under the Senior Indenture and (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 of the Company.
Notwithstanding the foregoing, Senior Debt will not include (a) any liability
for federal, state, local or other taxes; (b) any Indebtedness of the Company
to any of its Affiliates, (c) any trade payables or (d) any Indebtedness that
is incurred in violation of the Indenture.
"Senior Indenture" means the indenture, dated as of October 10, 1995,
among the Company, RPG and the trustee thereunder, and any other credit
arrangements that are either Pari Passu with the notes issued pursuant to the
Senior Indenture that together (subject to the succeeding sentence) provide for
no greater than an aggregate of $150 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% Senior Notes Due 2000 issued in
accordance with the Senior Indenture, as amended or modified from time to time
in accordance with the terms thereof.
"Series A Notes" has the meaning ascribed thereto in the preamble
hereof.
"Series B Notes" has the meaning ascribed thereto in the preamble
hereof.
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"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.
"Special Record Date" shall have the meaning specified in Section
2.12.
"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). 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.
"Subsidiary Guarantor" shall have the meaning set forth in Section
12.1(a).
"TIA" means the Trust Indenture Act of 1939 (15 U.S. Code Section
Section 77aaa-7bbbb) as in effect on the date of the execution of this
Indenture; except as otherwise provided in Section 9.3.
"Tax Loss Benefit Amount" as to any taxable year of the Company or any
of its Subsidiaries, shall mean the amount by which the Permitted Tax
Distributions would be reduced were a net operating loss or net capital loss
from a prior taxable year of such entity ending subsequent to the date hereof
carried forward to the applicable taxable year; provided, that for such purpose
the amount of any such net operating loss or net capital loss shall be utilized
only once and in each case shall be carried forward to the next succeeding
taxable year until so utilized.
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<PAGE> 32
"Transfer Restricted Note" means Notes that bear or are required to
bear the legend set forth in Section 2.6.
"Trustee" means the party named as such in this Indenture until a
successor replaces it in accordance with the provisions of this indenture and
thereafter means such successor.
"Trust Officer" means any officer within the corporate trust
department (or any successor group) of the Trustee including any vice
president, assistant vice president, secretary, assistant secretary or any
other officer or assistant officer of the Trustee customarily performing
functions similar to those performed by the persons who at that time shall be
such officers, and also means, with respect to a particular corporate trust
matter, any other officer of the corporate trust department (or any successor
group) of the Trustee to whom such trust matter is referred because of his
knowledge of and familiarity with the particular subject.
"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.
"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 Section 4.3; provided, however, that the
determination of whether a Restricted Payment is prohibited by Section 4.3 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 percent" 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 fifty percent
(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 had been made on the first day of the Reference
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<PAGE> 33
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 Section 4.3(a); (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 Section 4.3
hereof. 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 one dollar ($1.00) of additional Indebtedness
pursuant to clause (ii) of paragraph (a) of Section 4.11. 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.
"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.
Section 1.2 Incorporation by Reference of TIA.
Whenever this Indenture refers to a provision of the TIA, such
provision is incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following meanings:
"indenture securities" means the Notes.
"indenture securityholder" means a Holder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
"obligor" on the indenture securities means the Company and any other
obligor on the Notes.
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All other TIA terms used in this Indenture that are defined by the
TIA, defined by TIA reference to another statute or defined by SEC rule and not
otherwise defined herein have the meanings assigned to them thereby.
Section 1.3 Rules of Construction.
Unless the context otherwise requires:
(i) a term has the meaning assigned to it;
(ii) an accounting term not otherwise defined has the
meaning assigned to it in accordance with GAAP;
(iii) "or" is not exclusive;
(iv) words in the singular include the plural, and words
in the plural include the singular;
(v) provisions apply to successive events and
transactions;
(vi) the words "include" and "including" shall be deemed
to mean "include, without limitation," and "including, without
limitation";
(vii) "herein," "hereof" and other words of similar import
refer to this Indenture as a whole and not to any particular Article,
Section or other subdivision; and
(viii) references to Sections or Articles means reference to
such Section or Article in this Indenture, unless stated otherwise.
ARTICLE II
THE SECURITIES
Section 2.1 Form and Dating.
The Notes and the Trustee's certificate of authentication in respect
thereof shall be substantially in the form of the Note and Trustee's
certificate contained in Exhibit A hereto, which Exhibit is part of this
Indenture. The Notes may have notations, legends or endorsements required by
law, stock exchange rule or usage. The Company shall approve the form of the
Notes and any notation, legend or endorsement on them. Any such notations,
legends or endorsements not contained in the form of Note attached as Exhibit A
hereto shall be delivered in writing to the Trustee. Each Note shall be dated
the date of its authentication.
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The terms and provisions contained in the form of Note shall
constitute, and are hereby expressly made, a part of this Indenture and, to the
extent applicable, the Company and the Trustee, by their execution and delivery
of this Indenture, expressly agree to such terms and provisions and to be bound
thereby.
Section 2.2 Execution and Authentication.
An Officer shall sign the Notes for the Company by manual or facsimile
signature. If an Officer whose signature is on a Note was an Officer at the
time of such execution but no longer holds that office at the time the Trustee
authenticates the Note, the Note shall be valid nevertheless and the Company
shall nevertheless be bound by the terms of the Note and this Indenture. A
Note shall not be valid until an authorized signatory of the Trustee manually
signs the certificate of authentication on the Note, but such signature shall
be conclusive evidence that the Note has been authenticated pursuant to the
terms of this Indenture. The Guarantor shall endorse all Notes issued by the
Company under this Indenture.
The Trustee shall authenticate Series A Notes for original issue in
the aggregate principal amount of up to one hundred sixty million dollars
($160,000,000) and shall authenticate Series B Notes for original issue in the
aggregate principal amount of up to one hundred sixty million dollars
($160,000,000), in each case upon a written order of the Company in the form of
an Officers' Certificate complying with TIA Section 313(c); provided, however,
that Series B Notes shall be issuable only upon the valid surrender for
cancellation of original Notes of a like aggregate principal amount in
accordance with the Registration Rights Agreement. The Officers' Certificate
shall specify the amount of Notes to be authenticated and the date on which the
Notes are to be authenticated. The aggregate principal amount of Notes
outstanding at any time may not exceed one hundred sixty million dollars
($160,000,000), except as provided in Section 2.7. Upon the written order of
the Company in the form of an Officers' Certificate, the Trustee shall
authenticate Notes in substitution of Notes originally issued to reflect any
name change of the Company.
The Trustee may appoint an authenticating agent acceptable to the
Company to authenticate Notes. Unless otherwise provided in the appointment,
an authenticating agent may authenticate Notes whenever the Trustee may do so.
Each reference in this Indenture to authentication by the Trustee includes
authentication by such agent. An authenticating agent has the same rights as
an Agent to deal with the Company, any Affiliate of the Company or any of their
respective Subsidiaries.
Notes shall be issuable only in registered form without coupons in
denominations of one thousand dollars ($1,000) and any integral multiple
thereof.
Section 2.3 Registrar and Paying Agent.
The Company shall maintain, or cause to be maintained, an office or
agency in the Borough of Manhattan, The City of New York, where Notes may be
presented for registration
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of transfer or for exchange ("Registrar") and an office or agency in the
Borough of Manhattan, The City of New York where Notes may be presented for
payment ("Paying Agent") and an office or agency where notices and demands to
or upon the Company in respect of the Notes may be served. The Company may act
as its own Registrar or Paying Agent, except that, for the purposes of Articles
III, VIII, XI and Section 4.14 neither the Company nor any Affiliate of the
Company shall act as Paying Agent. The Registrar shall keep a register of the
Notes and of their transfer and exchange. The Company may have one or more
co-Registrars and one or more additional Paying Agents. The term "Paying
Agent" includes any additional Paying Agent. The Company hereby initially
appoints the Trustee as Registrar and Paying Agent, and the Trustee hereby
initially agrees so to act.
The Company shall enter into an appropriate written agency agreement
with any Agent not a party to this Indenture, which agreement shall implement
the provisions of this Indenture that relate to such Agent. The Company shall
promptly notify the Trustee in writing of the name and address of any such
Agent. If the Company fails to maintain a Registrar or Paying Agent, the
Trustee shall act as such.
The Company initially appoints The Depository Trust Company ("DTC") to
act as Depository with respect to the Global Notes.
The Company initially appoints the Trustee to act as Notes Custodian
with respect to the Global Notes.
Section 2.4 Paying Agent to Hold Assets in Trust.
Not later than the date on which any payment of principal of, premium,
interest or Liquidated Damages, if any, is due on any of the Notes, or such
earlier day as the Trustee may reasonably request, the Company shall deposit
with the Paying Agent available funds sufficient to make such payments so
becoming due to Holders. The Company shall require the Paying Agent (if other
than the Trustee) to agree in writing that such Paying Agent shall hold in
trust for the benefit of Holders or the Trustee all assets (if any) held by the
Paying Agent for the payment of principal of, and interest and Liquidated
Damages, if any, on, the Notes (whether such assets have been distributed to it
by the Company or any other obligor on the Notes), and shall notify the Trustee
in writing of any Default by the Company (or any other obligor on the Notes) in
making any such payment. If the Company or a Subsidiary of the Company acts as
Paying Agent, it shall segregate such assets and hold them as a separate trust
fund for the benefit of the Holders or the Trustee. The Company at any time
may require a Paying Agent to distribute all assets held by it to the Trustee
and account for any assets disbursed and the Trustee may at any time during the
continuance of any payment Default, upon written request to a Paying Agent,
require such Paying Agent to distribute all assets held by it to the Trustee
and to account for any assets distributed. Upon distribution to the Trustee of
all assets that shall have been delivered by the Company to the Paying Agent,
the Paying Agent (if other than the Company) shall have no further liability
for such assets.
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Section 2.5 Holder Lists.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
the Holders and shall otherwise comply with TIA Section 312(a). If the Trustee
is not the Registrar, the Company shall furnish to the Trustee on or before the
third Business Day preceding each Interest Payment Date and at such other times
as the Trustee may request in writing a list in such form and as of such date
as the Trustee reasonably may require of the names and addresses of Holders
including the aggregate principal amount of Notes held by each Holder and the
Company shall otherwise comply with TIA Section 312(a). The Trustee, the
Registrar and the Company shall provide a current holder list to any Gaming
Authority upon demand.
Section 2.6 Transfer and Exchange.
(a) Transfer and Exchange of a Definitive Note for a Definitive
Note. When Definitive Notes are presented to the Registrar or a co-Registrar
with a request
(x) to register the transfer of such Definitive Notes or
(y) to exchange such Definitive Notes for an equal
principal amount of Definitive Notes of other
authorized denominations,
the Registrar or Co-Registrar shall register the transfer to make the exchange
as requested if its reasonable requirements for such transaction are met;
provided, however, that the Definitive Notes surrendered for transfer or
exchange:
(i) shall be duly endorsed or accompanied by a
written instrument of transfer in form reasonably satisfactory
to the Company and the Registrar, duly executed by the Holder
thereof or the Holder's attorney duly authorized in writing,
and
(ii) in the case of Transfer Restricted Notes that
are Definitive Notes, shall be accompanied by the following
additional information and documents, as applicable:
(A) if such Transfer Restricted Note is being delivered
to the Registrar by a Holder for registration in the name of
such Holder, without transfer, a certification from such
Holder to that effect (in substantially the form set forth on
the reverse of the Note); or
(B) if such Transfer Restricted Note is being transferred
(i) to a "qualified institutional buyer" (as defined in Rule
144A under the Securities Act) in accordance with Rule 144A
under the Securities Act, (ii) to an "accredited investor"
within the meaning of Rule 501(a) under the Securities Act
that is
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acquiring at least one hundred thousand dollars ($100,000)
aggregate principal amount of the Notes and that has delivered
to the Trustee and the Company a letter in the form of Exhibit
B hereto with respect to such transfer, (iii) pursuant to an
exemption from registration in accordance with Rule 144 or
Regulation S under the Securities Act, (iv) pursuant to an
effective registration statement under the Securities Act, or
(v) in reliance on another exemption from the registration
requirement of the Securities Act, a certification to that
effect (in substantially the form set forth on the reverse of
the Note); provided, that if such Transfer Restricted Note is
being transferred as provided in clauses (ii), (iii) or (v) of
this paragraph (B) then, in addition to the certification
referred to above, there shall also be delivered, upon
request, an Opinion of Counsel reasonably acceptable to the
Company, to the Trustee and to the Registrar to the effect
that such transfer is in compliance with the Securities Act.
(b) Restriction on Transfer of a Definitive Note for a Beneficial
Interest in a Global Note. A Definitive Note may not be exchanged for a
beneficial interest in a Global Note except upon satisfaction of the
requirements set forth below. Upon receipt by the Trustee of a Definitive
Note, duly endorsed or accompanied by appropriate instruments of transfer, in
form satisfactory to the Trustee, together with:
(i) if such Definitive Note is a Transfer Restricted
Note, certification, substantially in the form set forth on the
reverse of the Note, that such Definitive Note is being transferred to
(A) a "qualified institutional buyer" (as defined in Rule 144A under
the Securities Act) in accordance with Rule 144A under the Securities
Act, or (B) to an "accredited investor" within the meaning of Rule
501(a) under the Securities Act that is acquiring at least one hundred
thousand dollars ($100,000) aggregate principal amount of the Notes
and that has delivered to the Trustee and the Company a letter in the
form of Exhibit B hereto with respect to such transfer (C) in a
transaction meeting the requirements of Regulation S, (D) pursuant to
an effective registration statement under the Securities Act or (E) in
reliance on another exemption from the registration requirements of
the Securities Act or in a transaction exempt from the registration
requirements of the Securities Act, in either case based on an Opinion
of Counsel to the effect that such transfer does not require
registration under the Securities Act; and
(ii) whether or not such Definitive Note is a Transfer
Restricted Note, written instructions from the transferor directing
the Trustee to make, or to direct the Notes Custodian to make, an
endorsement on the Global Note to reflect an increase in the aggregate
principal amount of the Notes represented by the Global Note,
then the Trustee shall cancel such Definitive Note and cause, or direct the
Notes Custodian to cause, in accordance with the standing instructions and
procedures existing between the Depository and the Notes Custodian, the
aggregate principal amount of Notes represented by the Global Note to be
increased accordingly. If no Global Notes are then outstanding, the Company
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shall issue, the Guarantor shall endorse and the Trustee shall authenticate a
new Global Note in the appropriate principal amount.
(c) Transfer and Exchange of Global Notes. The transfer and
exchange of Global Notes or beneficial interests therein shall be effected
through the Depository, in accordance with this Indenture (including the
restrictions on transfer set forth herein) and the procedures of the Depository
therefor.
(d) Transfer of a Beneficial Interest in a Global Note for a
Definitive Note.
(i) Any Person having a beneficial interest in a Global
Note may upon request exchange such beneficial interest for a
Definitive Note. Upon receipt by the Trustee of written instructions
or such other form of instructions as is customary for the Depository
from the Depository or its nominee on behalf of any Person having a
beneficial interest in a Global Note and upon receipt by the Trustee
of a written order or such other form of instructions as is customary
for the Depository or the Person designated by the Depository as
having such a beneficial interest in a Transfer Restricted Note only,
together with the following additional information and documents (all
of which may be submitted by facsimile):
(A) if such beneficial interest is being
transferred to the Person designated by the Depository as
being the beneficial owner, a certification from such person
to that effect (in substantially the form set forth on the
reverse of the Note); or
(B) if such beneficial interest is being
transferred (i) to a "qualified institutional buyer" (as
defined in Rule 144A under the Securities Act) in accordance
with Rule 144A under the Securities Act, (ii) to an
"accredited investor" within the meaning of Rule 501(a) under
the Securities Act that is acquiring at least one hundred
thousand dollars ($100,000) aggregate principal amount of the
Notes and that has delivered to the Trustee and the Company a
letter in the form of Exhibit B hereto with respect to such
transfer, (iii) pursuant to an exemption from registration in
accordance with Rule 144 or Regulation S under the Securities
Act, (iv) pursuant to an effective registration statement
under the Securities Act or (v) in reliance on another
exemption from the registration requirements of the Securities
Act, a certification to that effect (in substantially the form
set forth on the reverse of the Note); provided that, if such
beneficial interest is being transferred as provided in
clauses (ii), (iii) or (v) of this paragraph (B), then, in
addition to such certification required above, there shall
also be delivered, upon request, an Opinion of Counsel from
the transferee or transferor reasonably acceptable to the
Company, to the Trustee and to the Registrar to the effect
that such transfer is in compliance with the Securities Act,
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then the Trustee or the Notes Custodian, at the direction of
the Trustee, will cause, in accordance with the standing
instructions and procedures existing between the Depository
and the Notes Custodian, the aggregate principal amount of the
Global Note to be reduced and, following such reduction, the
Company will execute and, upon receipt of an authentication
order in the form of an Officers' Certificate, the Trustee
will authenticate and deliver to the transferee a Definitive
Note.
(ii) Definitive Notes issued in exchange for a beneficial
interest in a Global Note pursuant to this Section 2.6(d) shall be
registered in such names and in such authorized denominations as the
Depository, pursuant to instructions from its direct or indirect
participants or otherwise, shall instruct the Trustee. The Trustee
shall deliver such Definitive Notes to the persons in whose names such
Notes are so registered.
(e) Restrictions on Transfer and Exchange of Global Notes.
Notwithstanding any other provisions of this Indenture (other than the
provisions set forth in subsection (f) of this Section 2.6), a Global Note may
not be transferred as a whole except by the Depository to a nominee of the
Depository or by the nominee of the Depository to the Depository or another
nominee of the Depository or by the Depository or any such nominee to a
successor Depository or a nominee of such successor Depository.
(f) Authentication of Definitive Notes in Absence of Depository.
If at any time:
(i) the Depository for the Notes notifies the Company
that the Depository is unwilling or unable to continue as Depository
for the Global Notes and a successor Depository for the Global Notes
is not appointed by the Company within ninety (90) days after delivery
of such notice; or
(ii) the Company, in its sole discretion, notifies the
Trustee in writing that it elects to cause the issuance of Definitive
Notes under this Indenture,
then the Company will execute, and the Trustee, upon receipt of an Officers'
Certificate requesting the authentication and delivery of Definitive Notes,
will authenticate and deliver Definitive Notes in an aggregate principal amount
equal to the principal amount of the Global Notes, in exchange for such Global
Notes.
(g) Legends.
(i) Except as permitted by the following paragraphs (ii)
and (iii), each Note certificate evidencing the Global Notes and the Definitive
Notes (and all Notes issued in exchange therefor or substitution thereof) shall
bear a legend in substantially the following form:
THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS
ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM
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REGISTRATION UNDER SECTION 5 OF THE UNITED STATES SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND THE
SECURITY EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR
AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THE
SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER
MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION
5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE
HOLDER OF THE SECURITY EVIDENCED HEREBY AGREES FOR THE BENEFIT
OF THE COMPANY THAT (A) SUCH SECURITY MAY BE RESOLD, PLEDGED
OR OTHERWISE TRANSFERRED, ONLY (i)(a) TO A PERSON WHO THE
SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER
(AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT), IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (b) IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE
SECURITIES ACT, (c) OUTSIDE THE UNITED STATES TO A FOREIGN
PERSON IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 904
UNDER THE SECURITIES ACT OR (d) IN ACCORDANCE WITH ANOTHER
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT (AND BASED UPON AN OPINION OF COUNSEL IF THE COMPANY OR
THE TRUSTEE SO REQUESTS), (ii) TO THE COMPANY, OR (iii)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT AND, IN EACH CASE, IN ACCORDANCE WITH ANY
APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES
OR ANY OTHER APPLICABLE JURISDICTION AND (B) THE HOLDER WILL,
AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY
PURCHASER FROM IT OF THE SECURITY EVIDENCED HEREBY OF THE
RESALE RESTRICTIONS SET FORTH IN (A) ABOVE. THE SECURITY
EVIDENCED HEREBY MAY BE HELD OR TRANSFERRED ONLY IN COMPLIANCE
WITH APPLICABLE GAMING LAWS.
THE SECURITY WAS ISSUED WITH "ORIGINAL ISSUE DISCOUNT." THE
TOTAL AMOUNT OF ORIGINAL ISSUE DISCOUNT WAS 0.111% OF ITS
PRINCIPAL AMOUNT, THE ISSUE DATE IS JUNE 25, 1997 AND THE
YIELD TO MATURITY ON THE ISSUE DATE IS 9.390% COMPOUNDED
SEMIANNUALLY.
(ii) Upon any sale or transfer of a Transfer Restricted
Note (including any Transfer Restricted Note represented by a Global
Note) pursuant to Rule 144 under the Act, an effective registration
statement under the Act or in connection with which the Trustee
receives an Opinion of Counsel to the effect that such Note will no
longer be subject to resale restrictions under federal and state
securities laws:
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(A) in the case of any Transfer
Restricted Note that is a Definitive Note, the
Registrar shall permit the Holder thereof to exchange
such Transfer Restricted Note for a Definitive Note
that does not bear the legend set forth above and
rescind any restriction on the transfer of such
Transfer Restricted Note; and
(B) in the case of any such Transfer
Restricted Note represented by a Global Note, such
Transfer Restricted Note shall not be subject to the
provisions set forth in (i) above (such sales or
transfers being subject only to the provisions of
Section 2.6(c) hereof); provided, however, that with
respect to any request for an exchange of a Transfer
Restricted Note that is represented by a Global Note
for a Definitive Note that does not bear a legend,
which request is made in reliance upon Rule 144, the
Holder thereof shall certify in writing to the
Registrar that such request is being made pursuant to
Rule 144 (such certification to be substantially in
the form set forth on the Note).
(iii) Notwithstanding the foregoing, upon consummation of
the Exchange Offer, the Company shall issue and, upon receipt of an
authentication order in accordance with Section 2.2 hereof, the
Trustee shall authenticate Series B Notes in exchange for Series A
Notes accepted for exchange pursuant to the Registration Rights
Agreement, which Series B Notes shall not bear the legend set forth in
(i) above, and the Registrar shall rescind any restriction on the
transfer of such Notes, in each case unless the Holder of such Series
A Notes is (A) a broker-dealer who purchased such Series A Notes
directly from the Company to resell pursuant to Rule 144A or any other
available exemption under the Securities Act, (B) a Person
participating in the distribution (within the meaning of the
Securities Act) of the Series A Notes or (C) a Person who is an
affiliate (as defined in Rule 144 under the Securities Act) of the
Company.
(h) Cancellation and/or Adjustment of Global Note. At such time
as all beneficial interests in a Global Note have either been exchanged for
Definitive Notes, redeemed, repurchased or canceled or, with respect to Global
Note that is a Series A Note, exchanged for beneficial interests in a Series B
Note, such Global Note shall be returned to or retained and canceled by the
Trustee. At any time prior to such cancellation, if any beneficial interest in
a Global Note is exchanged for Definitive Notes, redeemed, repurchased or
canceled or, with respect to Global Note that is a Series A Note, exchanged for
beneficial interests in a Series B Note, the aggregate principal amount of
Notes represented by such Global Note shall be reduced and an endorsement shall
be made on such Global Note, by the Trustee or the Notes Custodian, at the
direction of the Trustee, to reflect such reduction.
(i) Obligations with respect to Transfers and Exchanges of
Definitive Notes.
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(i) To permit registrations of transfers and exchanges,
the Company shall execute and the Trustee shall authenticate
Definitive Notes and Global Notes at the Registrar's or co-Registrar's
request.
(ii) No service charge shall be made for any registration
of transfer or exchange, but the Company may require payment of a sum
sufficient to cover any transfer tax, assessment or similar
governmental charge payable in connection therewith (other than any
such transfer tax, assessment or similar governmental charge payable
upon exchanges or transfers pursuant to Section 2.2, 2.10, 3.8, 4.14,
9.5 or 11.1).
(iii) Except for a Regulatory Redemption pursuant to
Section 3.2 or upon an order of any Gaming Authority, the Registrar or
co-Registrar shall not be required to register the transfer or
exchange of (a) any Definitive Note selected for redemption in whole
or in part pursuant to Article III, except the unredeemed portion of
any Definitive Note being redeemed in part, or (b) any Note for a
period beginning fifteen (15) Business Days before the mailing of a
notice of an offer to repurchase pursuant to Article XI or Section
4.14 hereof or a notice of the Company's intent to redeem Notes
pursuant to Article III hereof and ending at the close of business on
the day of such mailing.
(j) Requirement of Opinion with respect to Certain Transfers.
Prior to effectuating any transfer of Transfer Restricted Notes pursuant to
Section 2.6(a)(ii)(B)(ii), (iii) or (v) or Section 2.6(d)(i)(B)(ii), (iii) or
(v), the Trustee shall request and obtain an Opinion of Counsel from the
transferee or transferor reasonably acceptable to the Company, the Trustee and
the Registrar to the effect that such transfer is in compliance with the
Securities Act.
Section 2.7 Replacement Notes.
If a mutilated Note is surrendered to the Trustee or if the Holder of
a Note claims and submits an affidavit or other evidence, satisfactory to the
Trustee, to the effect that the Note has been lost, destroyed or wrongfully
taken, the Company shall issue, the Guarantor shall endorse and the Trustee
shall authenticate a replacement Note if the Trustee's requirements are met.
If required by the Trustee or the Company as a condition to receiving a
replacement Note, such Holder must provide an indemnity bond or other
indemnity, sufficient in the judgment of both the Company and the Trustee, to
protect the Company, the Trustee or any Agent from any loss that any of them
may suffer if a Note is replaced. The Company may charge such Holder for its
reasonable, out-of-pocket expenses in replacing a Note. Every replacement Note
shall be an additional obligation of the Company.
Section 2.8 Outstanding Notes.
Notes outstanding at any time are all the Notes that have been
authenticated by the Trustee except those canceled by it, those delivered to it
for cancellation, those reductions in the interest in a Global Note effected by
the Trustee hereunder and those otherwise described in this
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Section 2.8 as not outstanding. A Note does not cease to be outstanding
because the Company or an Affiliate of the Company holds the Note, except as
provided in Section 2.9.
If a Note is replaced pursuant to Section 2.7 (other than a mutilated
Note surrendered for replacement), it ceases to be outstanding unless the
Trustee receives proof satisfactory to it that the replaced Note is held by a
bona fide purchaser. A mutilated Note ceases to be outstanding upon surrender
of such Note and replacement thereof pursuant to Section 2.7.
If on a Redemption Date or the Maturity Date the Paying Agent (other
than the Company or an Affiliate of the Company) holds U.S. Legal Tender or
U.S. Government Obligations sufficient to pay all of the principal and interest
due on the Notes payable on that date and payment of the Notes called for
redemption is not otherwise prohibited, then on and after that date such Notes
(or portions thereof) shall cease to be outstanding and interest on them shall
cease to accrue.
Section 2.9 Treasury Notes.
In determining whether the Holders of the required principal amount of
Notes have concurred in any direction, amendment, supplement, waiver or
consent, Notes owned by the Company, any Guarantor and Affiliates of the
Company or of any Guarantor shall be disregarded, except that, for the purposes
of determining whether the Trustee shall be protected in relying on any such
direction, amendment, supplement, waiver or consent, only Notes that a Trust
Officer for the Trustee has actual knowledge are so owned shall be disregarded.
Section 2.10 Temporary Notes.
Until Definitive Notes are ready for delivery, the Company may
prepare, the Guarantor shall endorse and the Trustee shall authenticate
temporary Notes. Temporary Notes shall be substantially in the form of
Definitive Notes but may have variations that the Company reasonably and in
good faith considers appropriate for temporary Notes. Without unreasonable
delay, the Company shall prepare, the Guarantor shall endorse and the Trustee
shall authenticate Definitive Notes in exchange for temporary Notes. Until so
exchanged, the temporary Notes shall in all respects be entitled to the same
benefits under this Indenture as permanent Notes authenticated and delivered
hereunder.
Section 2.11 Cancellation.
The Company at any time may deliver Notes to the Trustee for
cancellation. The Registrar and the Paying Agent shall forward to the Trustee
any Notes surrendered to them for transfer, exchange or payment. The Trustee,
or at the direction of the Trustee, the Registrar or the Paying Agent (other
than the Company or an Affiliate of the Company), and no one else, shall cancel
and, at the written direction of the Company, shall destroy and return to the
Company all Notes surrendered for transfer, exchange, payment or cancellation.
Subject to Section 2.7, the Company may not issue new Notes to replace Notes it
has paid or delivered to
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the Trustee for cancellation. No Notes shall be authenticated in lieu of or in
exchange for any Notes canceled as provided in this Section 2.11, except as
expressly permitted in the form of Notes and as permitted by this Indenture.
Section 2.12 Defaulted Interest.
Any interest on any Notes which is payable, but is not punctually paid
or duly provided for, on any Interest Payment Date (herein called "Defaulted
Interest") shall forthwith cease to be payable to the Holder on the relevant
regular Record Date by virtue of having been such Holder, and such Defaulted
Interest may be paid by the Company, at its election in each case, as provided
in clause (a) or (b) below:
(a) The Company may elect to make payment of any Defaulted
Interest to the Persons in whose names the Notes are registered at the close of
business on a special Record Date (a "Special Record Date") for the payment of
such Defaulted Interest, which shall be fixed in the following manner. The
Company shall notify the Trustee in writing of the amount of Defaulted Interest
proposed to be paid on each Note and the date of the proposed payment, and at
the same time the Company shall deposit with the Trustee an amount of money
equal to the aggregate amount proposed to be paid in respect of such Defaulted
Interest or shall make arrangements satisfactory to the Trustee for such
deposit prior to the date of the proposed payment, such money when deposited is
to be held in trust for the benefit of the Persons entitled to such Defaulted
Interest as provided in this clause (a). Thereupon the Trustee shall fix a
Special Record Date for the payment of such Defaulted Interest which shall not
be more than 15 days and not less than 10 days prior to the date of the
proposed payment and not less than 10 days after the receipt by the Trustee of
the notice of the proposed payment. The Trustee shall promptly notify the
Company of such Special Record Date and, in the name and at the expense of the
Company, shall cause notice of the proposed payment of such Defaulted Interest
and the Special Record Date therefor to be mailed, first-class postage prepaid,
to each Holder at the Holder's address as it appears in the Note register, not
less than 10 days prior to such Special Record Date. Notice of the proposed
payment of such Defaulted Interest and such Special Record Date therefor having
been so mailed, such Defaulted Interest shall be paid to the Persons in whose
names the Notes are registered at the close of business on such Special Record
Date and shall no longer be payable pursuant to the following clause (b).
(b) The Company may make payment of any Defaulted Interest in any
other lawful manner not inconsistent with the requirements of any securities
exchange on which the Notes may be listed, and upon such notice as may be
required by such exchange, if, after notice given by the Company to the Trustee
of the proposed payment pursuant to this clause (b), such manner of payment
shall be deemed practicable by the Trustee.
Subject to the foregoing provisions of this Section, each Note
delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of any other Note shall carry the rights to interest accrued and
unpaid, and to accrue, which were carried by such other Note.
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ARTICLE III
REDEMPTION
Section 3.1 Right of Redemption.
Redemption of Notes shall be made only in accordance with this Article
III. At its election, the Company may redeem the Notes in whole or in part, as
follows:
(a) At any time, or from time to time, prior to June 15, 2000, the
Company shall have the option to redeem up to an aggregate of 30% of the
principal amount of the Notes originally issued pursuant to the terms hereof
with the Net Cash Proceeds of one or more Public Equity Offerings for Cash at a
Redemption Price equal to 110% of the principal amount thereof, together with
accrued and unpaid interest and Liquidated Damages, if any, to the Redemption
Date, which option shall be exercisable within ninety (90) days following the
consummation of any such Public Equity Offering.
(b) From time to time, on or after June 15, 2002, at the
redemption prices (expressed as a percentage of the principal amount thereof)
set forth below, plus 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>
Redemption
Year Price
--------- --------------
<S> <C>
2002 104.688%
2003 103.125%
2004 101.563%
2005 and thereafter 100.000%
</TABLE>
Except as provided in this Section and Section 3.2, the Notes may not otherwise
be redeemed at the option of the Company.
Section 3.2 Regulatory Redemption Pursuant to Gaming Laws.
(a) Subject to the provisions of subsection (b) below with regard
to the Mississippi Gaming Authority and notwithstanding any other provision of
this Indenture, if the 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 or maintenance, existence or reinstatement of
any gaming or liquor license, or permit or approval of any Gaming Authority
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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, such
Holder shall be obligated, at the request of the Company, to dispose of such
Holder's Notes (subject to any restrictions on the Transfer of the Notes set
forth herein, in the Offering Memorandum or otherwise provided by applicable
law and subject to any approvals by any Gaming Authority that may be required)
within ninety (90) days (or such longer time period permitted by the applicable
Gaming Authority or such shorter time period required by any Gaming Authority)
after receipt of notice of such determination by any Governmental Authority or
the Board of Managers, 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
at a redemption price equal to (A) in the case of a Regulatory Redemption
pursuant to clause (i) above the lowest of (x) the price at which such Holder
or beneficial owner acquired such Notes, without accrued interest, if any, (y)
the principal amount of such Notes, without accrued and unpaid interest or
Liquidated Damages, if any, or (z) the Current Market Price of such Notes,
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
Regulatory Redemption pursuant to clause (ii) above, the Current Market Price,
with all accrued and unpaid interest, if any (or such higher or lower price
required by applicable law or as specifically determined by an order of the
relevant Governmental Authority). 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.
(b) 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, such Holder shall be obligated, at
the Company's request, to dispose of its Notes or beneficial interest therein
within 10 days (or such longer time period permitted by the applicable Gaming
Authority or such shorter time period required by any Gaming Authority) of
receipt of notice from the Company or such time as may be ordered by the
Mississippi Gaming Commission, and if such Notes are not so disposed of within
the required period, the Company shall have the right to redeem such Notes 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.
Section 3.3 Notices to Trustee.
If the Company elects to redeem Notes pursuant to Section 3.1 or 3.2
above, it shall furnish written notice to the Trustee specifying (i) the date
on which the Notes are to be
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<PAGE> 48
redeemed (the "Redemption Date"), (ii) the principal amount of Notes to be
redeemed, (iii) whether it wants the Trustee to give notice of redemption to
the Holders, (iv) the Section of this Indenture pursuant to which the
redemption shall occur, (v) the principal amount of Notes to be redeemed and
(vi) the redemption price.
If the Company elects to reduce the principal amount of Notes to be
redeemed pursuant to the optional redemption provisions of the Notes by
crediting against any such redemption Notes it has not previously delivered to
the Trustee for cancellation, it shall so notify the Trustee of the amount of
the reduction and deliver such Notes with such notice.
The Company shall give each notice to the Trustee provided for in this
Section 3.3 not less than thirty (30) nor more than sixty (60) days before the
Redemption Date (unless a shorter notice shall be required by applicable Gaming
Laws or by order of any Governmental Authority).
Section 3.4 Selection of Notes to Be Redeemed.
If less than all of the Notes are to be redeemed, the Trustee shall
select the Notes to be redeemed among the Holders (other than as provided in
Section 3.2 hereof), in compliance with the requirements of the principal
national securities exchange, if any, on which the Notes are listed or, if the
Notes are not so listed, on a pro rata basis, the particular Notes to be
redeemed shall be selected by the Trustee by lot or in accordance with any
other method the Trustee considers fair and appropriate. In the event of a
partial redemption by lot, the particular Notes to be redeemed shall be
selected, unless otherwise provided herein, not less than thirty (30) nor more
than 60 days prior to the Redemption Date.
The Trustee shall make the selection from the Notes outstanding and
not previously called for redemption and shall promptly notify the Company in
writing of the Notes selected for redemption and, in the case of any Note
selected for partial redemption, the principal amount thereof to be redeemed.
Notes in denominations of one thousand dollars ($1,000) may be redeemed only in
whole. The Trustee may select for redemption portions (equal to one thousand
dollars ($1,000) or any integral multiple thereof) of the principal of Notes
that have denominations larger than one thousand dollars ($1,000), except that
if all Notes of a Holder are to be redeemed, the entire outstanding amount of
Notes held by such Holder, even if not a multiple of $1,000, shall be redeemed.
Provisions of this Indenture that apply to Notes called for redemption also
apply to portions of Notes called for redemption.
Section 3.5 Notice of Redemption.
At least thirty (30) days but not more than sixty (60) days before a
Redemption Date, the Company shall mail a notice of redemption by first class
mail, postage prepaid, to each Holder whose Notes are to be redeemed (unless a
shorter notice shall be required by any Governmental Authority) at such
Holder's last address as then shown upon the Company's registry books. At the
Company's request, the Trustee shall give the notice of redemption in the
Company's name
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<PAGE> 49
and at the Company's expense. Each notice of redemption shall identify the
Notes to be redeemed and shall state:
(1) the Redemption Date;
(2) the Redemption Price, including the amount of
accrued and unpaid interest to be paid upon such redemption;
(3) the name and address of the Paying Agent;
(4) that Notes called for redemption must be
surrendered to the Paying Agent at the address specified in such
notice to collect the Redemption Price;
(5) that, unless (a) the Company defaults in its
obligation to deposit U.S. Legal Tender with the Paying Agent in
accordance with Section 3.7 hereof or (b) such redemption payment is
prevented for any reason, interest on Notes called for redemption
ceases to accrue on and after the Redemption Date and the only
remaining right of the Holders of such Notes is to receive payment of
the Redemption Price, including accrued and unpaid interest, upon
surrender to the Paying Agent of the Notes called for redemption and
to be redeemed;
(6) if any Note is being redeemed in part, the
portion of the principal amount, equal to one thousand dollars
($1,000) or any integral multiple thereof, of such senior Note to be
redeemed and that, after the Redemption Date, and upon surrender of
such Note, a new Note or Notes in aggregate principal amount equal to
the unredeemed portion thereof will be issued in the name of the
Holder thereof upon cancellation of the original Note;
(7) if less than all the Notes are to be
redeemed, the identification of the particular Notes (or portion
thereof) to be redeemed, as well as the aggregate principal amount of
such Notes to be redeemed and the aggregate principal amount of Notes
to be outstanding after such partial redemption;
(8) the CUSIP number of the Notes to be redeemed;
and
(9) that the notice is being sent pursuant to
this Section 3.5 and pursuant to the optional redemption provisions of
the Notes.
Section 3.6 Effect of Notice of Redemption.
Once notice of redemption is mailed in accordance with Section 3.5,
Notes called for redemption become irrevocably due and payable on the
Redemption Date and at the Redemption Price, including accrued and unpaid
interest and Liquidated Damages, if any. Upon surrender to the Trustee or
Paying Agent, such Notes called for redemption shall be paid at the
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<PAGE> 50
Redemption Price, including interest and Liquidated Damages, if any, accrued to
and unpaid on the Redemption Date; provided, however, that if the Redemption
Date is after a regular Record Date and on or prior to the Interest Payment
Date, the accrued interest shall be payable to the Holder of the redeemed Notes
registered on the relevant Record Date; and provided, further, that if a
Redemption Date is a Legal Holiday, payment shall be made on the next
succeeding Business Day and no interest shall accrue for the period from such
Redemption Date to such succeeding Business Day.
Section 3.7 Effect of Deposit by the Company with the Paying Agent.
On or before the Redemption Date, the Company shall deposit with the
Paying Agent (other than the Company or an Affiliate of the Company) U.S. Legal
Tender sufficient to pay the Redemption Price of, including accrued and unpaid
interest and Liquidated Damages, if any, on, all Notes to be redeemed on such
Redemption Date (other than Notes or portions thereof called for redemption on
that date that have been delivered by the Company to the Trustee for
cancellation). The Paying Agent shall promptly return to the Company any U.S.
Legal Tender so deposited that is not required for that purpose upon the
written request of the Company.
If the Company complies with the preceding paragraph and the other
provisions of this Article III and payment of the Notes called for redemption
is not prevented for any reason, interest on the Notes (or the portion thereof)
to be redeemed will cease to accrue on the applicable Redemption Date, whether
or not such Notes are presented for payment. Notwithstanding anything herein to
the contrary, if any Note surrendered for redemption in the manner provided in
the Notes shall not be so paid upon surrender for redemption because of the
failure of the Company to comply with the preceding paragraph and the other
provisions of this Article III, interest shall continue to accrue and be paid
from the Redemption Date until such payment is made on the unpaid principal,
and, to the extent lawful, on any premium, interest and Liquidated Damages, if
any, not paid on such unpaid principal, in each case at the rate and in the
manner provided in Section 4.1 hereof and the Notes.
Section 3.8 Notes Redeemed in Part.
Upon surrender of a Note that is to be redeemed in part, the Company
shall execute, the Guarantor shall endorse and the Trustee shall authenticate
and deliver to the Holder, without service charge, a new Note or Notes equal in
principal amount to the unredeemed portion of the Note surrendered.
Section 3.9 Mandatory Redemption.
Except as set forth under Section 4.14 and Article XI hereof, the
Company shall not be required to make mandatory redemption or sinking fund
payments with respect to the Notes.
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<PAGE> 51
ARTICLE IV
COVENANTS
Section 4.1 Payment of Notes.
The Company shall pay the principal of and premium, interest and
Liquidated Damages, if any, on the Notes on the dates and in the manner
provided in the Notes and this Indenture. Principal of and premium, interest
and Liquidated Damages, if any, on the Notes shall be considered paid on the
date it is due if the Trustee or Paying Agent (other than the Company or an
Affiliate of the Company) holds for the benefit of the Holders, on or before
10:00 a.m., New York City time on that date, in immediately payable funds
deposited and designated for and sufficient to pay all principal of, and
premium, interest and Liquidated Damages, if any, on the Notes then due. The
Company shall pay interest on overdue principal and on overdue installments of
interest, premium and Liquidated Damages, if any, at the rate specified in the
Notes compounded semi-annually, to the extent lawful.
Section 4.2 Maintenance of Office or Agency.
The Company and the Guarantor shall maintain in the Borough of
Manhattan, the City of New York, an office or agency where Notes may be
presented or surrendered for payment, where Notes may be surrendered for
registration of transfer or exchange and where notices and demands to or upon
the Company and the Guarantor in respect of the Notes and this Indenture may be
served. The Company and the Guarantor shall give prompt, written notice to the
Trustee of the location, and any change in the location, of such office or
agency. If at any time the Company and the Guarantor shall fail to maintain
any such required office or agency or shall fail to furnish the Trustee with
the address thereof, such presentations, surrenders, notices and demands may be
made or serviced at the address of the Trustee set forth in Section 13.2.
The Company and the Guarantor may also from time to time designate one
or more other offices or agencies where the Notes may be presented or
surrendered for any or all such purposes and may from time to time rescind such
designations; provided, however, that no such designation or rescission shall
in any manner relieve the Company and the Guarantor of their obligation to
maintain an office or agency in the Borough of Manhattan, The City of New York,
for such purposes. The Company and the Guarantor shall give prompt written
notice to the Trustee of any such designation or rescission and of any change
in the location of any such other office or agency. The Company and the
Guarantor hereby initially designate the Corporate Trust Office of the Trustee
set forth in Section 13.2 as such office.
Section 4.3 Limitation on Restricted Payments.
(a) 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 immediately prior thereto and
after giving effect thereto on a pro forma basis (1) a Default or an Event of
Default shall have occurred and be continuing, (2) the Company could not incur
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<PAGE> 52
at least one dollar ($1.00) of additional Indebtedness pursuant to clause (ii)
of paragraph (a) of Section 4.11 hereof 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 (or to be
received within one (1) Business Day upon the Closing of a Public Equity
Offering of Qualified Capital pursuant to a registration statement which prior
to such Restricted Payment, has been declared effective by the SEC; provided,
however, that if any such Public Equity Offering does not result in the Company
receiving such proceeds within one (1) Business Day, then any payment that
would be in contravention of this Section 4.3 but for this parenthetical clause
shall be deemed in contravention of this Section 4.3 unless cash equal to such
payment is repaid in full to the Company as an equity contribution to the
Company within one (1) Business Day of when such closing was scheduled to
occur) by the Company from the sale of the Company's Qualified 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 the case of (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 Section 4.3(a).
(b) Notwithstanding anything in paragraph (a) to the contrary,
from and after the Issue Date, unless a Default or an Event of Default shall
have occurred and be continuing, the
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<PAGE> 53
following Restricted Payments shall be permitted: (u) Investments in one or
more persons in an amount not in excess of fifty million dollars ($50,000,000)
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 fifty percent (50%) in the
case of returns in excess of capital and by one hundred percent (100%) in the
case of return of capital), then outstanding under this clause (u) for the
purposes of the fifty million dollar ($50,000,000) 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 sixty (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 contained in Section 3.2 hereof (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 fifty million dollars ($50,000,000) for all such Restricted Payments
permitted by this clause (z) taken together; provided, however, that no part of
the Restricted Payment permitted by this clause (z) will be made for purposes
described in clause (u), it being the intention of the parties that the fifty
million dollar ($50,000,000) limit set forth therein, respectively, be the only
amounts 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) of Section 4.11 hereof,
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 the Summary section
of the Offering Memorandum 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) (i) Notwithstanding anything in paragraphs (a) and (b)
above to the contrary, from and after the Issue Date, prior to the occurrence
of a Non-Tax Distribution Event (and after such Non-Tax Distribution Event
shall have been cured and no longer be continuing), and without limiting the
payments that may be made to the Company, or to any of its Subsidiaries by any
of its Subsidiaries, each of the Company and its Subsidiaries may make
distributions to its Equity Holders in the amounts provided in clause (ii)
below (such distributions being referred to as "Permitted Tax Distributions").
From and after the occurrence of a Non-Tax Distribution
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<PAGE> 54
Event (and during the entire time such Non-Tax Distribution Event shall be
continuing and shall not have been cured), no Permitted Tax Distributions shall
be made until such Non-Tax Distribution Event shall have been cured. In
addition, if the Company or any of its Subsidiaries was prohibited, as a result
of the occurrence of a Non-Tax Distribution Event, from making any
distributions which would otherwise have been Permitted Tax Distributions
(referred to herein as "Delayed Permitted Tax Distributions") the Company shall
be permitted to make such Delayed Permitted Tax Distributions after such
Non-Tax Distribution Event shall have been cured.
(ii) The amount of Permitted Tax Distributions by the
Company and each of its Subsidiaries shall be, with respect to any taxable
year, the sum of: (I) the product of (A) the excess of (i) all items of taxable
income or gain (other than capital gains) allocated by the Company and each of
its Subsidiaries to their respective Equity Holders for that year over (ii) all
items of taxable deduction or loss (other than capital loss) allocated to such
Equity Holders by the Company and each of its Subsidiaries, respectively, for
such year and (B) the Applicable Income Tax Rate; plus (II) the product of (A)
the net capital gain (i.e., net long-term capital gain over net short-term
capital loss), if any, allocated by the Company and each of its Subsidiaries to
their respective Equity Holders for such year, and (B) the Applicable Capital
Gains Tax Rate; plus (III) taking into account the capital gains and losses of
the Company and each of its Subsidiaries, respectively, the product of (A) the
net short-term capital gain (i.e., net short-term capital gains in excess of
net long-term capital losses), if any, allocated by the Company and each of its
Subsidiaries to their respective Equity Holders for such year and (B) the
Applicable Income Tax Rate; minus (IV) the aggregate Tax Loss Benefit Amounts
for the Company and each of its Subsidiaries, respectively, for such year.
Estimated Tax Distributions shall be made within twelve days following March
31, June 30, September 30 and December 31 based upon an estimate of the excess
of (x) the Tax Distributions that would be payable for the period beginning on
January 1 of such year and ending on March 31, June 30, September 30 and
December 31 were such period a taxable year (computed as provided above) over
(y) distributions attributable to all prior periods during such taxable year.
The Company shall give the Trustee written notice of each Permitted Tax
Distribution paid pursuant to this Section 4.3(c)(ii) within fifteen (15) days
after the payment thereof. Promptly after filing by the Company and each of its
Subsidiaries of their respective annual tax return, each Equity Holder shall
reimburse the Company or the applicable Subsidiary, as the case may be, to the
extent such estimated Tax Distributions made to such Equity Holder exceeded the
actual permissible Tax Distributions with respect to such taxable year for that
Equity Holder, and the Company or the applicable Subsidiary, as the case may
be, shall make a further payment to its respective Equity Holders to the extent
such estimated Tax Distributions were less than the Tax Distributions actually
payable to such Equity Holders with respect to such taxable year. To the
extent that any Tax Distribution would otherwise be made to any Equity Holder
at a time when an obligation of such Equity Holder to make a payment to the
Company or the applicable Subsidiary under this clause (ii) remains
outstanding, the amount of any Tax Distribution to be made will be reduced by
the amounts such Equity Holder is obligated to pay the Company or the
applicable Subsidiary. Notwithstanding the foregoing, with respect only to the
Investor Limited Partners' percentage allocable interest in income, gain,
deduction, loss, capital gain and
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capital loss of HE, the Applicable Income Tax Rate and the Applicable Capital
Gains Tax Rate for purposes of this Section 4.3(c)(ii) shall be deemed to be
100%; provided, however, that such payment of 100% of their allocable interest
in income, gain, deduction, 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.
Section 4.4 Existence.
Subject to Article V, the Company and the Guarantor shall do or cause
to be done all things necessary to preserve and keep in full force and effect
each of their existence and the existence of each of their Subsidiaries in
accordance with the respective organizational documents of each of them and the
rights (charter and statutory) and franchises of the Company and the Guarantor
and their Subsidiaries; provided, however, that neither the Company nor the
Guarantor shall be required to preserve, with respect to itself, any right or
franchise, and with respect to any of their Subsidiaries, any such existence,
right or franchise, if (a) the Board of Managers of the Company shall determine
reasonably and in good faith that the preservation thereof is no longer
desirable in the conduct of the business of the Company or the Guarantor, as
the case may be, and (b) the loss thereof is not adverse in any material
respect to the Holders.
Section 4.5 Payment of Taxes and Other Claims.
The Company and the Guarantor shall, and shall cause each of their
Subsidiaries to, pay or discharge or cause to be paid or discharged, before the
same shall become delinquent, (i) all taxes, assessments and governmental
charges (including withholding taxes and any penalties, interest and additions
to taxes) levied or imposed upon the Company, the Guarantor or any of their
Subsidiaries or properties and assets of the Company, the Guarantor or any of
their Subsidiaries and (ii) all lawful claims, whether for labor, materials,
supplies, services or anything else, that have become due and payable and that
by law have or may become a Lien upon the property and assets of the Company,
the Guarantor or any of their Subsidiaries; provided, however, that neither the
Company nor the Guarantor shall be required to pay or discharge or cause to be
paid or discharged any such tax, assessment charge or claim whose amount,
applicability or validity is being contested in good faith by appropriate
proceedings and for which disputed amounts adequate reserves have been
established in accordance with GAAP.
Section 4.6 Maintenance of Insurance.
From and at all times after the Issue Date, the Company and its
Subsidiaries shall 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.
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Section 4.7 Compliance Certificates; Notice of Default.
(a) The Company shall deliver to the Trustee within ninety (90)
days after the end of each fiscal year an Officers' Certificate complying
(whether or not required) with Section 314(a)(4) of the TIA and stating that a
review of its activities and the activities of its Subsidiaries during the
preceding fiscal year has been made under the supervision of the signing
Officers with a view to determining whether the Company has kept, observed,
performed and fulfilled its obligations under this Indenture and further
stating, as to each such Officer signing such certificate, whether or not the
signer knows of any failure by the Company, the Guarantor or any Subsidiary of
the Company or the Guarantor to comply with any conditions or covenants in this
Indenture and, if such signer does know of such a failure to comply, the
certificate shall describe such failure with particularity. The Officers'
Certificate shall also notify the Trustee should the relevant fiscal year end
on any date other than the current fiscal year-end date.
(b) So long as not contrary to the then current recommendation of
the American Institute of Certified Public Accountants, the Company shall
deliver to the Trustee within one hundred twenty (120) days after the end of
each of its fiscal years a written report of a firm of independent certified
public accountants with an established national reputation stating that in
conducting their audit for such fiscal year, nothing has come to their
attention that caused them to believe that the Company or any Subsidiary of the
Company was not in compliance with the provisions set forth in Section 4.3,
4.11 or 4.14 of this Indenture.
(c) The Company, so long as any of the Notes are outstanding,
shall deliver to the Trustee, promptly upon becoming aware of any Default or
Event of Default under this Indenture, an Officers' Certificate specifying such
Default or Event of Default and what action the Company is taking or proposes
to take with respect thereto. The Trustee shall not be deemed to have
knowledge of a Default or an Event of Default unless one of its Trust Officers
receives written notice of the Default giving rise thereto from the Company or
any of the Holders.
Section 4.8 Reports.
(a) 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 shall file with the SEC 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 SEC may by rules and
regulations prescribe) required to be filed pursuant to such provisions of the
Exchange Act. The Company shall file with the Trustee, within 5 days after it
files the same with the SEC, 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 SEC may by rules and regulations prescribe) that it is
required to file with the SEC pursuant to this Section 4.8. The Company shall
also comply with the other provisions of TIA Section 314(a). If the Company
is not permitted by applicable law or regulations to file the aforementioned
reports, the Company (at its own expense) shall file with the Trustee and mail,
or cause the Trustee to mail, to Holders
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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 SEC, 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.
(b) At any time when the Company is not permitted by applicable
law or regulations to file the aforementioned reports, upon the request of a
Holder of a Note other than a Series B Note, the Company will promptly furnish
or cause to be furnished such information as is specified pursuant to Rule
144A(d)(4) under the Securities Act (or any successor provision thereto) to
such Holder or to a prospective purchaser of such Note designated by such
Holder, as the case may be, in order to permit compliance by such Holder with
Rule 144A under the Securities Act.
Section 4.9 Waiver of Stay, Extension or Usury Laws.
Each of the Company and the Guarantor covenant that they will not at
any time insist upon, plead or in any manner whatsoever claim or take the
benefit or advantage of, any stay or extension law or any usury law or other
law wherever enacted that would prohibit or forgive the Company or the
Guarantor from paying all or any portion of the principal of or interest on the
Notes as contemplated herein, wherever enacted, now or at any time hereafter in
force, or that may affect the covenants or the performance of this Indenture,
and each of the Company and the Guarantor hereby expressly waive all benefit
and advantage of any such law insofar as such law applies to the Notes and
covenant that it shall not hinder, delay or impede the execution of any power
herein granted to the Trustee, but will suffer and permit the execution of
every such power as though no such law had been enacted.
Section 4.10 Limitation on Transactions with Affiliates.
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
five million dollars ($5,000,000) 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
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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, officers and employees, (b) Restricted Payments permitted under
Section 4.3 of this Indenture (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"),
(c) transactions solely between the Company and a Subsidiary Guarantor or among
any Subsidiary Guarantors, (d) the Intercompany Notes, (e) 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 (f) transactions
permitted pursuant to paragraph (b) or (c) of the definition of Permitted
Indebtedness.
Section 4.11 Limitation on Incurrence of Additional Indebtedness and
Disqualified Capital.
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 this Indenture and the Guarantee hereof;
(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) fifteen million dollars ($15,000,000) per Casino;
(d) The Company's Subsidiaries may each incur up to five million
dollars ($5,000,000) of working capital Indebtedness at any time outstanding;
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(e) The Company and the Guarantor may incur Refinancing
Indebtedness with respect to any Indebtedness or Disqualified Capital, as
applicable, described in clauses (a), (b), (g) and (h) of this Section 4.11 and
the Company and its Subsidiaries may incur Refinancing Indebtedness with
respect to any Indebtedness described in clause (c) of this Section 4.11;
(f) The Company and the Guarantor may incur Indebtedness (in
addition to any Indebtedness incurred in accordance with any other provision of
this Section 4.11) in an aggregate amount outstanding at any time (including
any Indebtedness issued to refinance, replace, or refund such Indebtedness) of
up to twenty million dollars ($20,000,000) 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) one hundred fifty million dollars ($150,000,000) 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 herein, 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 Section 4.11(h).
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Section 4.12 Limitation on Dividends and Other Payment Restrictions
Affecting Subsidiaries.
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, asset 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 Section 4.14, (e)
reasonable and customary restrictions on transfers of all collateral imposed in
connection with Liens securing Indebtedness, to the extent such Liens are
permitted by Section 4.13 and to the extent such Indebtedness is permitted by
Section 4.11, 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.
Section 4.13 Liens.
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
Section 4.11; (iii) Liens securing Refinancing Indebtedness in accordance with
clause (e) of Section 4.11, but only if such Liens have the same relative
priority and do not extend to property and assets other than 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 Section 4.11 and Liens securing any increases in the amount of
Indebtedness under the Credit Facility above the amount of Indebtedness
permitted under such clause (g), but only to the extent that the increase in
such Indebtedness is permitted under clause (a) of Section 4.11 at the time of
the incurrence of such additional Indebtedness; (v) Liens in favor of the
Company; and (vi) Liens securing Indebtedness under the Senior Indenture.
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.
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Section 4.14 Limitation on Sale of Assets and Subsidiary Capital; Event of
Loss.
(a) 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 of Section 4.14(e)
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 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 of Section 4.14(a):
(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 in Section 5.1;
(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.
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Each of the transactions described in this paragraph (b) shall not be deemed an
Asset Sale for purposes of this Section 4.14.
(c) For the purposes of this Section 4.14, the "Asset Sale Event
of Loss Offer Amount" shall equal 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 paragraph (g) of Section 4.11 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) 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 to paragraph (g)
of Section 4.11 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
Secured 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
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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 (ii) by the Guarantor of its Casino or (iii) 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), (A)(2)(iii) or (A)(2)(iv) of clause (y) 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.
(d) For the purposes of this Section 4.14, "Minimum Accumulation
Date" means each date on which the accumulated Asset Sale Event of Loss Offer
Amount exceeds ten million dollars ($10,000,000).
(e) Not later than ten (10) Business Days after each Minimum
Accumulation Date, the Company shall 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 thereof, together with
accrued and unpaid interest and Liquidated Damages, if any, 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 shall 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 shall 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 this Indenture, shall govern the terms of
an Asset Sale Event of Loss Offer shall state that:
(1) the Asset Sale Event of Loss Offer is being made
pursuant to such notice and this Section 4.14;
(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 and Liquidated
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Damages, if any), the Asset Sale Event of Loss Put Date (which Asset
Sale Event of Loss Put 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 purposes of this
Section 4.14, notwithstanding anything in this Indenture to the
contrary, be the Company or any Affiliate of the Company) in
accordance with the last paragraph of this clause (e), 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 this Section 4.14,
notwithstanding any other provision of this 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 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.
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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 this 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 shall (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 paragraph (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
the Notes so accepted together with an Officers' Certificate setting forth the
Notes or portion thereof being purchased by the Company. The Paying Agent
shall 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 shall 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 shall 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 this 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.
Section 4.15 Limitation on Lines of Business.
Neither the Company nor any of its Subsidiaries shall directly or
indirectly engage to any substantial extent in any line or lines of business
activity other than in a Related Business.
Section 4.16 Limitation on Status as Investment Company.
Neither the Company nor any of its Subsidiaries shall become an
"investment company" (as that term is defined in the Investment Company Act of
1940, as amended), or otherwise become subject to regulation under the
Investment Company Act.
Section 4.17 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
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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 Article XII and that
all the terms and conditions of Article XII and, to the extent applicable,
Article XIII, applying to the Guarantor shall apply with the same effect to
such Additional Guarantor or Additional Guarantors and to deliver copies of the
supplemental indenture and guarantee to the Trustee; 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 shall use their best efforts to obtain.
Section 4.18 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.
ARTICLE V
SUCCESSOR CORPORATION
Section 5.1 Limitation on Consolidation, Merger and Sale of Assets.
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 this
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
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Obligations of the Company or the Guarantor, as the case may
be, in connection with the Notes, this Indenture, if
applicable, and the Guarantee, and the rights of the Holders
under the Notes, this 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 one dollar ($1.00) of additional
Indebtedness pursuant to clause (ii) of paragraph (a) of
Section 4.11;
(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 Section
4.14 herein, so long as such Subsidiary does not account for all or
substantially all the assets of the Company.
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Section 5.2 Successor Corporation Substituted.
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 contained in Section 5.1, 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 this
Indenture and the Notes (including, without limitation, the Guarantee) with the
same effect as if such successor corporation had been named herein and 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 this
Indenture, the Notes and the Guarantee, as applicable, except as to any
obligations that arise from or as a result of such transaction.
ARTICLE VI
EVENTS OF DEFAULT AND REMEDIES
Section 6.1 Events of Default.
"Event of Default," wherever used herein, means any one of the
following events (whatever the reason for such Event of Default and whether it
shall be caused voluntarily or involuntarily or effected, without limitation,
by operation of law or pursuant to any judgment, decree or order of any court
or any order, rule or regulation of any Governmental Authority):
(1) 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 thirty (30) days;
(2) the failure by the Company to pay all or any part of the
principal, 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;
(3) the failure by the Company or the Guarantor to observe or
perform any other covenant or agreement contained in the Notes, this Indenture,
the Registration Rights Agreement (other than such failures as to which
Liquidated Damages shall accrue pursuant to the terms of the Registration
Rights Agreement) or the Guarantee and the continuance of such failure for a
period of thirty (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
twenty-five percent (25%) in aggregate principal amount of the Notes
outstanding;
(4) the Guarantee or any guarantee of an Additional Guarantor or
Additional Guarantors which, individually or in the aggregate, constitute a
Significant Subsidiary shall be
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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 or
their Obligations under the Guarantee and the Guarantor or any Additional
Guarantor shall not, in the case of a judgment, procure a stay of execution of
such judgment within sixty (60) days of the occurrence thereof and within such
sixty (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;
(5) a decree, judgment or order by a court of competent
jurisdiction shall have been entered adjudging the Company or any of its
Subsidiaries that individually or as a group constitute a Significant
Subsidiary, as bankrupt or insolvent, or approving as properly filed a petition
seeking reorganization of the Company or such Significant Subsidiary under any
bankruptcy or similar law, and such decree or order shall have continued
undischarged and unstayed for a period of sixty (60) days; or a decree or order
of a court of competent jurisdiction for the appointment of a receiver,
liquidator, trustee or assignee in bankruptcy or insolvency of the Company or
such Significant Subsidiary, or of the property of any such person, or for the
winding up or liquidation of the affairs of any such person, shall have been
entered, and such decree, judgment or order shall have remained in force
undischarged and unstayed for a period of sixty (60) days;
(6) the Company or any of its Subsidiaries that individually or as
a group constitute a Significant Subsidiary, shall institute proceedings to be
adjudicated a voluntary bankrupt, or shall consent to the filing of a
bankruptcy proceeding against it, or shall file a petition or answer or consent
seeking reorganization under any bankruptcy or similar law or similar statute,
or shall consent to the filing of any such petition, or shall consent to the
appointment of a Custodian, receiver, liquidator, trustee or assignee in
bankruptcy or insolvency of it or any of its assets or property, or shall make
a general assignment for the benefit of creditors, or shall admit in writing
its inability to pay its debts generally as they become due, or shall, within
the meaning of any Bankruptcy Law, become insolvent or fail generally to pay
its debts as they become due;
(7) default in the payment of principal, premium or interest when
due that 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 ten million dollars ($10,000,000) (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);
(8) final, non-appealable, unsatisfied judgments not covered by
insurance aggregating in excess of ten million dollars ($10,000,000), at any
one time being rendered against the Company or any of its Subsidiaries and not
stayed, bonded or discharged within sixty (60) days; and
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(9) the legal right of the Company or any of its Subsidiaries to
operate the gaming establishment included within any Casino is suspended or
lost and such suspension or loss shall continue for more than ninety (90)
consecutive days.
If a Default occurs and is continuing, the Trustee must, within ten
(10) days after the occurrence of such Default, give to the Holders notice of
such Default; provided, however, that 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 interest of the Holders.
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 Article VII relating to the duties of the Trustee,
the Trustee will be under no obligation to exercise any of its rights or powers
under this 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 this Indenture and applicable law, the
Holders of a majority in aggregate principal amount of the Notes at the time
outstanding shall 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 Company shall, within thirty (30) days following the end of each
of its fiscal years, file with the Trustee an Officers' Certificate certifying
that the Company and the Guarantor have performed all of their obligations
under this Indenture in all material respects and that no Event of Default has
occurred during the preceding fiscal year, or in the event any such Event of
Default has occurred, the facts and circumstances resulting in such Event of
Default. The Company shall promptly upon the occurrence thereof provide notice
to the Trustee of an Event of Default.
Section 6.2 Acceleration of Maturity Date, Rescission and Annulment.
(a) If an Event of Default occurs and is continuing, other than an
Event of Default specified in Section 6.1(5) or (6), 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 not less than twenty five percent
(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 and
Liquidated Damages thereon to be due and payable immediately. If an Event of
Default specified in Section 6.1(5) or (6) 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 the Trustee or the Holders.
(b) In the case of any Event of Default occurring by reason of any
willful action (or inaction) taken (or not taken) by or on behalf of the
Company with the intention of avoiding
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payment of the premium that the Company would have had to pay if the Company
then had elected to redeem the Notes pursuant to Section 3.1(b) hereof, an
equivalent premium shall also become and be immediately due and payable to the
extent permitted by law upon the acceleration of the Notes. If an Event of
Default occurs prior to June 15, 2002 by reason of any willful action (or
inaction) taken (or not taken) by or on behalf of the Company with the
intention of avoiding the prohibition on redemption of the Notes prior to such
date, then, upon acceleration of the Notes, an additional premium shall also
become and be immediately due and payable in an amount, for each of the years
beginning on June 15, of the years set forth below, as set forth below:
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . 109.3750%
1998 . . . . . . . . . . . . . . . . . . . . . . . . . . . 108.4375
1999 . . . . . . . . . . . . . . . . . . . . . . . . . . . 107.5000
2000 . . . . . . . . . . . . . . . . . . . . . . . . . . . 106.5625
2001 . . . . . . . . . . . . . . . . . . . . . . . . . . . 105.6250
</TABLE>
(c) At any time after such declaration of acceleration being made
and before a judgment or decree for payment of the money due has been obtained
by the Trustee as hereinafter provided in this Article VI, the Holders of no
less than a majority in aggregate principal amount of the Notes then
outstanding, by written notice to the Company and the Trustee, may waive, on
behalf of all Holders, an Event of Default or an event that with notice or
lapse of time or both would become an Event of Default if:
(1) The Company has paid or deposited with the Trustee a
sum sufficient to pay
(A) all overdue interest and Liquidated Damages
on all Notes,
(B) the principal of (and premium, if any)
applicable to any Notes that could become due otherwise than
by such declaration of acceleration, and interest thereon at
the rate borne by the Notes,
(C) to the extent that payment of such interest
is lawful, interest upon overdue interest and Liquidated
Damages, if any, at the rate borne by the Notes, and
(D) all sums paid or advanced by the Trustee
hereunder and the compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel, and
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(2) All Events of Default, other than the non-payment of
amounts that have come due solely by such declaration of acceleration,
have been cured or waived as provided in Section 6.12.
Notwithstanding the previous sentence of this Section 6.2, no waiver shall be
effective for any Event of Default or event that with notice or lapse of time
or both would be an Event of Default with respect to any covenant or provision
that cannot be modified or amended without the consent of the Holder of each
outstanding Note, unless all such affected Holders agree, in writing, to waive
such Event of Default or event. No such waiver shall cure and waive any
subsequent default or impair any right consequent thereon.
Section 6.3 Collection of Indebtedness and Suits for Enforcement by
Trustee.
The Company covenants that if an Event of Default in payment of
principal, premium or interest specified in Section 6.1(1) or (2) occurs and is
continuing, the Company shall, upon demand of the Trustee, pay to it, for the
benefit of the Holders of such Notes, the whole amount then due and payable on
such Notes for principal, premium (if any), interest and Liquidated Damages, if
any, and, to the extent that any interest shall be legally enforceable,
interest on any overdue principal and premium, if any, and on any overdue
interest and Liquidated Damages, if any, at the rate borne by the Notes, and,
in addition thereto, such further amount as shall be sufficient to cover the
reasonable costs and expenses of collection, including reasonable compensation
to, and expenses, disbursements and advances of, the Trustee and its agents and
counsel.
If the Company fails to pay such amounts promptly upon such demand,
the Trustee, in its own name and as trustee of an express trust in favor of the
Holders, may institute a judicial proceeding for the collection of the sums so
due and unpaid, may prosecute such proceedings to judgment or final decree and
may enforce the same against the Company or any other obligor upon the Notes
and collect the moneys adjudged or decreed to be payable in the manner provided
by law out of the property of the Company or any other obligor upon the Notes,
wherever situated.
If an Event of Default occurs and is continuing, the Trustee may in
its discretion proceed to protect and enforce its rights and the rights of the
Holders by such appropriate judicial proceedings as the Trustee shall deem most
effective to protect and enforce any such rights, whether for the specific
enforcement of any covenant or agreement in this Indenture or the Notes or in
aid of the exercise of any power granted herein or therein, or to enforce any
other proper remedy.
Section 6.4 Trustee May File Proofs of Claim.
In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition or other
judicial proceeding relative to the Company or any other obligor upon the Notes
or the property of the Company or of such other
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obligor or their creditors, the Trustee shall be entitled and empowered, by
intervention in such proceeding or otherwise, to take any and all actions under
the TIA, including
(i) to file and prove a claim for the whole amount of
principal (and premium, if any), interest and Liquidated
Damages owing and unpaid in respect of the Notes and to file
such other papers or documents as may be necessary or
advisable in order to have the claims of the Trustee
(including any claim for the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agent
and counsel) and of the Holders allowed in such judicial
proceeding, and
(ii) to collect and receive any moneys or other property
payable or deliverable on any such claims and to distribute
the same,
and any Custodian in any such judicial proceeding is hereby authorized by each
Holder to make such payments to the Trustee and, in the event that the Trustee
shall consent to the making of such payments directly to the Holders, to pay
the Trustee any amount due it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any
other amounts due the Trustee under Section 7.7.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Notes or
the rights of any Holder thereof or to authorize the Trustee to vote in respect
of the claim of any Holder in any such proceeding.
Section 6.5 Trustee May Enforce Claims Without Possession of Notes.
All rights of action and claims under this Indenture or the Notes may
be prosecuted and enforced by the Trustee without the possession of any of the
Notes or the production thereof in any proceeding relating thereto, and any
such proceeding instituted by the Trustee shall be brought in its own name as
trustee of an express trust in favor of the Holders and any recovery of
judgment shall, after provision for the payment of compensation to, and
expenses, disbursements and advances of the Trustee and its agents and counsel,
be for the ratable benefit of the Holders of the Notes in respect of which such
judgment has been recovered.
Section 6.6 Priorities.
Any money collected by the Trustee pursuant to this Article VI shall
be applied in the following order, at the date or dates fixed by the Trustee,
in case of the distribution of such money on account of principal, premium (if
any), interest or Liquidated Damages, upon presentation of the Notes and the
notation thereon of the payment if only partially paid and upon surrender
thereof if fully paid:
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FIRST: To the Trustee in payment of (i) all amounts due
pursuant to Section 7.7 and (ii) all costs and expenses (including reasonable
attorneys' fees and disbursements) incurred by the Trustee in collecting any
monies due hereunder;
SECOND: To the Holders in payment of the amount then due and
unpaid for principal of, premium, if any, interest and Liquidated Damages, if
any, on, the Notes, and related costs and expenses, in respect of which or for
the benefit of which such money has been collected, ratably, without preference
or priority of any kind, according to the amounts due and payable on such Notes
for principal, premium, if any, and interest, respectively, and
THIRD: To whomsoever may be lawfully entitled thereto, the
remainder, if any.
Section 6.7 Limitation on Suits.
No Holder of any Note shall have any right to, or to order or direct
the Trustee to, pursue any remedy or institute any proceeding, judicial or
otherwise, with respect to this Indenture, the Notes or the Guarantee, or for
the appointment of a receiver or trustee, or for any other remedy hereunder,
unless
(A) such Holder has previously given written notice to
the Trustee of a continuing Event of Default;
(B) the Holders of not less than twenty five percent
(25%) in principal amount of then outstanding Notes shall have made written
request to the Trustee to institute proceedings in respect of such Event of
Default in its own name as Trustee hereunder;
(C) such Holder or Holders have offered to the Trustee
reasonable security or indemnity against the costs, expenses and liabilities to
be incurred or reasonably likely to be incurred in compliance with such
request;
(D) the Trustee for sixty (60) days after its receipt of
such notice, request and offer of indemnity has failed to institute any such
proceedings; and
(E) no direction inconsistent with such written request
has been given to the Trustee during such sixty (60)-day period by the Holders
of a majority in principal amount of the outstanding Notes;
it being understood and intended that no one or more Holders shall have any
right in any manner whatever by virtue of, or by availing of, any provision of
this Indenture to affect, disturb or prejudice the rights of any other Holders,
or to obtain or to seek to obtain priority or preference over any other Holders
or to enforce any right under this Indenture, except in the manner herein
provided and for the equal and ratable benefit of all the Holders.
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Section 6.8 Unconditional Right of Holders to Receive Principal, Premium
and Interest.
Notwithstanding any other provision of this Indenture, the Holder of
any Note shall have the right, which is absolute and unconditional, to receive
payment of the principal of, and premium, if any, interest and Liquidated
Damages, if any, on such Note on the Maturity Dates or Interest Payment Dates,
as applicable, of such payments as are expressed in such Note (in the case of
redemption, the Redemption Price on the applicable Redemption Date, in the case
of a Change of Control, the Change of Control Offer Price on the applicable
Change of Control Payment Date and, in the case of an Asset Sale Event of Loss
Offer, the Asset Sale Event of Loss Offer Price on the Asset Sale Event of Loss
Purchase Date) and the Registration Rights Agreement and to institute suit for
the enforcement of any such payment, and such rights shall not be impaired
without the consent of such Holder.
Section 6.9 Rights and Remedies Cumulative.
Except as otherwise provided with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Notes in Section 2.7, no right
or remedy herein conferred upon or reserved to the Trustee or to the Holders is
intended to be exclusive of any other right or remedy, and every right and
remedy shall, to the extent permitted by law, be cumulative and in addition to
every other right and remedy given hereunder or now or hereafter existing at
law or in equity or otherwise. The assertion or employment of any right or
remedy hereunder, or otherwise, shall not prevent the concurrent assertion or
employment of any other appropriate right or remedy.
Section 6.10 Delay or Omission Not Waiver.
No delay or omission by the Trustee or by any Holder of any Note to
exercise any right or remedy arising upon any Event of Default shall impair the
exercise of any such right or remedy or constitute a waiver of any such Event
of Default. Every right and remedy given by this Article VI or by law to the
Trustee or to the Holders may be exercised from time to time, and as often as
may be deemed expedient, by the Trustee or by the Holders, as the case may be.
Section 6.11 Control by Holders.
The Holder or Holders of a majority in aggregate principal amount of
then outstanding Notes shall 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 upon the Trustee; provided, however,
that
(1) such direction shall not be in conflict with any
applicable law or with this Indenture,
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(2) the Trustee shall not determine that the action so
directed would be unjustly prejudicial to the Holders not
taking part in such direction, and
(3) the Trustee may take any other action deemed proper
by the Trustee that is not inconsistent with such direction.
Section 6.12 Waiver of Past Default.
Subject to Section 6.8, the Holder or Holders of not less than a
majority in aggregate principal amount of the outstanding Notes may, by written
notice to the Trustee on behalf of the Holders, prior to the acceleration of
the maturity of the Notes, waive any past Default hereunder and its
consequences, except a Default
(A) in the payment of the principal of, premium, if any,
interest or Liquidated Damages, if any, on, any Note as specified in clauses
(1) and (2) of Section 6.1, or
(B) in respect of a covenant or provision hereof which,
under Article IX, cannot be modified or amended without the consent of the
Holder of each outstanding Note affected.
Upon any such waiver, such Default shall cease to exist, and any Event
of Default arising therefrom shall be deemed to have been cured, for every
purpose of this Indenture, but no such waiver shall extend to any subsequent or
other Default or impair the exercise of any right arising therefrom.
Section 6.13 Undertaking for Costs.
All parties to this Indenture agree, and each Holder of any Note by
such Holder's acceptance thereof shall be deemed to have agreed, that any court
may in its discretion require, in any suit for the enforcement of any right or
remedy under this Indenture, or in any suit against the Trustee for any action
taken, suffered or omitted to be taken by it as Trustee, the filing by any
party litigant in such suit of an undertaking to pay the costs of such suit,
and that such court may in its discretion assess reasonable costs, including
reasonable attorneys' fees, against any party litigant in such suit, having due
regard to the merits and good faith of the claims or defenses made by such
party litigant, but the provisions of this Section 6.13 shall not apply to any
suit instituted by the Company, to any suit instituted by the Trustee, to any
suit instituted by any Holder, or group of Holders, holding in the aggregate
more than ten percent (10%) in aggregate principal amount of the outstanding
Notes, or to any suit instituted by any Holder for enforcement of the payment
of principal of, or premium, if any, or interest on, any Note on or after the
Maturity Date of such Note.
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Section 6.14 Restoration of Rights and Remedies.
If the Trustee or any Holder has instituted any proceeding to enforce
any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then and in every case, subject to any
determination in such proceeding, the Company, the Guarantor, the Trustee and
the Holders shall be restored severally and respectively to their former
positions hereunder and thereafter all rights and remedies of the Trustee and
the Holders shall continue as though no such proceeding had been instituted.
ARTICLE VII
TRUSTEE
The Trustee hereby accepts the trust imposed upon it by this Indenture
and covenants and agrees to perform the same, as herein expressed.
Section 7.1 Duties of Trustee.
(a) If a Default or an Event of Default has occurred and is
continuing, the Trustee shall exercise such of the rights and powers vested in
it by this Indenture and use the same degree of care and skill in their
exercise as a prudent person would exercise or use under the circumstances in
the conduct of such person's own affairs.
(b) Except during the continuance of a Default or an Event of
Default:
(1) The Trustee undertakes to perform only those duties
as are specifically set forth in this Indenture and no others,
and no covenants or obligations shall be implied in or read
into this Indenture that are adverse to the Trustee.
(2) In the absence of bad faith on its part, the Trustee
may conclusively rely, as to the truth of the statements and
the correctness of the opinions expressed therein, upon
certificates or opinions furnished to the Trustee and
conforming to the requirements of this Indenture. However,
the Trustee shall examine the certificates and opinions to
determine whether or not they conform to the requirements of
this Indenture.
(c) The Trustee may not be relieved from liability for its own
negligent action, its negligent failure to act or its own willful misconduct,
except that:
(i) This clause does not limit the effect of paragraph
(b) of this Section 7.1;
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(ii) The Trustee shall not be liable for any error of
judgment made in good faith by a Trust Officer unless it is proved
that the Trustee was negligent in ascertaining the pertinent facts;
and
(iii) The Trustee shall not be liable with respect to any
action it takes or omits to take in good faith in accordance with a
direction received by it pursuant to Section 6.11 or 6.12.
(d) The Trustee shall cooperate fully and completely with, provide
any information required by, and comply with any order or directive of a Gaming
Authority that the Trustee submit an application for any license, finding of
suitability or other approval pursuant to any Gaming Law.
(e) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or to take or omit to take any
action under this Indenture or at the request, order or direction of the
Holders or in the exercise of any of its rights or powers if it shall have
reasonable grounds for believing that repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured to it.
(f) Every provision of this Indenture that in any way relates to
the Trustee is subject to paragraphs (a), (b), (c), (d) and (e) of this Section
7.1.
(g) The Trustee shall not be liable for interest on any assets
received by it except as the Trustee may agree in writing with the Company.
Assets held in trust by the Trustee need not be segregated from other assets
except to the extent required by law.
Section 7.2 Rights of Trustee.
Subject to Section 7.1:
(a) The Trustee may rely on any document believed by it to be
genuine and to have been signed or presented by the proper person. The Trustee
need not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may
consult with counsel and may require an Officers' Certificate or an Opinion of
Counsel, which shall conform to Sections 13.4 and 13.5. The Trustee shall not
be liable for any action it takes or omits to take in good faith in reliance on
such certificate or opinion.
(c) The Trustee may act through its attorneys and agents and shall
not be responsible for the misconduct or negligence of any agent appointed with
due care.
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(d) The Trustee shall not be liable for any action it takes or
omits to take in good faith that it believes to be authorized or within its
rights or powers.
(e) The Trustee shall not be bound to make any investigation into
the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, notice, request, direction, consent, order, bond,
debenture or other paper or document, but the Trustee, in its discretion, may
make such further inquiry or investigation into such facts or matters as it may
see fit.
(f) The Trustee shall be under no obligation to exercise any of
the rights or powers vested in it by this Indenture at the request, order or
direction of any of the Holders, pursuant to the provisions of this Indenture,
unless such Holders shall have offered to the Trustee reasonable security or
indemnity against the costs, expenses and liabilities that may be incurred
therein or thereby.
(g) Except with respect to Section 4.1, the Trustee shall have no
duty to inquire as to the performance of the Company's covenants in Article IV
hereof. In addition, the Trustee shall not be deemed to have knowledge of any
Default or Event of Default except (i) any Event of Default occurring pursuant
to Sections 4.1, 6.1(1) and 6.1(2) (in each case so long as the Trustee is the
Paying Agent), or (ii) any Default or Event of Default of which a Trust Officer
of the Trustee shall have received written notification or obtained actual
knowledge.
Section 7.3 Individual Rights of Trustee.
The Trustee in its individual or any other capacity may become the
owner or pledgee of Notes and may otherwise deal with the Company, the
Guarantor, any of their Subsidiaries or their respective Affiliates with the
same rights it would have if it were not Trustee. Any Agent may do the same
with like rights. However, the Trustee must comply with sections 7.10 and
7.11.
Section 7.4 Trustee's Disclaimer.
The Trustee makes no representation as to the validity or adequacy of
this Indenture or the Notes, and it shall not be responsible for any statement
in the Notes, other than the Trustee's certificate of authentication, or the
use or application of any funds received by a Paying Agent other than the
Trustee.
Section 7.5 Notice of Default.
If a Default or an Event of Default occurs and is continuing and if it
is known to the Trustee, the Trustee shall mail to each Holder notice of the
uncured Default or Event of Default immediately, but in no event later than ten
(10) days after such Default or Event of Default occurs. Except in the case of
a Default or an Event of Default in payment of principal (or premium, if any)
of, or interest or Liquidated Damages, if any, on, any Note (including the
payment of the Change of Control Offer Price on the Change of Control Payment
Date, the
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Redemption Price on the Redemption Date and the Asset Sale Event of Loss Offer
Price on the Asset Sale Event of Loss Purchase Date, as the case may be), the
Trustee may withhold the notice if and so long as a Trust Officer in good faith
determines that withholding the notice is in the interest of the Holders.
Section 7.6 Reports by Trustee to Holders.
If required by law, within sixty (60) days after each May 15 beginning
with the May 15 following the date of this Indenture, the Trustee shall mail to
each Holder a brief report dated as of such date that complies with TIA Section
313(a). If required by law, the Trustee also shall comply with TIA Section
Section 313(b) and 313(c). The Company shall promptly notify the Trustee in
writing if the Notes become listed on any stock exchange or automated quotation
system. A copy of each report at the time of its mailing to Holders shall be
mailed to the Company and filed with the SEC and each stock exchange, if any,
on which the Notes are listed.
Section 7.7 Compensation and Indemnity.
The Company shall pay to the Trustee from time to time reasonable
compensation for its services. The Trustee's compensation shall not be limited
by any law on compensation of a trustee of an express trust. The Company shall
reimburse the Trustee upon request for all reasonable disbursements, expenses
and advances incurred or made by it. Such expenses shall include the
reasonable compensation, disbursements and expenses of the Trustee's agents,
accountants, experts and counsel.
The Company shall indemnify the Trustee (in its capacity as Trustee)
and each of its officers, directors, attorneys- in-fact and agents for, and
hold it harmless against, any claim, demand, expense (including reasonable
compensation, disbursements and expenses of the Trustee's agents and counsel),
loss or liability incurred by them without negligence or bad faith on its part,
arising out of or in connection with the administration of this trust and their
rights or duties hereunder including the reasonable costs and expenses of
defending themselves against any claim or liability in connection with the
exercise or performance of any of its powers or duties hereunder. The Trustee
shall notify the Company promptly of any claim asserted against the Trustee for
which it may seek indemnity. The Company shall defend the claim and the
Trustee shall provide reasonable cooperation at the Company's expense in the
defense. The Trustee may have separate counsel and the Company shall pay the
reasonable fees and expenses of such counsel; provided, however, that the
Company will not be required to pay such fees and expenses if it assumes the
Trustee's defense and there is no conflict of interest between the Company and
the Trustee in connection with such defense. The Company need not pay for any
settlement made without its written consent. The Company need not reimburse
any expense or indemnify against any loss or liability to the extent incurred
by the Trustee through its negligence, bad faith or willful misconduct.
To secure the Company's payment obligations in this Section 7.7, the
Trustee shall have a lien prior to the Notes on all assets held or collected by
the Trustee, in its capacity as Trustee,
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except assets held in trust to pay principal of, premium, if any, interest or
Liquidated Damages, if any, on particular Notes.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.1(5) or (6) occurs, the expenses and the
compensation for the services are intended to constitute expenses of
administration under any applicable Bankruptcy Law.
The Company's obligations under this Section 7.7 and any lien arising
hereunder shall survive the resignation or removal of the Trustee, the
discharge of the Company's obligations pursuant to Article VIII of this
Indenture and any rejection or termination of this Indenture under any
applicable Bankruptcy Law.
Section 7.8 Replacement of Trustee.
The Trustee may resign by so notifying the Company in writing. The
Holder or Holders of a majority in principal amount of the outstanding Notes
may remove the Trustee by so notifying the Company and the Trustee in writing
and may appoint a successor trustee with the Company's consent. The Company
may remove the Trustee if:
(1) the Trustee fails to comply with Section 7.1 or 7.10;
(2) the Trustee is adjudged bankrupt or insolvent;
(3) a receiver, Custodian or other public officer takes
charge of the Trustee or its property;
(4) the Trustee becomes incapable of acting; or
(5) the Trustee seeks an increase in its fee for
administering this Indenture which increase is not mutually agreed upon.
If the Trustee resigns or is removed or if a vacancy exists in the
office of the Trustee for any reason, the Company shall promptly appoint a
successor Trustee. The Holder or Holders of a majority in principal amount of
the Notes may appoint a successor Trustee to replace the successor Trustee
appointed by the Company in accordance with the foregoing provisions.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Immediately after that
and provided that all sums owing to the Trustee provided for in Section 7.7
have been paid, the retiring Trustee shall transfer all property held by it as
Trustee to the successor Trustee, subject to the lien provided in Section 7.7,
the resignation or removal of the retiring Trustee shall become effective, and
the successor Trustee shall have all the rights, powers and duties of the
Trustee under this Indenture. A successor Trustee shall mail notice of its
succession to each Holder.
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If a successor Trustee does not take office within sixty (60) days
after the retiring Trustee resigns or is removed, the retiring Trustee, the
Company or the Holder or Holders of at least ten percent (10%) in principal
amount of the outstanding Notes may petition any court of competent
jurisdiction for the appointment of a successor Trustee.
If the Trustee fails to comply with Section 7.10, any Holder may
petition any court of competent jurisdiction for the removal of the Trustee and
the appointment of a successor Trustee.
Notwithstanding replacement of the Trustee pursuant to this Section
7.8, the Company's obligations under Section 7.7 shall continue for the benefit
of the retiring Trustee.
Section 7.9 Successor Trustee by Merger, Etc.
If the Trustee consolidates with, merges or converts into, or
transfers all or substantially all of its corporate trust business to, another
corporation, the resulting, surviving or transferee corporation without any
further act shall, if such resulting, surviving or transferee corporation is
otherwise eligible hereunder, be the successor Trustee.
Section 7.10 Eligibility; Disqualification.
The Trustee shall at all times satisfy the requirements of TIA Section
310(a)(1) and TIA Section 310(a)(5). The Trustee shall be a trust company or
commercial bank having trust powers and having a combined capital (exclusive of
borrowed capital) and surplus of at least twenty million dollars ($20,000,000)
(or in the case of a corporation included in a bank holding company system, the
related bank holding company shall have a reported capital and surplus of not
less than twenty million dollars ($20,000,000)), and subject to supervision or
examination by federal or state authority. If any bank or trust company
appointed as a successor publishes a report of condition at least annually,
pursuant to law or to the requirements of any supervising or examining
authority referred to, then for the purposes of this Section the combined
capital and surplus of such bank or trust company shall be deemed to be its
combined capital and surplus as set forth in its most recent report of
condition so published. The Trustee shall comply with TIA Section 310(b).
Section 7.11 Preferential Collection of Claims against Company.
The Trustee shall comply with TIA Section 311(a), excluding any
creditor relationship listed in TIA Section 311(b). A Trustee who has
resigned or has been removed shall be subject to TIA Section 311(a) to the
extent indicated.
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ARTICLE VIII
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Section 8.1 Option to Effect Legal Defeasance or Covenant Defeasance.
The Company may at its option at any time elect to have Section 8.2 or
Section 8.3 applied to all outstanding Notes upon compliance with the
conditions set forth below in this Article VIII.
Section 8.2 Legal Defeasance and Discharge.
Upon the Company's exercise under Section 8.1 of the option applicable
to this Section 8.2, the Company and the Guarantor shall be deemed to have been
discharged from their obligations with respect to all outstanding Notes on the
date the conditions set forth below are satisfied (hereinafter, "Legal
Defeasance"). For this purpose, such Legal Defeasance means that the Company
shall be deemed to have paid and discharged the entire Indebtedness represented
by the outstanding Notes, and this Indenture shall cease to be of further
effect as to all outstanding Notes and the Guarantee except as to rights of
Holders to receive payments which shall thereafter be deemed to be
"outstanding" only for the purposes of Section 8.5 and the other Sections of
this Indenture referred to in (a) and (b) below, and to have satisfied all its
other obligations under such Notes and this Indenture (and the Trustee, on
demand of and at the expense of the Company, shall execute proper instruments
acknowledging the same), except for the following which shall survive until
otherwise terminated or discharged hereunder: (a) the rights of Holders of
outstanding Notes to receive solely from the trust fund described in Section
8.4, and as more fully set forth in such section, payments in respect of the
principal of, premium, if any, interest and Liquidated Damages, if any, on such
Notes when such payments are due, (b) the Company's obligations with respect to
such Notes under Sections 2.3, 2.6, 2.7, 2.10 and 5.2, (c) the rights, powers,
trusts, duties and immunities of the Trustee hereunder and the Company's
obligations in connection therewith and (d) this Article VIII. Subject to
compliance with this Article VIII, the Company may exercise its option under
this Section 8.2 notwithstanding the prior exercise of its option under Section
8.3 with respect to the Notes.
Section 8.3 Covenant Defeasance.
Upon the Company's exercise under Section 8.1 of the option applicable
to this Section 8.3, the Company shall be released from its obligations under
the covenants contained in Sections 4.3, 4.6, 4.7, 4.8, 4.10, 4.11, 4.12, 4.13,
4.14, 4.15, 4.16, 4.17 and 4.18, Article V and Article XI with respect to the
outstanding Notes on and after the date the conditions set forth below are
satisfied (hereinafter "Covenant Defeasance"), and the Notes shall thereafter
be deemed not "outstanding" for the purposes of any direction, waiver, consent
or declaration or act of Holders (and the consequences of any thereof) in
connection with such covenants, but shall continue to be deemed "outstanding"
for all other purposes hereunder. For this purpose, such Covenant Defeasance
means that, with respect to the outstanding Notes, the Company need not comply
with and shall have no liability in respect of any term, condition or
limitation set
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forth in any such covenant, whether directly or indirectly, by reason of any
reference elsewhere herein to any such covenant or by reason of any reference
in any such covenant to any other provision herein or in any other document,
but, except as specified above, the remainder of this Indenture and such Notes
shall be unaffected thereby. In addition, upon the Company's exercise under
Section 8.1 of the option applicable to this Section 8.3, Section 6.1(3) (to
the extent it relates to the foregoing listed covenants) and Sections 6.1(4)
through 6.1(9) shall not constitute Events of Default.
Section 8.4 Conditions to Legal or Covenant Defeasance.
The following shall be the conditions to the application of either
Section 8.2 or Section 8.3 to the outstanding Notes:
(a) the Company shall irrevocably deposit or cause to be
deposited with the Trustee (or another trustee satisfying the requirements of
Section 7.10 who shall agree to comply with the provisions of this Article VIII
applicable to it) as trust funds in trust for the purpose of making the
following payments, specifically pledged as security for, and dedicated solely
to, the benefit of the Holders of such Notes, (a) U.S. Legal Tender in an
amount, or (b) U.S. Government Obligations that through the scheduled payment
of principal and interest in respect thereof in accordance with their terms
will provide, not later than one day before the due date of any payment, U.S.
Legal Tender in an amount, or (c) a combination thereof, in such amounts, as in
each case will be sufficient, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification thereof
delivered to the Trustee, to pay and discharge and which shall be applied by
the Trustee (or other qualifying trustee) to pay and discharge, (i) the
principal of, premium, interest and Liquidated Damages, if any, on the
outstanding Notes on the stated date for payment thereof or on the redemption
date, as the case may be, of such principal or installment of principal,
premium, if any, interest or Liquidated Damages, if any, on such Notes, and the
Trustee on behalf of the Holders must have a valid, perfected, exclusive
security interest in such trust; provided, however, that the Trustee shall have
been irrevocably instructed to apply such U.S. Legal Tender and the proceeds of
such U.S. Government Obligations to said payments with respect to the Notes;
(b) in the case of an election under Section 8.2, the
Company shall have delivered to the Trustee an Opinion of Counsel in the United
States reasonably satisfactory to the Trustee confirming that (i) the Company
has received from, or there has been published by, the Internal Revenue Service
a ruling or (ii) since the date hereof, there has been a change in the
applicable Federal income tax law, in either case to the effect that, and based
thereon such opinion shall confirm that, the Holders of the outstanding 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 had not occurred;
(c) in the case of an election under Section 8.3, the
Company shall have delivered to the Trustee an Opinion of Counsel in the United
States reasonably satisfactory to
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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 Covenant 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 Covenant Defeasance had not occurred;
(d) no Default or Event of Default with respect to the
Notes shall have occurred and be continuing on the date of such deposit or,
insofar as Sections 6.1(5) and 6.1(6) are concerned, at any time in the period
ending on the ninety first (91st) day after the date of such deposit (it being
understood that this condition shall not be deemed satisfied until the
expiration of such period);
(e) such Legal Defeasance or Covenant Defeasance shall
not result in a breach or violation of, or constitute a default under, this
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;
(f) the Company shall have delivered to the Trustee an
Opinion of Counsel to the effect that after the 91st day following the deposit,
the trust funds will not be subject to the effect of any applicable bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally;
(g) the Company shall have delivered to the Trustee an
Officers' Certificate stating that the deposit made by the Company pursuant to
its election under Section 8.2 or 8.3 was not made with the intent of
preferring the Holders of such Notes over any other creditors of the Company or
with the intent of defeating, hindering, delaying or defrauding any other
creditors of the Company or others; and
(h) the Company shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel in the United States, each
stating that all conditions precedent provided for relating to either the Legal
Defeasance under Section 8.2 or the Covenant Defeasance under Section 8.3 (as
the case may be) have been complied with as contemplated by this Section 8.4.
Section 8.5 Deposited U.S. Legal Tender and U.S. Government Obligations to
be Held in Trust; Other Miscellaneous Provisions.
Subject to Section 8.6, all U.S. Legal Tender and U.S. Government
Obligations, (including the proceeds thereof) deposited with the Trustee (or
other qualifying trustee, collectively for purposes of this Section 8.5, the
"Trustee") pursuant to Section 8.4 in respect of the outstanding Notes shall be
held in trust and applied by the Trustee, in accordance with the provisions of
such Notes and this Indenture, to the payment, either directly or through any
Paying Agent as the Trustee may determine, to the Holders of such Notes of all
sums due and to become due thereon in respect of principal, premium, if any,
and interest, but such money need not be segregated from other funds except to
the extent required by law. Anything in this
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Article VIII to the contrary notwithstanding, the Trustee shall deliver or pay
to the Company from time to time upon the request of the Company any U.S. Legal
Tender or U.S. Government Obligations held by it as provided in Section 8.4
that, in the opinion of a nationally recognized firm of independent public
accountants expressed in a written certification thereto delivered to the
Trustee (which may be the opinion delivered under Section 8.4(a)), are in
excess of the amount thereof that would then be required to be deposited to
effect an equivalent Legal Defeasance or Covenant Defeasance.
Section 8.6 Repayment to the Company.
Any money deposited with the Trustee or any Paying Agent, or then held
by the Company, in trust for the payment of the principal of, premium, if any,
interest or Liquidated Damages, if any, on any Note, either pursuant to this
Article VIII or otherwise, and remaining unclaimed for two (2) years after such
principal, and premium, if any, interest or Liquidated Damages, if any, has
become due and payable, shall be paid to the Company on its request, and the
Holder of such Note shall thereafter look only to the Company for payment
thereof, and all liability of the Trustee or such Paying Agent with respect to
such trust money shall thereupon cease; provided, however, that the Trustee or
such Paying Agent, before being required to make any such repayment, may at the
expense of the Company cause to be published once, in the New York Times and
The Wall Street Journal (national edition), notice that such money remains
unclaimed and that, after a date specified therein, which shall not be less
than thirty (30) days from the date of such notification or publication, any
unclaimed balance of such money then remaining will be repaid to the Company.
Section 8.7 Reinstatement.
If the Trustee or Paying Agent is unable to apply any U.S. Legal
Tender or U.S. Government Obligations in accordance with Section 8.2 or 8.3, as
the case may be, by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise prohibiting such
application, then the Company's obligations under this Indenture and the Notes
shall be revived and reinstated as though no deposit had occurred pursuant to
Section 8.2 or 8.3 until such time as the Trustee or Paying Agent is permitted
to apply such money in accordance with Section 8.2 and 8.3, as the case may be;
provided, however, that, if the Company makes any payment of principal of,
premium, if any, or interest on any Note following the reinstatement of its
obligations, the Company shall be subrogated to the rights of the Holders of
such Notes to receive such payment from the Cash held by the Trustee or Paying
Agent.
Section 8.8 Termination of Obligations Upon Cancellation of the Notes.
In addition to the Company's rights under Sections 8.2 and 8.3, the
Company and the Guarantor may terminate all of their obligations under this
Indenture (subject to Section 8.7) when:
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(1) either (a) all such outstanding Notes theretofore
authenticated and delivered (other then Notes that have been
destroyed, lost or stolen and that have been replaced or paid as
provided in Section 2.7) 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;
(2) the Company has paid all sums payable hereunder; and
(3) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel (other than in-house counsel),
each stating that all conditions precedent specified herein relating
to the satisfaction and discharge of this Indenture have been complied
with, and that such satisfaction and discharge will not result in a
breach or violation of, or constitute a Default under, this Indenture
or any other instrument to which the Company, the Guarantor or any of
their Subsidiaries is a party or by which it or their property is
bound.
ARTICLE IX
AMENDMENTS, SUPPLEMENTS AND WAIVERS
Section 9.1 Supplemental Indentures Without Consent of Holders.
Without the consent of any Holder, the Company, when authorized by
Board Resolutions, and the Trustee, at any time and from time to time, may
amend or supplement the Indenture or the Notes for any of the following
purposes:
(1) to cure any ambiguity, defect, or inconsistency, or
to make any other provisions with respect to matters or questions arising under
this Indenture that shall not be inconsistent with the provisions of this
Indenture, provided such action pursuant to this clause (1) shall not adversely
affect the interests of any Holder in any respect;
(2) to add to the covenants of the Company for the
benefit of the Holders, or to surrender any right or power herein conferred
upon the Company, or to provide any additional rights or benefits to the
Holders, or to make any other change that does not materially adversely affect
the legal rights of any Holder under the Indenture;
(3) to provide for collateral or additional guarantees of
the Notes;
(4) to provide for uncertificated Notes in addition to or
in place of certificated Notes;
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(5) to evidence the succession of another person to the
Company, and the assumption by any such successor of the Obligations of the
Company herein and in the Notes in accordance with Article V;
(6) to release a Subsidiary Guarantor from its Guarantee
if such Subsidiary Guarantor is sold in accordance with Section 4.14;
(7) to comply with the TIA; or
(8) to set out the form of the Series B Notes and to set
forth such other matters as may be necessary or desirable in connection with
the Exchange Offer.
Section 9.2 Amendments, Supplemental Indentures and Waivers with Consent
of Holders.
Subject to Section 6.8 and the last sentence of this paragraph, with
the consent of the Holders of not less than a majority in aggregate principal
amount of the Notes then outstanding, by written act of said Holders delivered
to the Company and the Trustee (including consents obtained in connection with
a tender offer or exchange offer for the Notes), the Company and the Guarantor,
when authorized by Board Resolutions, and the Trustee, may amend or supplement
this Indenture or the Notes or enter into an indenture or indentures
supplemental hereto for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of this Indenture or the Notes
or of modifying in any manner the rights of the Holders under this Indenture or
the Notes. Subject to Section 6.8 and the last sentence of this paragraph, the
Holder or Holders of a majority in principal amount of then outstanding Notes
may waive compliance by the Company or the Guarantor with any provision of this
Indenture or the Notes. Notwithstanding the foregoing provisions of this
Section 9.2, without the consent of the Holders of at least sixty six and
two-thirds percent (66-2/3%) of the aggregate principal amount of outstanding
Notes, no such amendment, supplemental indenture or waiver shall change any
provision of Article VI or Article XII or (except for the Stated Maturity which
is governed by clause (4) below) change any Maturity Date of any Note, and
without the consent of the Holder of each outstanding Note affected thereby, no
such amendment, supplemental indenture or waiver shall:
(1) reduce the percentage in principal amount of Notes,
the consent of whose Holders is required for any amendment, supplement or
waiver provided for in this Indenture or the Notes;
(2) reduce the rate or extend the time for payment of
interest on any Note;
(3) reduce the principal amount of any Note or reduce any
Purchase Price;
(4) change the Stated Maturity of any Note;
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(5) alter the redemption provisions of Article III in a
manner that adversely affects the rights of any Holder of Notes;
(6) make any changes in the provisions concerning waivers
of Defaults or Events of Default by Holders of the Notes or the rights of
Holders to recover the principal or premium of, interest or Liquidated Damages
on, or redemption payment with respect to, any Note or otherwise impair the
right to institute suit for enforcement of any such payment whether on or after
the Stated Maturity thereof, the Redemption Date thereof, or otherwise, in a
manner that adversely affects the rights of any Holder of Notes;
(7) make any changes in Section 6.4, 6.7 or this third
sentence of this Section 9.2 in a manner that adversely affects the rights of
any Holder of Notes;
(8) make the principal of, premium, if any, or the
interest or Liquidated Damages, if any, on, any Note payable with anything, at
any place of payment or in any manner other than as provided for in this
Indenture and the Notes as in effect on the date hereof;
(9) except as expressly permitted by this Indenture, make
the Notes subordinated in right of payment to any extent or under any
circumstances to any other Indebtedness;
(10) make any changes in the provisions of Article XI in a
manner that adversely affects the rights of any Holder of Notes, or
(11) make any changes in the provisions of Section 4.14
regarding an Asset Sale Event of Loss Offer in a manner that adversely affects
the rights of any Holder of Notes.
It shall not be necessary for the consent of the Holders under this
Section to approve the particular form of any proposed amendment, supplement or
waiver, but it shall be sufficient if such consent approves the substance
thereof.
After an amendment, supplement or waiver under this Section becomes
effective, the Company shall mail to the Holders affected thereby a notice
briefly describing the amendment, supplement or waiver. Any failure of the
Company to mail such notice, or any defect therein, shall not, however, in any
way impair or affect the validity of any such supplemental indenture.
After an amendment, supplement or waiver under this Section 9.2 or 9.4
becomes effective, it shall bind each Holder.
In connection with any amendment, supplement or waiver under this
Article IX, the Company may, but shall not be obligated to, offer to any Holder
who consents to such amendment, supplement or waiver, or to all Holders,
consideration for such Holder's consent to such amendment, supplement or
waiver.
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Section 9.3 Compliance with TIA.
Every amendment, waiver or supplement of this Indenture or the Notes
shall comply with the TIA as then in effect.
Section 9.4 Revocation and Effect of Consents.
Until an amendment, waiver or supplement becomes effective, a consent
to it by a Holder is a continuing consent by the Holder and every subsequent
Holder of a Note or portion of a Note that evidences the same Indebtedness as
the consenting Holder's Note, even if notation of the consent is not made on
any Note. However, any such Holder or subsequent Holder that is not the Holder
of a Global Note may revoke the consent as to such Holder's Note or portion of
such Holder's Note by written notice to the Company or the person designated by
the Company as the person to whom consents should be sent if such revocation is
received by the Company or such person before the date on which the Trustee
receives an Officers' Certificate certifying that the Holders of the requisite
principal amount of Notes have consented (and not theretofore revoked such
consent) to the amendment, supplement or waiver
The Company may, but shall not be obligated to, fix a record date for
the purpose of determining the Holders entitled to consent to any amendment,
supplement or waiver, which record date shall be the date so fixed by the
Company notwithstanding the provisions of the TIA. If a record date is fixed,
then notwithstanding the last sentence of the immediately preceding paragraph,
those persons who were Holders at such record date, and only those persons (or
their duly designated proxies), shall be entitled to revoke any consent
previously given, whether or not such persons continue to be Holders after such
record date. No such consent shall be valid or effective for more than ninety
(90) days after such record date.
After an amendment, supplement or waiver becomes effective, it shall
bind every Holder, unless it makes a change described in any of clauses (1)
through (11), of Section 9.2, in which case, the amendment, supplement or
waiver shall bind only each Holder of a Note who has consented to it and every
subsequent Holder of a Note or portion of a Note that evidences the same
Indebtedness as the consenting Holder's Note; provided, however, that any such
waiver shall not impair or affect the right of any Holder to receive payment of
principal and premium of and interest on a Note, on or after the respective
dates set for such amounts to become due and payable expressed in such Note, or
to bring suit for the enforcement of any such payment on or after such
respective dates.
Section 9.5 Notation on or Exchange of Notes.
If an amendment, supplement or waiver changes the terms of a Note, the
Trustee may require the Holder of the Note to deliver it to the Trustee or
require the Holder to put an appropriate notation on the Note. The Trustee may
place an appropriate notation on the Note about the changed terms and return it
to the Holder. Alternatively, if the Company or the Trustee so determines, the
Company in exchange for the Note shall issue, the Guarantor shall
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endorse and the Trustee shall authenticate a new Note that reflects the changed
terms. Any failure to make the proper notation or issue a new Note shall not
affect the validity of such amendment, supplement or waiver.
Section 9.6 Trustee to Sign Amendments, Etc.
The Trustee shall execute any amendment, supplement or waiver
authorized pursuant to this Article IX; provided, however, that the Trustee
may, but shall not be obligated to, execute any such amendment, supplement or
waiver that affects the Trustee's own rights, duties or immunities under this
Indenture. The Trustee shall be entitled to receive, and shall be fully
protected in relying upon, an Opinion of Counsel stating that the execution of
any amendment, supplement or waiver authorized pursuant to this Article IX is
authorized or permitted by this Indenture.
ARTICLE X
MEETINGS OF HOLDERS
Section 10.1 Purposes for Which Meeting May Be Called.
A meeting of Holders may be called at any time and from time to time
pursuant to the provisions of this Article X for any of the following purposes:
(a) to give any notice to the Company, any Guarantor or
to the Trustee, or to give any directions to the Trustee, or to waive or to
consent to the waiving of any Default or Event of Default hereunder and its
consequences, or to take any other action authorized to be taken by Holders
pursuant to any of the provisions of Article VI;
(b) to remove the Trustee or appoint a successor Trustee
pursuant to the provisions of Article VII;
(c) to consent to any amendment, supplement or waiver
pursuant to the provisions of Section 9.2; or
(d) to take any other action (i) authorized to be taken
by or on behalf of the Holder or Holders of any specified aggregate principal
amount of the Notes under any other provision of this Indenture, or authorized
or permitted by law or (ii) that the Trustee deems necessary or appropriate in
connection with the administration of this Indenture.
Section 10.2 Manner of Calling Meetings.
The Trustee may at any time call a meeting of Holders to take any
action specified in Section 10.1, to be held at such time and at such place in
The City of New York, State of New York or elsewhere as the Trustee shall
determine. Notice of every meeting of Holders, setting
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forth the time and place of such meeting and in general terms the action
proposed to be taken at such meeting, shall be mailed by the Trustee,
first-class postage prepaid, to the Company, the Guarantor and to the Holders
at their last addresses as they shall appear on the registration books of the
Registrar, not less than ten (10) nor more than sixty (60) days prior to the
date fixed for a meeting. The Company shall pay the reasonable costs and
expenses of preparing and mailing such notice.
Any meeting of Holders shall be valid without notice if the Holders of
all Notes then outstanding are present in person or by proxy, or if notice is
waived before or after the meeting by the Holders of all Notes outstanding, and
if the Company and the Trustee are either present by duly authorized
representatives or have, before or after the meeting, waived notice.
Section 10.3 Call of Meetings by Company or Holders.
In case at any time the Company, pursuant to a Board Resolution or the
Holders of not less than twenty five percent (25%) in aggregate principal
amount of the Notes then outstanding, shall have requested the Trustee to call
a meeting of Holders to take any action specified in Section 10.1, by written
request setting forth in reasonable detail the action proposed to be taken at
the meeting, and the Trustee shall not have mailed the notice of such meeting
within twenty (20) days after receipt of such request, then the Company or the
Holders of Notes in the amount above specified may determine the time and place
in The City of New York, State of New York or elsewhere for such meeting and
may call such meeting for the purpose of taking such action, by mailing or
causing to be mailed notice thereof as provided in Section 10.2, or by causing
notice thereof to be published at least once in each of two (2) successive
calendar weeks (on any Business Day during such week) in a newspaper or
newspapers printed in the English language, customarily published at least five
(5) days a week of a general circulation in The City of New York, State of New
York, the first such publication to be not less than ten (10) nor more than
sixty (60) days prior to the date fixed for the meeting.
Section 10.4 Who May Attend and Vote at Meetings.
To be entitled to vote at any meeting of Holders, a person shall (a)
be a registered Holder of one or more Notes, or (b) be a person appointed by an
instrument in writing as proxy for the registered Holder or Holders of Notes.
The only person who shall be entitled to be present or to speak at any meeting
of Holders shall be the persons entitled to vote at such meeting and their
counsel and any representatives of the Trustee and its counsel and any
representatives of the Company, the Guarantor and their respective counsel.
Section 10.5 Regulations May Be Made by Trustee; Conduct of the Meeting;
Voting Rights; Adjournment.
Notwithstanding any other provision of this Indenture, the Trustee may
make such reasonable regulations as it may deem advisable for any action by or
any meeting of Holders, in regard to proof of the holding of Notes and of the
appointment of proxies, and in regard to
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the appointment and duties of inspectors of votes, and submission and
examination of proxies, certificates and other evidence of the right to vote,
and such other matters concerning the conduct of the meeting as it shall
determine to be appropriate. Such regulations may fix a record date and time
for determining the Holders of record of Notes entitled to vote at such
meeting, in which case those and only those persons who are Holders of Notes at
the record date and time so fixed, or their proxies, shall be entitled to vote
at such meeting whether or not they shall be such Holders at the time of the
meeting.
The Trustee shall, by an instrument in writing, appoint a temporary
chairman of the meeting, unless the meeting shall have been called by the
Company or by Holders as provided in Section 10.3, in which case the Company or
the Holders calling the meeting, as the case may be, shall in like manner
appoint a temporary chairman. A permanent chairman and a permanent secretary
of the meeting shall be elected by vote of the Holders of a majority in
principal amount of the Notes represented at the meeting and entitled to vote.
At any meeting each Holder or proxy shall be entitled to one vote for
each one thousand dollar ($1,000) principal amount of Notes held or represented
by such Holder; provided, however, that no vote shall be cast or counted at any
meeting in respect of any Notes challenged as not outstanding and ruled by the
chairman of the meeting to be not then outstanding. The chairman of the
meeting shall have no right to vote other than by virtue of Notes held by him
or her or instruments in writing as aforesaid duly designating him or her as
the proxy to vote on behalf of other Holders. Any meeting of Holders duly
called pursuant to the provisions of Section 10.2 or Section 10.3 may be
adjourned from time to time by vote of the Holder or Holders of a majority in
aggregate principal amount of the Notes represented at the meeting and entitled
to vote, and the meeting may be held as so adjourned without further notice.
Section 10.6 Voting at the Meeting and Record to Be Kept.
The vote upon any resolution submitted to any meeting of Holders shall
be by written ballots on which shall be subscribed the signatures of the
Holders of Notes or of their representatives by proxy and the principal amount
of the Notes voted by the ballot. The permanent chairman of the meeting shall
appoint two inspectors of votes, who shall count all votes cast at the meeting
for or against any resolution and who shall make and file with the secretary of
the meeting their verified written reports in duplicate of all votes cast at
the meeting. A record in duplicate of the proceedings of each meeting of
Holders shall be prepared by the secretary of the meeting and there shall be
attached to such record the original reports of the inspectors of votes on any
vote by ballot taken thereat and affidavits by one or more persons having
knowledge of the facts, setting forth a copy of the notice of the meeting and
showing that such notice was mailed as provided in Section 10.2 or published as
provided in Section 10.3. The record shall be signed and verified by the
affidavits of the permanent chairman and the secretary of the meeting and one
of the duplicates shall be delivered to the Company and the other to the
Trustee to be preserved by the Trustee, the latter to have attached thereto the
ballots voted at the meeting.
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Any record so signed and verified shall be conclusive evidence of the
matters therein stated.
Section 10.7 Exercise of Rights of Trustee or Holders May Not Be Hindered
or Delayed by Call of Meeting.
Nothing contained in this Article X shall be deemed or construed to
authorize or permit, by reason of any call of a meeting of Holders or any
rights expressly or impliedly conferred hereunder to make such call, any
hindrance or delay in the exercise of any right or rights conferred upon or
reserved to the Trustee or to the Holders under any of the provisions of this
Indenture or of the Notes.
ARTICLE XA
SUBORDINATION
Section 10A.1 Agreement to Subordinate.
The Company each agree for itself and for its successors, and each
Holder by accepting a Note agrees, that the payment of principal of, and
premium, interest, Liquidated Damages, if any, on and any other amount payable
by the Company with respect to, the Notes is subordinated in right of payment,
to the extent and in the manner provided in this Article 10A, to the prior
payment in full of all Senior Debt (whether outstanding on the date hereof or
hereafter created, incurred, assumed or guaranteed), and that the subordination
is for the benefit of the holders of Senior Debt. This Article 10A shall
constitute a continuing offer to all persons or entities who become holders of,
or continue to hold, Senior Debt. Notwithstanding anything to the contrary in
this Indenture or the Notes, the provisions of this Article 10A are made for
the benefit of the holders of Senior Debt, each of whom is an obligee hereunder
and is entitled to enforce such holder's rights hereunder, without any act or
notice of acceptance hereof or reliance hereon. No amendment, modification or
discharge of any provision of this Article 10A shall be effective against any
holder of Senior Debt unless expressly consented to in writing by such holder.
The provisions of this Article 10A apply notwithstanding anything to the
contrary contained in the Notes or this Indenture. Upon the maturity of any
Senior Debt by lapse of time, acceleration or otherwise, all principal thereof
and interest thereon and other amounts due in connection therewith shall first
be paid in full, or such payment duly provided for in cash or in a manner
satisfactory to the holders of such Senior Debt, before any payment is made on
account of the Notes or this Indenture.
Section 10A.2 Liquidation; Dissolution; Bankruptcy.
Upon any distribution to creditors of the Company in a liquidation or
dissolution of the Company or in a bankruptcy (whether voluntary or
involuntary), reorganization, insolvency,
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receivership or similar proceeding relating to the Company or their respective
properties, an assignment for the benefit of creditors or any marshalling of
the Company's assets and liabilities:
(1) holders of Senior Debt of the Company shall be
entitled to receive payment in full and in cash of all principal,
interest, fees, expenses and other 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 shall be entitled to receive any payment with respect to
the Notes (except that Holders 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 in Section 8.4 hereof); and
(2) until all principal, interest, fees, expenses and
other obligations with respect to Senior Debt of the Company are paid
in full, any distribution to which the Holders of Notes would be
entitled but for this Article 10A shall be made to the holders of such
Senior Debt (except that Holders 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 in Section 8.4 hereof).
Section 10A.3 Default on Designated Senior Debt.
The Company may not make, and no Holder shall ask for, demand, sue for
or otherwise exercise remedies with respect to, any payment upon or in respect
of the Notes and may not offer to repurchase Notes (other than in the form of
securities that are subordinated 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 in Section 8.4 hereof) if:
(i) a default in the payment of the principal of, or
premium or interest on, or fees or other amounts owing with respect
to, 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 Senior Debt that permits holders of the Senior Debt as to
which such default relates to accelerate its maturity and the Trustee
receives a notice of such default (a "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 default referred to in Section 10A.3(i) hereof,
upon the date on which such default is cured or waived in writing, and
(b) in case of a default referred to in Section 10A.3(ii) hereof,
the earlier of the date on which such nonpayment default is cured or waived in
writing or 179 days after the date on
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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 referred to in Section 10A.03(ii)
hereof that existed or was continuing on the date of delivery of any Payment
Blockage Notice to the Trustee by 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).
Section 10A.4 Acceleration of Notes.
The Company and the Trustee shall promptly notify holders of Senior
Debt of the issuance by the Trustee or the receipt of an acceleration notice
following an Event of Default, whereupon the Trustee shall promptly notify the
holders of Senior Debt of such acceleration notice, provided that failure to
give such notice shall not affect the subordination of the Notes to the Senior
Debt as provided in this Article 10A.
Section 10A.5 When Distribution Must be Paid Over.
In the event that the Trustee or any Holder receives any payment with
respect to the Notes at a time when such receipt by the Trustee or such Holder,
as applicable, is in violation of this Article 10A, such payment shall be held
by the Trustee or such Holder in trust for the benefit of and shall be paid
forthwith over and delivered to, the holders of Senior Debt as their interests
may appear or their Representative under the Credit Facility, Senior Indenture
or other agreement (if any) pursuant to which Senior Debt may have been issued,
as their respective interests may appear, for application to the payment of all
obligations with respect to Senior Debt remaining unpaid to the extent
necessary to pay such obligations in full in accordance with their terms, after
giving effect to any concurrent payment or distribution to or for the holders
of Senior Debt.
With respect to the holders of Senior Debt, the Trustee undertakes to
perform only such obligations on the part of the Trustee as are specifically
set forth in this Article 10A, and no implied covenants or obligations with
respect to the holders of Senior Debt shall be read into this Indenture against
the Trustee. The Trustee shall not be deemed to owe any fiduciary duty to the
holders of Senior Debt, and shall not be liable to any such holders if the
Trustee shall pay over or distribute to or on behalf of Holders or the Company
or any other Person money or assets to which any holders of Senior Debt shall
be entitled by virtue of this Article 10A, except if such payment is made as a
result of the willful misconduct or gross negligence of the Trustee.
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Section 10A.6 Notice By the Company.
The Company shall promptly notify the Trustee and the Paying Agent of
any facts known to the Company that would cause any payment with respect to the
Notes to violate this Article 10A, but failure to give such notice shall not
affect the subordination of the Notes to the Senior Debt as provided in this
Article 10A.
Section 10A.7 Subrogation.
After all Senior Debt is irrevocably paid in full in cash or Cash
Equivalents satisfactory to the holders thereof and until the Notes are paid in
full, Holders shall be subrogated (equally and ratably with all other
Indebtedness Pari Passu with the Notes) to the rights of holders of Senior Debt
to receive distributions applicable to Senior Debt to the extent that
distributions otherwise payable to the Holders have been applied to the payment
of Senior Debt. A distribution made under this Article 10A to holders of
Senior Debt that otherwise would have been made to Holders is not, as between
the Company and Holders, a payment by the Company on the Notes.
Section 10A.8 Relative Rights.
This Article 10A defines the relative rights of Holders and holders of
Senior Debt. Nothing in this Indenture shall:
(1) impair, as between the Company and Holders, the
obligation of the Company, which is absolute and unconditional, to pay
principal of and premium, if any, and interest on the Notes in
accordance with their terms;
(2) affect the relative rights of Holders and creditors
of the Company other than their rights in relation to holders of
Senior Debt; or
(3) prevent the Trustee or any Holder from exercising its
available remedies upon a Default or Event of Default, subject to the
rights of holders and owners of Senior Debt to receive distributions
and payments otherwise payable to Holders.
If the Company fails because of this Article 10A to pay principal of
or interest on a Note on the due date, the failure is still a Default or Event
of Default.
Section 10A.9 Subordination May Not Be Impaired By the Company.
No right of any holder of Senior Debt to enforce the subordination of
the Indebtedness evidenced by the Notes shall be impaired by any act or failure
to act by the Company or any Holder or by the failure of the Company or any
Holder to comply with this Indenture.
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Section 10A.10 Distribution or Notice to Representative.
Whenever a distribution is to be made or a notice given under the
Indenture to holders of Senior Debt, the distribution may be made and the
notice given to their Representative.
Upon any payment or distribution of assets of the Company referred to
in this Article 10A, the Trustee and the Holders shall be entitled to rely upon
any order or decree made by any court of competent jurisdiction or upon any
certificate of such Representative or of the liquidating trustee or agent or
other Persons making any distribution to the Trustee or to the Holders for the
purpose of ascertaining the Persons entitled to participate in such
distribution, the holders of Senior Debt and other Indebtedness of the Company,
the amount thereof or payable thereon, the amount or amounts paid or
distributed thereon and all other facts pertinent thereto or to this Article
10A.
Section 10A.11 Rights of Trustee and Paying Agent.
Notwithstanding the provisions of this Article 10A or any other
provision of this Indenture, the Trustee shall not be charged with knowledge of
the existence of any facts that would prohibit the making of any payment or
distribution by the Trustee, and the Trustee and the Paying Agent may continue
to make payments on the Notes, unless the Trustee shall have received at its
address in accordance with Section 13.2 hereof, prior to the date of such
payment, written notice of facts that would cause the payment of any
obligations with respect to the Notes to violate this Article. Nothing in this
Article 10A shall impair the claims of, or payments to, the Trustee under or
pursuant to Section 7.7 hereof.
The Trustee shall be entitled to rely on the delivery to it of a
written notice by a person representing himself to be a holder of Senior Debt
(or a Representative of such holder) to establish that such notice has been
given by a holder of Senior Debt (or a Representative of any such holder). In
the event that the Trustee determines in good faith that further evidence is
required with respect to the right of any Person as a holder of Senior Debt to
participate in any payment or distribution pursuant to this Article 10A, the
Trustee may request such Person to furnish evidence to the reasonable
satisfaction of the Trustee as to the amount of Senior Debt held by such
Person, the extent to which such Person is entitled to participate in such
payment or distribution and any other facts pertinent to the rights of such
Person under this Article 10A, and if such evidence is not furnished, the
Trustee may defer any payment which it may be required to make for the benefit
of such person pursuant to the terms of this Indenture pending judicial
determination as to the rights of such Person to receive such payment.
The Trustee in its individual or any other capacity may hold Senior
Debt with the same rights it would have if it were not Trustee. Any agent of
the Company may do the same with like rights.
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Section 10A.12 Authorization To Effect Subordination.
Each Holder of a Note by the Holder's acceptance thereof authorizes
and directs the Trustee on the Holder's behalf to take such action as may be
necessary or appropriate to effectuate the subordination as provided in this
Article 10A, and appoints the Trustee to act as the Holder's attorney-in-fact
for any and all such purposes. If the Trustee does not file a proper proof of
claim or proof of debt in the form required in any proceeding referred to in
Section 6.4 hereof at least 30 days before the expiration of the time to file
such claim, the Representatives of the holders of the Senior Debt are hereby
authorized to file an appropriate claim for and on behalf of the Holders of the
Notes.
Section 10A.13 Legend.
The Notes and any instrument evidencing any of the Indebtedness
arising under or with respect to this Indenture will, on the date issued, be
inscribed with a legend conspicuously indicating that the payment thereof is
subordinated to the Senior Debt pursuant to the terms of this Indenture.
Section 10A.14 No Waiver.
No right of any present or future holder of any Senior Debt to enforce
subordination as herein provided shall at any time in any way be prejudiced or
impaired by any act or failure to act on the part of the Company or by any act
or failure to act, in good faith, by any such holder, or by any noncompliance
by the Company with the terms and provisions and covenants of this Indenture,
regardless of any knowledge thereof which any such holder may have or be
otherwise charged with. The holders of Senior Debt or any security or
guarantee thereof, or therefor, may release, sell, exchange or enforce such
security or guarantee or elect any right or remedy, or delay in enforcing, or
release any right or remedy or otherwise deal freely with the Company and any
security for the Senior Debt all without notice to the Noteholders and all
without affecting the liabilities and obligations of the parties to this
Indenture, even if any right or reimbursement or subrogation or other right or
remedy of the Holders is extinguished, affected or impaired thereby. No
provision of any supplement or amendment to this Indenture or the Notes which
adversely affects in any way the holders of Senior Debt shall be effective
against the holders of Senior Debt who have not consented thereto in writing.
Section 10A.15 Guarantees.
The Guarantee and each Additional Guarantee shall be 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 to the Senior Debt of the Company, as more
fully described in this Article XA.
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ARTICLE XI
RIGHT TO REQUIRE REPURCHASE
Section 11.1 Repurchase of Notes at the Option of the Holder Upon a Change
of Control.
(a) 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 the date that is no later than thirty (30) Business Days after the
occurrence of such Change of Control (the "Change of Control Payment Date"), at
a Cash price equal to one hundred one percent (101%) of the principal amount
thereof (the "Change of Control Offer Price"), plus accrued and unpaid interest
and Liquidated Damages, if any, to and including the Change of Control Payment
Date. Upon expiration of the Change of Control Offer Period (as defined
below), the Company shall purchase all Notes tendered in response to the Change
of Control Offer.
(b) In the event that, pursuant to this Section 11.1, the
Company shall be required to commence a Change of Control Offer, the Company
shall follow the procedures set forth in this Section 11.1 as follows:
(1) the Change of Control Offer shall
commence within ten (10) Business Days following the
Change of Control;
(2) the Change of Control Offer shall
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 "Change of Control Offer Period");
(3) within five (5) Business Days
following the expiration of a Change of Control
Offer, the Company shall purchase all of the tendered
Notes at the Change of Control Offer Price, plus
accrued and unpaid interest and Liquidated Damages,
if any;
(4) if the Change of Control Payment
Date is on or after an interest payment record date
and on or before the related interest payment date,
any accrued interest will be paid to the person in
whose name a Note is registered at the close of
business on such record date, and no additional
interest will be payable to Holders who tender Notes
pursuant to the Change of Control Offer;
(5) the Company shall provide the
Trustee with notice of the Change of Control Offer at
least five (5) Business Days before the commencement
of any Change of Control Offer; and
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(6) on or before the commencement of any
Change of Control Offer, the Company or the Trustee
(upon the request and at the expense of the Company)
shall send, by first-class mail, a notice to each of
the Holders, which (to the extent consistent with
this Indenture) shall govern the terms of any Change
of Control Offer and shall state:
(i) that the Change of Control
Offer is being made pursuant to this
Section 11.1 and that all Notes or
portions thereof tendered will be
accepted for payment;
(ii) the Change of Control Offer
Price (including the amount of
accrued and unpaid interest and
Liquidated Damages, if any), the
Change of Control Payment Date and
the Change of Control Put Date (as
defined below);
(iii) that any Note, or portion
thereof, not tendered or accepted
for payment will continue to accrue
interest and Liquidated Damages, if
any;
(iv) that, unless the Company
defaults in depositing U.S. Legal
Tender with the Paying Agent in
accordance with the last paragraph
of this clause (b), or such payment
is prevented for any reason, any
Note, or portion thereof, accepted
for payment pursuant to the Change
of Control Offer shall cease to
accrue interest and Liquidated
Damages, if any, after the Change of
Control Payment Date;
(v) that Holders electing to have a
Note, or portion thereof, purchased
pursuant to a Change of Control
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 this
Section 11.1, notwithstanding
anything in this Indenture to the
contrary, be the Company or any
Affiliate of the Company) at the
address specified in the notice
prior to the close of business on
the earlier of (a) the fifth (5th)
Business Day prior to the Change of
Control Payment Date and (b) the
fifth (5th) Business Day following
the expiration of the Change of
Control Offer (such earlier date
being the "Change of Control Put
Date");
(vi) that Holders will be entitled
to withdraw their election, in whole
or in part, if the Paying Agent
receives,
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prior to the close of business on the
Change of Control Put Date, a
telegram, telex, facsimile
transmission or letter setting forth
the name of the Holder, the
principal amount of the Notes the
Holder is withdrawing and a
statement containing a facsimile
signature and stating that such
Holder is withdrawing his election
to have such principal amount of
Notes purchased; and
(vii) a brief description of the
events resulting in such Change of
Control.
Any such Change of Control Offer shall comply with all applicable
provisions of Federal and state laws, including those regulating tender offers,
if applicable, and any provisions of this Indenture that conflict with such
laws shall be deemed to be superseded by the provisions of such laws.
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 prior to the close of business on the Change of Control
Put Date, (ii) deposit with the Paying Agent U.S. Legal Tender or Cash
Equivalents (other than Credit Facility Notes, Senior Notes or Notes)
sufficient to pay the Change of Control Offer Price (together with accrued and
unpaid interest or 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 shall 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 shall promptly authenticate and mail or
deliver to such Holder a new Note equal in principal amount to any unpurchased
portion of the Note surrendered. Any Notes not so accepted shall be promptly
mailed or delivered by the Company to the Holder thereof. The Company shall
publicly announce the results of the Change of Control Offer on or as soon as
practicable after the Change of Control Offer Period expires, by causing notice
thereof to be published at least once in each of two (2) successive calendar
weeks (on any Business Day during such week) in a newspaper or newspapers
printed in the English language, customarily published at least five (5) days a
week of a general circulation in The City of New York, State of New York.
ARTICLE XII
GUARANTEE
Section 12.1 Guarantee.
(a) In consideration of good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged, and subject to the
provisions of this Article XII
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the Guarantor, and each Additional Guarantor which in accordance with Section
4.17 hereof is required to execute a Guarantee, upon execution of a counterpart
of this Indenture (such Guarantor and Additional Guarantors are collectively
referred to herein as the "Subsidiary Guarantors"), hereby jointly and
severally irrevocably and unconditionally guarantees (the "Guarantee") to each
Holder of a Note authenticated and delivered by the Trustee and the Trustee and
its successors and assigns, irrespective of the validity and enforceability of
this Indenture, the Notes or the Obligations of the Company under this
Indenture or the Notes, that: (x) the principal and premium (if any) of and
interest and Liquidated Damages, if any, on the Notes and related costs and
expenses will be paid in full when due, whether at the maturity or interest
payment date, by acceleration, call for redemption, upon an Offer to Purchase,
or otherwise and interest on the overdue principal and premium (if any) of and
interest and Liquidated Damages, if any, on the Notes and all other obligations
of the Company to the Holders or the Trustee under this Indenture or the Notes
will be promptly paid in full or performed all in accordance with the terms of
this Indenture and the Notes; and (y) in case of any extension of time of
payment or renewal of any Notes or any of such other obligations, they will be
paid in full when due in accordance with the terms of the extension or renewal,
whether at maturity, by acceleration, call for redemption, upon an Offer to
Purchase or otherwise.
(b) Each Subsidiary Guarantor hereby jointly and
severally agrees that its obligations with regard to this Guarantee shall be
unconditional, irrespective of the validity, regularity or enforceability of
the Notes or this Indenture, the absence of any action to enforce the same, any
delays in obtaining or realizing upon or failures to obtain or realize upon
collateral, the recovery of any judgment against the Company, any action to
enforce the same or any other circumstances that might otherwise constitute a
legal or equitable discharge or defense of such Subsidiary Guarantor. Each
Subsidiary Guarantor hereby waives and relinquishes all claims, rights and
remedies accorded by applicable law to guarantors and agrees not to assert or
take advantage of any such claims, right or remedies, including but not limited
to diligence, presentment, demand of payment, filing of claims with a court in
the event of insolvency or bankruptcy of the Company, any right to require a
proceeding first against the Company or right to require the prior disposition
of the assets of the Company to meet its obligations, protest, notice and all
demands whatsoever and covenants that this Guarantee will not be discharged
except by complete performance of the obligations contained in the Notes and
this Indenture. Notwithstanding the foregoing, neither the Trustee nor any
Holder may pursue any remedy under this Guarantee unless they comply with
Section 6.7.
(c) If any Holder or the Trustee is required by any court
or otherwise to return to either the Company or any Subsidiary Guarantor, or
any Custodian, Trustee or similar official acting in relation to either the
Company or any Subsidiary Guarantor, any amount paid by either the Company or
such Subsidiary Guarantor to the Trustee or such Holder, this Guarantee, to the
extent theretofore discharged, shall be reinstated in full force and effect.
Each Subsidiary Guarantor agrees that it will not be entitled to any right of
subrogation in relation to the Holders in respect of any obligations guaranteed
hereby until payment in full of all obligations guaranteed hereby. Each
Subsidiary Guarantor further agrees that, as between such Subsidiary Guarantor,
on the one hand, and the Holders and the Trustee, on the other hand, (i) the
maturity of the
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obligations guaranteed hereby may be accelerated as provided in Section 6.2 for
the purposes of this Guarantee, notwithstanding any stay, injunction or other
prohibition preventing such acceleration as to the Company of the obligations
guaranteed hereby, and (ii) in the event of any declaration of acceleration of
those obligations as provided in Section 6.2, those obligations (whether or not
due and payable) will forthwith become due and payable by such Subsidiary
Guarantor for the purpose of this Guarantee.
(d) It is the intention of the Subsidiary Guarantors and
the Company that the obligations of the Subsidiary Guarantors hereunder shall
be in, but not in excess of, the maximum amount permitted by applicable law.
Accordingly, if the obligations in respect of the Guarantee would be annulled,
avoided or subordinated to the creditors of a Subsidiary Guarantor by a court
of competent jurisdiction in a proceeding actually pending before such court as
a result of a determination both that such Guarantee was made before such court
as a consideration and, immediately after giving effect thereto, such
Subsidiary Guarantor was insolvent or unable to pay its debts as they mature or
left with an unreasonably small capital, then the obligations of such
Subsidiary Guarantor under such Guarantee shall be reduced by such court if and
to the extent such reduction would result in the avoidance of such annulment,
avoidance or subordination; provided, however, that any reduction pursuant to
this paragraph shall be made in the smallest amount as is strictly necessary to
reach such result. For purposes of this paragraph, "fair consideration,"
"insolvency," "unable to pay its debts as they mature," "unreasonably small
capital" and the effective times of reductions, if any, required by this
paragraph shall be determined in accordance with applicable law.
Section 12.2 Execution and Delivery of Guarantee.
To evidence its Guarantee set forth in Section 12.1, each Subsidiary
Guarantor agrees that a notation of such Guarantee substantially in the form
annexed hereto as contained in Exhibit A shall be endorsed on each Note
authenticated and delivered by the Trustee and that this Indenture shall be
executed on behalf of each Subsidiary Guarantor by two (2) Officers or an
Officer and an Assistant Secretary by manual or facsimile signature.
Each Subsidiary Guarantor agrees that its Guarantee set forth in
Section 12.1 shall remain in full force and effect and shall apply to all the
Notes notwithstanding any failure to endorse on each Note a notation of such
Guarantee.
If an Officer whose signature is on a Note no longer holds that office
at the time the Trustee authenticates the Note on which a Guarantee is
endorsed, the Guarantee shall be valid nevertheless.
The delivery of any Note by the Trustee, after the authentication
thereof hereunder, shall constitute due delivery of the Guarantee set forth in
this Indenture on behalf of each Subsidiary Guarantor.
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Section 12.3 Certain Bankruptcy Events.
Each Subsidiary Guarantor hereby covenants and agrees that in the
event of the insolvency, bankruptcy, dissolution, liquidation or reorganization
of the Company, such Subsidiary Guarantor shall not file (or join in any filing
of), or otherwise seek to participate in the filing of, any motion or request
seeking to stay or to prohibit (even temporarily) execution on the Guarantee
and hereby waives and agrees not to take the benefit of any such stay of
execution, whether under Section 362 or 105 of the United States Bankruptcy
Code or otherwise.
Section 12.4 Release of Guarantor.
Concurrently with any sale or other disposition of all or
substantially all of the assets of any Subsidiary Guarantor by way of merger,
consolidation or otherwise, or a sale or other disposition by way of such a
merger, consolidation or otherwise of all the Capital of such Subsidiary
Guarantor, in each case where such sale, consolidation, merger or other
disposition is not prohibited by Section 4.14, then such Subsidiary Guarantor,
and the person acquiring the Capital or the assets of such Subsidiary
Guarantor, shall be automatically and unconditionally released and discharged
from all obligations under the Guarantee, this Article XII and this Indenture
without any further action required on the part of the Trustee or any Holder.
ARTICLE XIII
MISCELLANEOUS
Section 13.1 TIA Controls.
If any provision of this Indenture limits, qualifies or conflicts with
the duties imposed by operation of the TIA, the imposed duties, upon
qualification of this Indenture under the TIA, shall control.
Section 13.2 Notices.
Any notices or other communications to the Company, the Guarantor or
the Trustee required or permitted hereunder shall be in writing, and shall be
sufficiently given if made by hand delivery, by telex, by telecopier or
registered or certified mail, postage prepaid, return receipt requested,
addressed as follows:
if to the Company or the Guarantor:
HORSESHOE GAMING, L.L.C.
4024 Industrial Road
Las Vegas, NV 89103
Attn: Chief Financial Officer
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with a copy to:
RIORDAN & MCKINZIE
300 S. Grand Avenue, 29th Floor
Los Angeles, California 90071
Attn: Roger Lustberg, Esq.
if to the Trustee:
U.S. TRUST COMPANY OF TEXAS, N.A.
515 S. Flower Street, Suite 2700
Los Angeles, California 90071
Attention: Sandra Leess
The Company, the Guarantor or the Trustee by notice to each other
party may designate additional or different addresses as shall be furnished in
writing by such party. Any notice or communication to the Company, the
Guarantor or the Trustee shall be deemed to have been given or made as of the
date so delivered, if personally delivered; when answered by, if telexed; when
receipt is acknowledged, if telecopied; and five (5) Business Days after
mailing if sent by registered or certified mail, postage prepaid (except that a
notice of change of address shall not be deemed to have been given until
actually received by the addressees).
Any notice or communication mailed to a Holder shall be mailed to such
person by first class mail or other equivalent means at such person's address
as it appears on the registration books of the Registrar and shall be
sufficiently given to such person if so mailed within the time prescribed.
Failure to mail a notice or communication to a Holder or any defect in
it shall not affect its sufficiency with respect to other Holders. If a notice
or communication is mailed in the manner provided above, it is duly given,
whether or not the addressee receives it.
Section 13.3 Communications by Holders with Other Holder.
Holders may communicate pursuant to TIA Section 312(b) with other
Holders with respect to their rights under this Indenture or the Notes. The
Company, the Guarantor, the Trustee, the Registrar and any other person shall
have the protection of TIA Section 312(c).
Section 13.4 Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Company to the Trustee to take
any action under this Indenture, the Company shall furnish to the Trustee, if
required by the Trustee:
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(1) an Officers' Certificate (in form and substance
reasonably satisfactory to the Trustee) stating that, in the opinion of the
signers, all conditions precedent, if any, provided for in this Indenture
relating to the proposed action have been complied with; and
(2) an Opinion of Counsel (in form and substance
reasonably satisfactory to the Trustee) stating that, in the opinion of such
counsel, all such conditions precedent have been complied with.
Section 13.5 Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
(1) a statement that the person making such certificate
or opinion has read such covenant or condition;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions contained in
such certificate or opinion are based;
(3) a statement that, in the opinion of such person, he
or she has made such examination or investigation as is necessary to enable him
or her to express an informed opinion as to whether or not such covenant or
condition has been complied with; and
(4) a statement as to whether or not, in the opinion of
each such person,such condition or covenant has been complied with; provided,
however, that with respect to matters of fact an opinion of counsel may rely on
an Officers' Certificate or certificates of public officials.
Section 13.6 Rules by Trustee, Paying Agent, Registrar.
The Trustee may make reasonable rules for action by or at a meeting of
Holders. The Paying Agent or Registrar may make reasonable rules for its
functions.
Section 13.7 Legal Holidays.
A "Legal Holiday" used with respect to a particular place of payment
is a Saturday, a Sunday or a day on which banking institutions in New York, New
York are not required to be open. If a payment date is a Legal Holiday in New
York, New York, payment may be made at such place on the next succeeding day
that is not a Legal Holiday, and no interest shall accrue for the intervening
period.
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Section 13.8 Governing Law.
THIS INDENTURE AND THE NOTES SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE
AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAW. THE COMPANY AND THE GUARANTOR HEREBY IRREVOCABLY SUBMIT TO
THE JURISDICTION OF ANY NEW YORK STATE COURT SITTING IN THE BOROUGH OF
MANHATTAN IN THE CITY OF NEW YORK OR ANY FEDERAL COURT SITTING IN THE BOROUGH
OF MANHATTAN IN THE CITY OF NEW YORK IN RESPECT OF ANY SUIT, ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS INDENTURE AND THE NOTES, AND
IRREVOCABLY ACCEPT FOR THEMSELVES AND IN RESPECT OF THEIR PROPERTY, GENERALLY
AND UNCONDITIONALLY, JURISDICTION OF THE AFORESAID COURTS. THE COMPANY AND THE
GUARANTOR IRREVOCABLY WAIVE, TO THE FULLEST EXTENT THEY MAY EFFECTIVELY DO SO
UNDER APPLICABLE LAW, TRIAL BY JURY AND ANY OBJECTION WHICH THEY MAY NOW OR
HEREAFTER HAVE TO THE LAYING OF THE VENUE OR THAT ANY SUCH SUIT, ACTION OR
PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE TRUSTEE OR ANY HOLDER TO SERVE
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS
OR OTHERWISE PROCEED AGAINST THE COMPANY IN ANY OTHER JURISDICTION.
Section 13.9 No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret another indenture, loan or
debt agreement of any of the Company, the Guarantor or any of their
Subsidiaries. Any such indenture, loan or debt agreement may not be used to
interpret this Indenture.
Section 13.10 No Recourse Against Others.
No direct or indirect equityholder, incorporator, employee, manager,
officer 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 this Indenture or the
Notes by reason of his, her or its status as such equityholder, incorporator,
employee, manager, officer or director. Each Holder by accepting a Note waives
and releases all such liability. Such waiver and release are part of the
consideration for the issuance of the Notes.
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Section 13.11 Successors.
All agreements of the Company and the Guarantor in this Indenture, the
Notes and the Guarantee shall bind their respective successors. All agreements
of the Trustee in this Indenture shall bind its successor.
Section 13.12 Duplicate Originals.
All parties may sign any number of copies or counterparts of this
Indenture. Each signed copy or counterpart shall be an original, but all of
them together shall represent the same agreement.
Section 13.13 Severability.
In case any one or more of the provisions of this Indenture or in the
Notes shall be held invalid, illegal or unenforceable, in any respect for any
reason, the validity, legality and enforceability of any such provision in
every other respect and of the remaining provisions shall not in any way be
affected or impaired thereby, it being intended that all of the provisions
hereof shall be enforceable to the full extent permitted by law.
Section 13.14 Table of Contents, Headings, Etc.
The Table of Contents, Cross-Reference Table and headings of the
Articles and the Sections of this Indenture have been inserted for convenience
of reference only, are not to be considered a part hereof and shall in no way
modify or restrict any of the terms or provisions hereof.
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SIGNATURE
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed as of the date first written above.
HORSESHOE GAMING, L.L.C.
By: HORSESHOE GAMING, INC., its Manager
By: /s/ PAUL R. ALANIS
------------------------------------
Paul Alanis
President
ROBINSON PROPERTY GROUP LIMITED
PARTNERSHIP
By: HORSESHOE GP, INC., its
General partner
By: /s/ PAUL R. ALANIS
-------------------------------------
Paul Alanis
President
U.S. TRUST COMPANY OF TEXAS, N.A., as
Trustee
By: /s/ SANDEE PARKS
------------------------------------
Sandee Parks
Authorized Officer
1
<PAGE> 1
EXHIBIT 4.45
EXCHANGE AND REGISTRATION RIGHTS AGREEMENT
This Exchange and Registration Rights Agreement (this "Agreement") is made
and entered into as of June 25, 1997 by and among Horseshoe Gaming, L.L.C., a
Delaware limited liability company (the "Company"), Robinson Property Group,
Limited Partnership, a Mississippi limited partnership (the "Guarantor"), and
Wasserstein Perella Securities, Inc. (the "Initial Purchaser"), who has agreed
to purchase an aggregate principal amount of $160,000,000 of the Company's
9-3/8% Series A Senior Subordinated Notes Due 2007 (the "Series A Notes") on the
Closing Date pursuant to the Purchase Agreement (as defined below).
This Agreement is made pursuant to the Note Purchase Agreement, dated as
of June 18, 1997, (the "Purchase Agreement"), by and among the Company, the
Guarantor and the Initial Purchaser. In order to induce the Initial Purchaser to
purchase the Series A Notes, the Company and the Guarantor have agreed to
provide the registration rights set forth in this Agreement for the equal
benefit of the Initial Purchaser and its direct and indirect transferees. The
execution and delivery of this Agreement is a condition to the Initial
Purchaser's obligation to purchase the Series A Notes under the Purchase
Agreement.
The parties hereby agree as follows:
Section 1. Definitions.
As used in this Agreement, the following capitalized terms shall have the
following meanings:
Act: The Securities Act of 1933, as amended.
Affiliate: Of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; provided that
beneficial ownership of 10% or more of the voting securities of a Person shall
be deemed to be control.
Broker-Dealer: Any broker or dealer registered under the Exchange Act.
Closing Date: The date of this Agreement.
Commission: The Securities and Exchange Commission.
<PAGE> 2
Company: As set forth in the preamble and shall also include the Company's
successors.
Consummate: A Registered Exchange Offer shall be deemed "Consummated" for
purposes of this Agreement upon the occurrence of (i) the filing and
effectiveness under the Act of the Exchange Offer Registration Statement
relating to the Series B Notes to be issued in the Exchange Offer, (ii) the
maintenance of such Registration Statement continuously effective and the
keeping of the Exchange Offer open for a period not less than the minimum period
required pursuant to Section 3(b) hereof, and (iii) the delivery by the Company
to the registrar under the Indenture of the Series B Notes in the same aggregate
principal amount as the aggregate principal amount of Series A Notes that were
tendered by Holders thereof pursuant to the Exchange Offer.
Damages Payment Date: With respect to the Series A Notes, each Interest
Payment Date.
Effectiveness Target Date: As defined in Section 5.
Exchange Act: The Securities Exchange Act of 1934, as amended.
Exchange Offer: The registration by the Company under the Act of the
Series B Notes pursuant to a Registration Statement pursuant to which the
Company offers the Holders of all outstanding Transfer Restricted Securities the
opportunity to exchange all such outstanding Transfer Restricted Securities held
by such Holders for Series B Notes in an aggregate principal amount equal to the
aggregate principal amount of the Transfer Restricted Securities tendered in
such Exchange Offer by such Holders.
Exchange Offer Registration Statement: The Registration Statement relating
to the Exchange Offer, including the related Prospectus.
Guarantor: Robinson Property Group Limited Partnership, a Mississippi
limited partnership.
Holders: As defined in Section 2(b) hereof.
Indemnified Holder: As defined in Section 8(a) hereof.
Indenture: The Indenture, dated as of June 15, 1997, by and among the
Company and U.S. Trust Company of Texas, N.A., as trustee (the "Trustee"), and
the Guarantor, pursuant to which the Notes are to be issued, as such Indenture
is amended or supplemented from time to time in accordance with the terms
thereof.
Initial Purchaser: As defined in the preamble hereto.
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<PAGE> 3
Interest Payment Date: As defined in the Indenture.
Liquidated Damages: As defined in Section 5 hereof.
NASD: National Association of Securities Dealers, Inc.
Notes: The Series A Notes and the Series B Notes.
Person or person: An individual, corporation, partnership, association,
limited liability company, limited liability partnership, trust, estate or other
entity.
Prospectus: The prospectus included in the Registration Statement, as
amended or supplemented by any prospectus supplement and by all other amendments
thereto, including post-effective amendments, and all material incorporated by
reference into such prospectus.
Record Holder: With respect to any Damages Payment Date relating to the
Series A Notes, each Person who is a Holder of Transfer Restricted Securities on
the record date with respect to the Interest Payment Date on which such Damages
Payment Date shall occur.
Registration Default: As defined in Section 5 hereof.
Registration Statement: Any registration statement of the Company relating
to (a) an offering of Series B Notes pursuant to an Exchange Offer or (b) the
registration for resale of Transfer Restricted Securities pursuant to a Shelf
Registration Statement, which is filed pursuant to the provisions of this
Agreement, in each case, including the Prospectus included therein, all
amendments and supplements thereto (including post-effective amendments) and all
exhibits and material incorporated by reference therein.
Series A Notes: As defined in the preamble hereto.
Series B Notes: Debt securities of the Company, which are substantially
identical to the Series A Notes (and which are entitled to the benefits of the
Indenture or a trust indenture which is substantially identical to the Indenture
(other than such changes to the Indenture or any such identical trust indenture
as are necessary to comply with any requirements of the Commission to effect or
maintain the qualification thereof under the TIA) and which, in either case, has
been qualified under the TIA, except that the Series B Notes related thereto
shall have been registered pursuant to an effective Registration Statement under
the Act and shall contain no restrictive legends thereon.
Shelf Filing Deadline: As defined in Section 4 hereof.
Shelf Registration Statement: As defined in Section 4 hereof.
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<PAGE> 4
Suspension Notice: As defined in Section 6(c)(iii)(D).
TIA: The Trust Indenture Act of 1939 (15 U.S.C. Section 77aaa-77bbbb) as
in effect on the date of the Indenture.
Trustee: The trustee under the Indenture and the trustee under any
indenture governing the Series B Notes.
Transfer Restricted Securities: Each Series A Note, until the earliest to
occur of (a) the date on which such Series A Note is exchanged in the Exchange
Offer for a Series B Note entitled to be resold to the public without complying
with the prospectus delivery requirements of the Act, (b) the date on which such
Series A Note has been effectively registered under the Act and disposed of in
accordance with a Shelf Registration Statement, (c) the date on which such
Series A Note is distributed to the public pursuant to Rule 144 under the Act or
by a Broker-Dealer pursuant to the "Plan of Distribution" contemplated by the
Exchange Offer Registration Statement (including delivery of the Prospectus
contained therein) and (d) the date on which such Series A Note is saleable
pursuant to Rule 144(k) under the Act.
Underwritten Registration or Underwritten Offering: A registration in
which securities of the Company are sold to an underwriter for reoffering to the
public.
Section 2. Securities Subject To This Agreement
(a) Transfer Restricted Securities. The securities entitled to the
benefits of this Agreement are the Transfer Restricted Securities. No securities
other than the Transfer Restricted Securities shall be entitled to the benefits
of this Agreement.
(b) Holders of Transfer Restricted Securities. A Person is deemed to be a
holder of Transfer Restricted Securities (each, a "Holder") whenever such Person
owns Transfer Restricted Securities.
Section 3. Registered Exchange Offer.
(a) Unless the Exchange Offer shall not be permissible under applicable
law or Commission policy (after the procedures set forth in Section 6(a) below
have been complied with), the Company and the Guarantor shall (i) cause to be
filed with the Commission as soon as practicable after the Closing Date, but in
no event later than forty-five (45) days after the Closing Date, an Exchange
Offer Registration Statement on Form S-1 or S-4 (if the use of such form is then
available) and, if applicable, a Shelf Registration Statement under the Act
relating to the Series B Notes and the Exchange Offer, (ii) cause such
Registration Statement to become effective as soon as practicable, but in no
event later than 165 days following the Closing Date, (iii) Consummate the
Exchange Offer as soon as practicable, but in no event later than 30 days after
the date the Exchange Offer Registration Statement is declared effective by the
Commission,
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(iv) in connection with the foregoing, file (A) all pre-effective amendments to
such Registration Statement as may be necessary in order to cause such
Registration Statement to become effective, (B) if applicable, a post-effective
amendment to such Registration Statement under the Act and (C) cause all
necessary filings in connection with the registration and qualification of the
Series B Notes to be made under state Blue Sky or securities laws of such
jurisdictions as are necessary to permit Consummation of the Exchange Offer, and
(v) upon the effectiveness of such Registration Statement, commence the Exchange
Offer. To the extent permitted by law, the Exchange Offer shall be on the
appropriate form permitting registration of the Series B Notes to be offered in
exchange for the Transfer Restricted Securities and to permit resales of Notes
held by Broker-Dealers as contemplated by Section 3(e) below.
(b) The Company and the Guarantor shall cause the Exchange Offer
Registration Statement to be effective continuously and shall keep the Exchange
Offer open for a period of not less than the minimum period required under
applicable federal and state securities laws to Consummate the Exchange Offer.
The Company and the Guarantor shall cause the Exchange Offer to comply with all
applicable federal and state securities laws. No securities other than the Notes
and the Guarantees executed by the Guarantor or any Additional Guarantor (as
such terms are defined in the Indenture) shall be included in the Exchange Offer
Registration Statement; provided, however, the Company and the Guarantor shall
not be restricted in any respect with regard to the filing or effectiveness of
any other registration statement under the Act.
(c) In connection with the Exchange Offer, the Company shall:
(i) mail to each Holder a copy of the Prospectus forming part of
the Exchange Offer Registration Statement, together with an
appropriate letter of transmittal and related documents;
(ii) utilize the services of a depositary for the Exchange Offer
with an address in the Borough of Manhattan, The City of New
York; and
(iii) permit Holders to withdraw tendered Transfer Restricted
Securities at any time prior to the close of business, New
York time, on the last Business Day on which the Exchange
Offer shall remain open.
(d) As soon as practicable after the close of the Exchange Offer, the
Company shall:
(i) accept for exchange all Transfer Restricted Securities
tendered and not validly withdrawn pursuant to the Exchange
Offer;
(ii) deliver to the Trustee for cancellation all Transfer
Restricted Securities so accepted for exchange;
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<PAGE> 6
(iii) cause the Trustee to authenticate and deliver promptly to each
holder of Series A Notes a principal amount of Series B Notes
that is equal in principal amount to the Transfer Restricted
Securities of such holder so accepted for exchange.
(e) The Company shall indicate in a "Plan of Distribution" section
contained in the Prospectus contained in the Exchange Offer Registration
Statement that any Broker-Dealer who holds Series A Notes that are Transfer
Restricted Securities and that were acquired for its own account as a result of
market-making activities or other trading activities (other than Transfer
Restricted Securities acquired directly from the Company), may exchange such
Series A Notes pursuant to the Exchange Offer; however, such Broker-Dealer may
be deemed to be an "underwriter" within the meaning of the Act and must,
therefore, deliver a prospectus meeting the requirements of the Act in
connection with any resales of the Series B 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 the Prospectus contained in the Exchange
Offer Registration Statement. Such "Plan of Distribution" section shall also
contain all other information with respect to such resales by Broker-Dealers
that the Commission may require in order to permit such resales pursuant
thereto, but such Plan of Distribution shall not name any such Broker-Dealer or
disclose the amount of Notes held by any such Broker-Dealer except to the extent
required by the Commission as a result of a change in policy after the date of
this Agreement.
The Company and the Guarantor shall use their best efforts to keep the
Exchange Offer Registration Statement continuously effective, supplemented and
amended as required by the provisions of Section 6(c) below to the extent
necessary to ensure that it is available for resales of Notes acquired by
Broker-Dealers for their own accounts as a result of market-making activities or
other trading activities, and to ensure that it conforms with the requirements
of this Agreement, the Act and the policies, rules and regulations of the
Commission as announced from time to time, for a period of one hundred twenty
(120) days from the date on which the Exchange Offer is Consummated.
The Company shall provide sufficient copies of the latest version of such
Prospectus to Broker-Dealers promptly upon request at any time during such
period in order to facilitate such resales.
Section 4. Shelf Registration.
(a) Shelf Registration. If (i) the Company and the Guarantor are not
required to file an Exchange Offer Registration Statement and the Company is not
required to consummate the Exchange Offer because the Exchange Offer is not
permitted by applicable law or Commission policy (after the procedures set forth
in Section 6(a) below have been complied with) or (ii) any Holder or Holders of
Transfer Restricted Securities shall notify the Company within
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<PAGE> 7
twenty (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 Series B Notes acquired by it in the Exchange Offer to the public without
delivering a prospectus and that the Prospectus contained in the Exchange Offer
Registration Statement is not appropriate or available for such resales by such
Holder, or (C) that any such Holder is a Broker-Dealer and holds Series A Notes
acquired directly from the Company or one of its affiliates, then the Company
and the Guarantor shall:
(x) cause to be filed a shelf registration statement pursuant to
Rule 415 under the Act, which may be an amendment to the Exchange Offer
Registration Statement (in either event, the "Shelf Registration Statement") on
or prior to the latest to occur of (1) the 30th day after the date on which the
Company determines that it is not required to file the Exchange Offer
Registration Statement, (2) the 30th day after the date on which the Company
receives notice from a Holder of Transfer Restricted Securities as contemplated
by clause (ii) above, and (3) the 45th day after the Closing Date, which Shelf
Registration Statement shall provide for resales of all Transfer Restricted
Securities the Holders of which shall have provided the information required
pursuant to Section 4(b) hereof (with each of the deadlines in (1), (2) and (3)
hereof constituting a "Shelf Filing Deadline"); and
(y) use their best efforts to cause such Shelf Registration
Statement to be declared effective by the Commission on or before the later of
the 30th business day after the applicable Shelf Filing Deadline but in no case
later than 60 days after the date such Shelf Registration Statement is filed.
The Company and the Guarantor shall keep such Shelf Registration Statement
continuously effective, supplemented and amended as required by the provisions
of Sections 6(b) and (c) hereof to the extent necessary to ensure that it is
available for resales of Notes by the Holders of Transfer Restricted Securities
entitled to the benefit of this Section 4(a), and to ensure that it conforms
with the requirements of this Agreement, the Act and the policies, rules and
regulations of the Commission as announced from time to time, from the effective
date of the Shelf Registration Statement until the earlier of (x) 36 months from
the effective date, (y) 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 (z) the date on which all
Transfer Restricted Securities may be sold without registration pursuant to Rule
144(k) of the Act. The Company shall not permit any securities other than the
Transfer Restricted Securities to be included in the Shelf Registration.
(b) Provision by Holders of Certain Information in Connection with the
Shelf Registration Statement. No Holder of Transfer Restricted Securities may
include any of its Transfer Restricted Securities in any Shelf Registration
Statement pursuant to this Agreement unless and until such Holder furnishes to
the Company in writing, within 20 business days after receipt of a request
therefor, such information as the Company may reasonably request for use in
connection with any Shelf Registration Statement or Prospectus or preliminary
Prospectus
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<PAGE> 8
included therein. No Holder of Transfer Restricted Securities shall be entitled
to Liquidated Damages pursuant to Section 5 hereof unless and until such Holder
shall have provided the Company in writing, within 20 business days after
receipt of a request therefor, all such reasonably requested information. Each
Holder as to which any Shelf Registration Statement is being effected agrees to
furnish promptly to the Company all information reasonably required to be
disclosed in order to make the information previously furnished to the Company
by such Holder not materially misleading.
Section 5. Liquidated Damages.
If (i) the Exchange Offer Registration Statement is not filed with the
Commission on or prior to 45 days after the Closing Date or a Shelf Registration
Statement required by this Agreement is not filed with the Commission on or
prior to the applicable Shelf Filing Deadline specified in Section 4 (a)(x)
hereof, (ii) the Exchange Offer Registration Statement or Shelf Registration
Statement has not been declared effective by the Commission on or prior to the
date specified for such effectiveness in Section 3 or 4, respectively, of this
Agreement (the "Effectiveness Target Date"), (iii) the Exchange Offer has not
been Consummated within 30 days following the date the Exchange Offer
Registration Statement is declared effective by the Commission or (iv) the
Exchange Offer Registration Statement or Shelf Registration Statement required
by this Agreement is filed and declared effective but shall thereafter cease to
be effective pursuant to a stop order or otherwise during the time period
specified herein that such Registration Statement is required to remain
effective (each such event referred to in clauses (i) through (iv), a
"Registration Default"), the Company and the Guarantor hereby jointly and
severally agree to pay liquidated damages ("Liquidated Damages") to each Holder
of Transfer Restricted Securities in an amount equal to $.05 per week per $1,000
principal amount of Transfer Restricted Securities held by such Holder for each
week or portion thereof that the Registration Default continues. The weekly
Liquidated Damages associated with a Registration Default shall increase by an
additional increment equal to $.05 per week per $1,000 principal amount 90 days
after commencement of the Registration Default and shall thereafter increase by
an additional increment equal to $.05 per week per $1,000 principal amount at
the end of each subsequent 90 day period for so long as the Registration Default
continues; provided however that in no event shall the Liquidated Damages
associated with a Registration Default exceed $.35 per week per $1,000 principal
amount. The Company shall notify the Trustee within one Business Day after each
and every date on which a Registration Default occurs. All accrued Liquidated
Damages on each Damages Payment Date shall be paid to Record Holders by the
Company in the same manner as interest payments on the Notes, as provided in the
Indenture. Following the cure of all Registration Defaults relating to any
particular Transfer Restricted Securities, the accrual of Liquidated Damages
with respect to such Transfer Restricted Securities will cease.
All obligations of the Company and the Guarantor set forth in the
preceding paragraph that are outstanding with respect to any Transfer Restricted
Security at the time such security ceases to be a Transfer Restricted Security
shall survive until such time as all such obligations with respect to such
Security shall have been satisfied in full.
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<PAGE> 9
Section 6. Registration Procedures.
(a) Exchange Offer Registration Statement. In connection with the Exchange
Offer, the Company and the Guarantor shall comply with all of the provisions of
Section 6(c) below, shall use their best efforts to effect such exchange to
permit the sale of Transfer Restricted Securities being sold in accordance with
the intended method or methods of distribution thereof, and shall comply with
all of the following provisions:
(i) If in the reasonable opinion of counsel to the Company there is
a question as to whether the Exchange Offer is permitted by applicable law, the
Company and the Guarantor hereby agree to seek a no-action letter or other
favorable decision from the Commission allowing the Company and the Guarantor to
Consummate an Exchange Offer for such Series A Notes. The Company and the
Guarantor hereby agree to pursue the issuance of such a decision to the
Commission staff level but shall not be required to take action to effect a
change of Commission policy. The Company and the Guarantor agree, however, to
(A) participate in telephonic conferences with the Commission, (B) deliver to
the Commission staff an analysis prepared by counsel to the Company setting
forth the legal bases, if any, upon which such counsel has concluded that such
an Exchange Offer should be permitted and (C) pursue a resolution (which need
not be favorable and may be resolved by an oral, rather than written,
communication from the Commission staff) by the Commission staff of such
submission with reasonable diligence.
(ii) All Holders of Transfer Restricted Securities participating in
the Exchange Offer shall cooperate in the Company's preparations for the
Exchange Offer. Each Holder of Transfer Restricted Securities shall furnish,
upon the request of the Company, prior to the Consummation of the Exchange
Offer, a written representation to the Company (which may be contained in the
letter of transmittal contemplated by the Exchange Offer Registration Statement)
to the effect that (A) it is not an affiliate of the Company within the meaning
of Rule 405 under the Act, (B) it is not engaged in, and does not intend to
engage in, and has no arrangement or understanding with any person to
participate in, a distribution of the Series B Notes to be issued in the
Exchange Offer and (C) it is acquiring the Series B Notes in its ordinary course
of business. Each Holder hereby acknowledges and agrees that, any Broker-Dealer
and any such Holder using the Exchange Offer to participate in a distribution of
the Series B Notes to be acquired in the Exchange Offer (1) could not under
Commission policy as in effect on the date of this Agreement rely on the
position of the Commission enunciated in Morgan Stanley and Co., Inc. (available
June 5, 1991) and Exxon Capital Holdings Corporation (available May 13, 1988),
as interpreted in the Commission's letter to Shearman & Sterling dated July 2,
1993, and similar no-action letters (including any no-action letter obtained
pursuant to clause (i) above), and (2) must comply with the registration and
prospectus delivery requirements of the Act in connection with a secondary
resale transaction and that such a secondary resale transaction should be
covered by an effective registration statement containing the selling security
holder information required by Item 507 or 508, as applicable, of Regulation S-K
if the resales are of
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<PAGE> 10
Series B Notes obtained by such Holder in exchange for Series A Notes acquired
by such Holder directly from the Company.
(iii) Prior to effectiveness of the Exchange Offer Registration
Statement, the Company shall provide a supplemental letter to the Commission (A)
stating that the Company is registering the Exchange Offer in reliance on the
position of the Commission enunciated in Exxon Capital Holdings Corporation
(available May 13, 1988), Morgan Stanley and Co., Inc. (available June 5, 1991)
and, if applicable, any no-action letter obtained pursuant to clause (i) above
and (B) including a representation that neither the Company nor the Guarantor
has entered into any arrangement or understanding with any Person to distribute
the Series B Notes to be received in the Exchange Offer and that, to the
Company's information and belief, each Holder participating in the Exchange
Offer is acquiring the Series B Notes in its ordinary course of business and has
no arrangement or understanding with any Person to participate in the
distribution of the Series B Notes received in the Exchange Offer.
(b) Shelf Registration Statement. In connection with the Shelf
Registration Statement, the Company and the Guarantor shall comply with all the
provisions of Section 6(c) below and shall use their best efforts to effect such
registration to permit the sale of the Transfer Restricted Securities being sold
in accordance with the intended method or methods of distribution thereof, and
pursuant thereto the Company will as expeditiously as possible prepare and file
with the Commission a Registration Statement relating to the registration on any
appropriate form under the Act, which form shall be available for the sale of
the Transfer Restricted Securities in accordance with the intended method or
methods of distribution thereof.
(c) General Provisions. In connection with any Registration Statement and
any Prospectus required by this Agreement to permit the exchange, sale or resale
of Transfer Restricted Securities, (including, without limitation, any
Registration Statement and the related Prospectus required to permit resales of
Notes by Broker-Dealers), the Company and the Guarantor shall:
(i) use their best efforts to keep such Registration Statement
continuously effective and provide all requisite financial statements
(including, if required by the Act or any regulation thereunder, financial
statements of the Guarantor) for the period specified in Section 3 or 4 of this
Agreement, as applicable; upon the occurrence of any event that would cause any
such Registration Statement or the Prospectus contained therein (A) to contain a
material misstatement or omission or (B) not to be effective and usable for
resale of Transfer Restricted Securities during the period required by this
Agreement, the Company and the Guarantor shall file promptly an appropriate
amendment to such Registration Statement, in the case of clause (A), correcting
any such misstatement or omission, and, in the case of either clause (A) or (B),
use its best efforts to cause such amendment to be declared effective and such
Registration Statement and the related Prospectus to become usable for their
intended purpose(s) as soon as practicable thereafter;
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<PAGE> 11
(ii) prepare and file with the Commission such amendments and
post-effective amendments to the Registration Statement as may be necessary to
keep the Registration Statement effective for the applicable period set forth in
Section 3 or 4 hereof as applicable, or such shorter period as will terminate
when all Transfer Restricted Securities covered by such Registration Statement
have been sold; cause the Prospectus to be supplemented by any required
Prospectus supplement, and as so supplemented to be filed pursuant to Rule 424
under the Act, and to comply fully with the applicable provisions of Rule 424
under the Act in a timely manner; and comply with the provisions of the Act with
respect to the disposition of all securities covered by such Registration
Statement during the applicable period in accordance with the intended method or
methods of distribution by the sellers thereof set forth in such Registration
Statement or supplement to the Prospectus;
(iii) advise the underwriter(s), if any, and selling Holders
promptly and, if requested by such Persons, to confirm such advice in writing
(A) when the Prospectus or any Prospectus supplement or post-effective amendment
has been filed, and, with respect to any Registration Statement or any
post-effective amendment thereto, when the same has become effective, (B) of any
request by the Commission for amendments to the Registration Statement or
amendments or supplements to the Prospectus or for additional information
relating thereto, (C) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement under the Act or of
the suspension by any state securities commission of the qualification of the
Transfer Restricted Securities for offering or sale in any jurisdiction, or the
initiation of any proceeding for any of the preceding purposes, and (D) of the
existence of any fact or the happening of any event that makes any statement of
a material fact made in the Registration Statement, the Prospectus, any
amendment or supplement thereto, or any document incorporated by reference
therein untrue (unless amended and corrected by disclosure in a subsequently
filed document that is incorporated therein by reference), or that requires the
making of any additions to or changes in the Registration Statement or the
Prospectus in order to make the statements therein not misleading (such notice
described in this clause (D) being referred to herein as a "Suspension Notice");
(iv) if at any time the Commission shall issue any stop order
suspending the effectiveness of the Registration Statement, or any state
securities commission or other regulatory authority shall issue an order
suspending the qualification or exemption from qualification of the Transfer
Restricted Securities under state securities or Blue Sky laws, the Company and
the Guarantor shall use their best efforts to obtain the withdrawal or lifting
of such order at the earliest possible time;
(v) before filing with the Commission, furnish to each of the
selling Holders and their counsel and each of the underwriter(s), if any, copies
of any Registration Statement or any Prospectus included therein or any
amendments or supplements to any such Registration Statement or Prospectus,
which documents will be subject to the review of such Holders and
underwriter(s), if any, for a period of no more than five (5) business days. The
Company will not file any such Registration Statement or Prospectus or any
amendment or
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<PAGE> 12
supplement to any such Registration Statement or Prospectus (including all such
documents incorporated by reference), and the Company shall use its good faith
efforts to correct such Registration Statement or Prospectus as soon as
practicable, to which a selling Holder of Transfer Restricted Securities covered
by such Registration Statement or the underwriter(s), if any, shall reasonably
object within five (5) business days after the receipt thereof. A selling Holder
or underwriter, if any, shall be deemed to have reasonably objected to such
filing if such Registration Statement, amendment, Prospectus or supplement, as
applicable, as proposed to be filed, contains a material misstatement or omits
to state a material fact required to be stated therein or necessary to make the
statements, in light of the circumstances under which they were made, not
misleading;
(vi) make available at reasonable times for inspection by the
selling Holders, any underwriter participating in any disposition pursuant to
such Registration Statement, and any attorney or accountant retained by such
selling Holders or any of the underwriters, all financial and other records,
pertinent corporate documents and properties of the Company and the Guarantor
and cause the Company's and Guarantor's officers, managers and employees to
supply all information reasonably requested by any such Holder, underwriter,
attorney or accountant in connection with such Registration Statement subsequent
to the filing thereof and prior to its effectiveness;
(vii) if requested by any selling Holders or the underwriter(s), if
any, promptly incorporate in any Registration Statement or Prospectus, pursuant
to a supplement or post-effective amendment if necessary, such information as
such selling Holders and underwriter(s), if any, may reasonably request to have
included therein, including, without limitation, information relating to the
"Plan of Distribution" of the Transfer Restricted Securities, information with
respect to the principal amount of Transfer Restricted Securities being sold to
such underwriters, the purchase price being paid therefor and any other terms of
the offering of the Transfer Restricted Securities to be sold in such offering;
and make all required filings of such Prospectus supplement or post-effective
amendment as soon as practicable after the Company is notified of the matters to
be incorporated in such Prospectus supplement or post-effective amendment;
(viii) cause the Transfer Restricted Securities covered by the
Registration Statement to be rated with the appropriate rating agencies, if so
requested by the Holders of a majority in aggregate principal amount of the
Notes covered thereby or the underwriter(s), if any;
(ix) furnish to each selling Holder and each of the underwriter(s)
if any, without charge, at least one copy of the Registration Statement, as
first filed with the Commission, and of each amendment thereto and, if
requested, any documents incorporated by reference therein;
(x) deliver to each selling Holder and each of the underwriter(s),
if any, without charge, as many copies of the Prospectus (including each
preliminary prospectus) and any
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<PAGE> 13
amendment or supplement thereto as such Persons reasonably may request; the
Company and the Guarantor hereby consent to the use of the Prospectus and any
amendment or supplement thereto by each of the selling Holders and each of the
underwriter(s), if any, in connection with the offering and the sale of the
Transfer Restricted Securities covered by the Prospectus or any amendment or
supplement thereto;
(xi) enter into, and cause the Guarantor to enter into, and deliver
an underwriting agreement and other reasonable and customary agreements and
certificates and make, and cause the Guarantor to make, such representations and
warranties as are reasonable and customary in connection with a registered
offering, and whether or not an underwriting agreement is entered into and
whether or not the registration is an Underwritten Registration, the Company and
the Guarantor shall:
(A) furnish to each Purchaser, each selling Holder and each
underwriter, if any, in such substance and scope as they may reasonably request
and as are customarily made by issuers to underwriters in primary underwritten
offerings upon the date of the Consummation of the Exchange Offer and, if
applicable, the effectiveness of the Shelf Registration Statement:
(1) a certificate, dated the date of Consummation of the
Exchange Offer or the date of effectiveness of the Shelf Registration Statement,
as the case may be, signed by (y) the President or any Vice President and (z) a
principal financial or accounting officer of each of the Company and the
Guarantor confirming, as of the date thereof, the matters set forth in
Paragraphs (c)(i), (ii), (iii) and (v) of Section 7 of the Purchase Agreement
and such other matters as such parties may reasonably request;
(2) an opinion, dated the date of Consummation of the
Exchange Offer or the date of effectiveness of the Shelf Registration Statement,
as the case may be, of counsel for the Company and the Guarantor, in form and
substance customary for transactions of this kind and reasonably satisfactory to
the Initial Purchaser's counsel, including a statement to the effect that the
counsel providing each such opinion or opinions has participated in conferences
with officers and other representatives of the Company and the Guarantor, and
representatives of the independent public accountants for the Company and the
Guarantor, in connection with the preparation of such Registration Statement and
the related Prospectus and have considered the matters required to be stated
therein and the statements contained therein, although such counsel has not
independently verified the accuracy, completeness or fairness of such
statements; and that such counsel advises that, on the basis of the foregoing
(relying as to materiality to a large extent upon facts provided to such counsel
by officers and other representatives of the Company and the Guarantor and
without independent check or verification), no facts have come to such counsel's
attention that caused such counsel to believe that the applicable Registration
Statement, at the time such Registration Statement or any post-effective
amendment thereto became effective, and, in the case of the Exchange Offer
Registration Statement, as of the date of Consummation, contained an untrue
statement of a material fact or
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<PAGE> 14
omitted to state a material fact required to be stated therein or necessary to
make the statements therein not misleading, or that, the Prospectus contained in
such Registration Statement as of its date and, in the case of the opinion dated
the date of Consummation of the Exchange Offer, as of the date of Consummation,
contained an untrue statement of a material fact or omitted to state a material
fact necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. Without limiting the
foregoing, such counsel may state further that such counsel assumes no
responsibility for, and has not independently verified, the accuracy,
completeness or fairness of the financial statements, notes and schedules and
other financial data included in any Registration Statement contemplated by this
Agreement or the related Prospectus; and
(3) a customary comfort letter, dated as of the date of
Consummation of the Exchange Offer or the date of effectiveness of the Shelf
Registration Statement, as the case may be, from the Company's and the
Guarantor's independent accountants, in the customary form and covering matters
of the type customarily covered in comfort letters by underwriters in connection
with primary underwritten offerings, and affirming the matters set forth in the
letters delivered pursuant to Section 7(d) of the Purchase Agreement, without
exception;
(B) set forth in full or incorporate by reference in the
underwriting agreement, if any, the indemnification provisions and procedures of
Section 8 hereof with respect to all parties to be indemnified pursuant to said
Section; and
(C) deliver such other documents and certificates as may be
reasonably requested by such parties to evidence compliance with clause (A)
above and with any customary conditions contained in the underwriting agreement
or other agreement entered into by the Company pursuant to this clause (xi), if
any.
(xii) prior to any public offering of Transfer Restricted
Securities, cooperate with, and cause the Guarantor to cooperate with, the
selling Holders, the underwriter(s), if any, and their respective counsel in
connection with the registration and qualification of the Transfer Restricted
Securities under the securities or Blue Sky laws of such jurisdictions as the
selling Holders or underwriter(s) may request and do any and all other acts or
things necessary or advisable to enable the disposition in such jurisdictions of
the Transfer Restricted Securities covered by the Shelf Registration Statement;
provided, however, that neither the Company nor the Guarantor shall be required
to register or qualify as a foreign corporation where it is not now so qualified
or to take any action that would subject it to the service of process in suits
or to taxation, other than as to matters and transactions relating to the
Registration Statement, in any jurisdiction where it is not now so subject;
(xiii) shall issue, upon the request of any Holder of Series A Notes
covered by the Shelf Registration Statement, Series B Notes, having an aggregate
principal amount equal to the aggregate principal amount of Series A Notes
surrendered to the Company
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<PAGE> 15
by such Holder in exchange therefor or being sold by such Holder; such Series B
Notes to be registered in the name of such Holder or in the name of the
purchaser(s) of such Notes, as the case may be; in return, the Series A Notes
held by such Holder shall be surrendered to the Company for cancellation;
(xiv) cooperate with the selling Holders and the underwriter(s), if
any, to facilitate the timely preparation and delivery of certificates
representing Transfer Restricted Securities to be sold and not bearing any
restrictive legends; and enable such Transfer Restricted Securities to be in
such denominations and registered in such names as the Holders or the
underwriter(s), if any, may request at least two business days prior to any sale
of Transfer Restricted Securities made by such underwriter;
(xv) use its best efforts to cause the Transfer Restricted
Securities covered by the Registration Statement to be registered with or
approved by such other governmental agencies or authorities as may be necessary
to enable the seller or sellers thereof or the underwriters, if any, to
consummate the disposition of such Transfer Restricted Securities, subject to
the proviso contained in clause (xii) above;
(xvi) if any fact or event contemplated by Section (6)(c)(iii)(D)
above shall exist or have occurred, prepare a supplement or post-effective
amendment to the Registration Statement or related Prospectus or any document
incorporated therein by reference or file any other required document so that,
as thereafter delivered to the purchasers of Transfer Restricted Securities, the
Prospectus will not contain an untrue statement of a material fact or omit to
state any material fact necessary to make the statements therein not misleading;
(xvii) provide a CUSIP number for all Transfer Restricted Securities
not later than the effective date of the Registration Statement and provide the
Trustee under the Indenture with printed certificates for the Transfer
Restricted Securities which are in a form eligible for deposit with The
Depository Trust Company;
(xviii) cooperate and assist in any filings required to be made with
the NASD and in the performance of any due diligence investigation by any
underwriter (including any "qualified independent underwriter") that is required
to be retained in accordance with the rules and regulations of the NASD, and use
its reasonable best efforts to cause such Registration Statement to become
effective and approved by such governmental agencies or authorities as may be
necessary to enable the Holders selling Transfer Restricted Securities to
consummate the disposition of such Transfer Restricted Securities;
(xix) otherwise use its best efforts to comply with all applicable
rules and regulations of the Commission, and make generally available to its
security holders, as soon as practicable, a consolidated earnings statement
meeting the requirements of Rule 158 (which need not be audited) for the
twelve-month period (A) commencing at the end of any fiscal quarter in which
Transfer Restricted Securities are sold to underwriters in a firm or best
efforts
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<PAGE> 16
Underwritten Offering or (B) if not sold to underwriters in such an offering,
beginning with the first month of the Company's first fiscal quarter commencing
after the effective date of the Registration Statement;
(xx) cause the Indenture to be qualified under the TIA not later
than the effective date of the first Registration Statement required by this
Agreement, and, in connection therewith, cooperate, and cause the Guarantor to
cooperate, with the Trustee and the Holders of Notes to effect such changes to
the Indenture as may be required for such Indenture to be so qualified in
accordance with the terms of the TIA; and execute, and cause the Guarantor to
execute, and use its best efforts to cause the Trustee to execute, all documents
that may be required to effect such changes and all other forms and documents
required to be filed with the Commission to enable such Indenture to be so
qualified in a timely manner;
(xxi) obtain an opinion of counsel to the Company addressed to the
Trustee for the benefit of all Holders of Transfer Restricted Securities
participating in the Exchange Offer and which includes an opinion that (i) the
Company has duly authorized, executed and delivered the Series B Notes and
related indenture, (ii) each of the Series B Notes and the related indenture
constitute a legal, valid and binding obligation of the Company, enforceable
against the Company in accordance with their respective terms (with customary
exceptions) and (iii) each of the Series B Notes are entitled to the benefits of
the Indenture or the indenture governing such Series B Notes as provided in this
Agreement.
(xxii) provide promptly to each Holder upon request each document
filed with the Commission pursuant to the requirements of Section 13 and Section
15 of the Exchange Act;
(xxiii) cause all Notes covered by the Registration Statement to be
listed on such securities exchange on which similar securities are listed if
requested by the Holders of a majority in aggregate principal amount of Notes or
any underwriter so long as the Company otherwise satisfies the listing
requirements of such securities exchange and such listing would not cause the
Company to incur substantial expenses; and
(xxiv) use their best efforts to take all other steps necessary to
effect the registration of the Transfer Restricted Securities covered by a
Registration Statement contemplated hereunder.
Each Holder agrees by acquisition of a Transfer Restricted Security that,
upon receipt of any Suspension Notice, such Holder will forthwith discontinue
disposition of Transfer Restricted Securities pursuant to the applicable
Registration Statement until such Holder's receipt of the copies of the
supplemented or amended Prospectus contemplated by Section 6(c)(xvi) hereof, or
until it is advised in writing (the "Advice") by the Company that the use of the
Prospectus may be resumed, and has received copies of any additional or
supplemental filings that are incorporated by reference in the Prospectus;
provided, however, that the Company shall not
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<PAGE> 17
give more than three Suspension Notices during any period of twelve consecutive
months and in no event shall the aggregate period during which a Holder of
Transfer Restricted Securities is prohibited from disposing of Transfer
Restricted Securities pursuant to this sentence exceed sixty (60) days in any
twelve consecutive months. If so directed by the Company, each Holder will
deliver to the Company (at the Company's expense) all copies, other than
permanent file copies then in such Holder's possession, of the Prospectus
covering such Transfer Restricted Securities that was current at the time of
receipt of such notice. In the event the Company shall give any such notice, the
time period regarding the effectiveness of such Registration Statement set forth
in Section 3 or 4 hereof, as applicable, shall be extended by the number of days
during the period from and including the date of the giving of such notice
pursuant to Section (6)(c)(iii)(D) hereof to and including the date when each
selling Holder covered by such Registration Statement shall have received the
copies of the supplemented or amended Prospectus contemplated by Section
6(c)(xvi) hereof or shall have received the Advice.
Section 7. Registration Expenses.
(a) All expenses incident to the Company's or the Guarantor's performance
of or compliance with this Agreement will be borne by the Company or the
Guarantor, regardless of whether a Registration Statement becomes effective,
including without limitation: (i) all registration and filing fees and expenses
(including filings made by any Purchaser or Holder with the NASD (and, if
applicable, the fees and expenses of any "qualified independent underwriter" and
its counsel that may be required by the rules and regulations of the NASD));
(ii) all fees and expenses of compliance with federal securities and state Blue
Sky or securities laws; (iii) all expenses of printing (including printing
certificates for the Series B Notes to be issued in the Exchange Offer and
printing of Prospectuses), messenger and delivery services and telephone; (iv)
all fees and disbursements of counsel for the Company, the Guarantor and,
subject to Section 7(b) below, the Holders of Transfer Restricted Securities;
(v) all application and filing fees in connection with listing Notes on a
national securities exchange or automated quotation system pursuant to the
requirements hereof; and (vi) all fees and disbursements of independent
certified public accountants of the Company and the Guarantor (including the
expenses of any special audit and comfort letters required by or incident to
such performances).
The Company and the Guarantor, in any event, will bear their respective
internal expenses (including, without limitation, all salaries and expenses of
its officers and employees performing legal or accounting duties), the expenses
of any annual audit and the fees and expenses of any Person, including special
experts, retained by the Company or the Guarantor.
(b) In connection with any Registration Statement required by this
Agreement (including, without limitation, the Exchange Offer Registration
Statement and the Shelf Registration Statement), the Company will reimburse the
Initial Purchaser and the Holders of Transfer Restricted Securities being
tendered in the Exchange Offer and/or resold pursuant to the "Plan of
Distribution" contained in the Exchange Offer Registration Statement or
registered pursuant to the Shelf Registration Statement, as applicable, for the
reasonable fees and
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<PAGE> 18
disbursements of not more than one counsel, who shall be chosen by the Holders
of a majority in principal amount of the Transfer Restricted Securities for
whose benefit such Registration Statement is being prepared.
(c) The Company shall have no obligation to pay any underwriting fees,
discounts or selling commissions attributable to the Notes being sold by the
selling Holders, which expenses shall be borne by the selling Holders.
Section 8. Indemnification.
(a) The Company and the Guarantor, jointly and severally, agree to
indemnify and hold harmless (i) each Holder, (ii) each person, if any, who
controls (within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act) any Holder (any of the persons referred to in this clause (ii)
being hereinafter referred to as a "controlling person") and (iii) the
respective officers, directors, partners, employees, representatives and agents
of any Holder or any controlling person (any person referred to in clause (i),
(ii) or (iii) may hereinafter be referred to as an "Indemnified Holder"), to the
fullest extent lawful, from and against any and all losses, claims, damages,
liabilities, judgments, actions and expenses (including without limitation and
as incurred, reimbursement of all reasonable costs of investigating, preparing,
pursuing or defending any claim or action, or any investigation or proceeding by
any governmental agency or body, commenced or threatened, including the
reasonable fees and expenses of counsel to any Indemnified Holder) directly or
indirectly caused by, related to, based upon, arising out of or in connection
with any untrue statement or alleged untrue statement of a material fact
contained in any Registration Statement, Prospectus or preliminary prospectus
(or any amendment or supplement thereto), or any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, except insofar as such losses, claims,
damages, liabilities or expenses are caused by (x) an untrue statement or
omission or alleged untrue statement or omission that is made in reliance upon
and in conformity with information relating to any of the Holders furnished in
writing to the Company by any of the Holders expressly for use therein or (y)
any untrue statement or omission contained in a preliminary prospectus or
amended preliminary prospectus delivered by a Holder to a purchaser if such
untrue statement or omission is corrected in the Prospectus and such Holder
failed to deliver a copy of the Prospectus at or prior to the sale of Series B
Notes to such purchaser.
In case any action or proceeding (including any governmental or regulatory
investigation or proceeding) shall be brought or asserted against any of the
Indemnified Holders with respect to which indemnity may be sought against the
Company, such Indemnified Holder (or the Indemnified Holder controlled by such
controlling person) shall promptly notify the Company and the Guarantor in
writing (provided, that the failure to give such notice shall not relieve the
Company or the Guarantor of their obligations pursuant to this Agreement to the
extent that such failure does not materially prejudice the position of the
Company or the Guarantor). Such Indemnified Holders shall have the right to
employ not more than one counsel in any such action and the fees and expenses of
such counsel shall be paid, as incurred, by the
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<PAGE> 19
Company and the Guarantor; provided, however, that the Indemnified Holders shall
reimburse the Company and the Guarantor for such fees and expenses in the event
that it is ultimately determined that such Indemnified Holders are not entitled
to indemnification hereunder. The Company and the Guarantor shall not, in
connection with any one such action or proceeding or separate but substantially
similar or related actions or proceedings in the same jurisdiction arising out
of the same general allegations or circumstances, be liable for the reasonable
fees and expenses of more than one separate firm of attorneys (in addition to
any local counsel) at any time for all such Indemnified Holders, which firm
shall be designated by the Holders. Notwithstanding anything contained herein to
the contrary, the Company and the Guarantor shall indemnify Indemnified Holders
for more than one counsel if the Indemnified Holders shall have been advised by
counsel that there may exist a conflict of interest among any of the Indemnified
Holders. The Company shall be liable for any settlement of any such action or
proceeding effected with the Company's prior written consent, which consent
shall not be withheld unreasonably, and the Company agrees to indemnify and hold
harmless any Indemnified Holder from and against any loss, claim, damage,
liability or expense by reason of any settlement of any action effected with the
written consent of the Company. The Company shall not, without the prior written
consent of each Indemnified Holder, settle or compromise or consent to the entry
of judgment in or otherwise seek to terminate any pending or threatened action,
claim, litigation or proceeding in respect of which indemnification or
contribution may be sought hereunder (whether or not any Indemnified Holder is a
party thereto), unless such settlement, compromise, consent or termination
includes an unconditional release of each Indemnified Holder from all liability
arising out of such action, claim, litigation or proceeding.
(b) In connection with a Registration Statement in which a Holder of
Transfer Restricted Securities is participating, each such Holder agrees,
severally and not jointly, to indemnify and hold harmless (i) the Company and
the Guarantor (ii) any person controlling (within the meaning of Section 15 of
the Act or Section 20 of the Exchange Act) the Company or the Guarantor, and
(iii) the respective officers, managers, partners, members, employees,
representatives and agents of the Company or the Guarantor and each such
controlling person (any person referred to in clause (i), (ii) or (iii) may
hereinafter be referred to as a "Company Indemnitee"), to the fullest extent
lawful, from and against any and all losses, claims, damages, liabilities,
judgments, actions and expenses (including without limitation and as incurred,
reimbursement of all reasonable costs of investigating, preparing, pursuing or
defending any claim or action, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, including the reasonable
fees and expenses of counsel to any Company Indemnitee) directly or indirectly
caused by, related to, based upon, arising out of or in connection with any
untrue statement or alleged untrue statement of a material fact contained in any
Registration Statement, Prospectus or preliminary prospectus (or any amendment
or supplement thereto), or any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, but only with respect to claims and actions based on
information relating to such Holder furnished in writing to the Company by such
Holder expressly for use in any Registration Statement; provided, however, that
such Holder shall not be liable in any such case to the extent that within a
reasonable time prior to the filing of any
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<PAGE> 20
such Registration Statement, Prospectus, preliminary prospectus or amendment
thereof or supplement thereto, such Holder has furnished in writing to the
Company information expressly for use in such Registration Statement,
Prospectus, preliminary prospectus or any amendment thereof or supplement
thereto which corrected or made not misleading information previously furnished
to the Company and such Holder specifically notified the Company in writing that
such information was delivered in order to correct or make not misleading
information previously furnished to the Company. In no event shall the liability
of any selling Holder hereunder be greater in amount than the dollar amount of
the proceeds received by such Holder upon the sale of the Transfer Restricted
Securities giving rise to such indemnification obligation. The Company shall be
entitled to receive indemnities from underwriters, selling brokers, dealer
managers and similar securities industry professionals participating in the
distribution, to the same extent as provided above with respect to information
so furnished in writing by such persons specifically for inclusion in any
Registration Statement.
In case any action or proceeding (including any governmental or regulatory
investigation or proceeding) shall be brought or asserted against any of the
Company Indemnitees with respect to which indemnity may be sought against any
Holder described above, such Company Indemnitee (or the Company Indemnitee
controlled by such controlling person) shall promptly notify such Holder in
writing (provided, that the failure to give such notice shall not relieve such
Holder of its obligations pursuant to this Agreement to the extent that such
failure does not prejudice the position of such Holder). Such Company
Indemnitees shall have the right to employ not more than one counsel in any such
action and the fees and expenses of such counsel shall be paid, as incurred, by
such Holder; provided, however, that the Company Indemnitees shall reimburse
such Holder for such fees and expenses in the event that it is ultimately
determined that such Company Indemnitees are not entitled to indemnification
hereunder. The indemnifying Holder shall not, in connection with any one such
action or proceeding or separate but substantially similar or related actions or
proceedings in the same jurisdiction arising out of the same general allegations
or circumstances, be liable for the reasonable fees and expenses of more than
one separate firm of attorneys (in addition to any local counsel) at any time
for all such Company Indemnitees, which firm shall be designated by the Company
Indemnitees. Notwithstanding anything contained herein to the contrary, the
indemnifying Holder shall indemnify Company Indemnitees for more than one
counsel if the Company Indemnitees shall have been advised by counsel that there
may exist a conflict of interest among any of the Company Indemnitees. The
indemnifying Holder shall be liable for any settlement of any such action or
proceeding effected with the indemnifying Holder's prior written consent, which
consent shall not be withheld unreasonably, and the indemnifying Holder agrees
to indemnify and hold harmless any Company Indemnitee from and against any loss,
claim, damage, liability or expense by reason of any settlement of any action
effected with the written consent of such Holder. The Indemnifying Holder shall
not, without the prior written consent of each Indemnified Holder, settle or
compromise or consent to the entry of judgment in or otherwise seek to terminate
any pending or threatened action, claim, litigation or proceeding in respect of
which indemnification or contribution may be sought hereunder (whether or not
any Company Indemnitee is a party thereto), unless such settlement, compromise,
consent or
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<PAGE> 21
termination includes an unconditional release of each Company Indemnitee from
all liability arising out of such action, claim, litigation or proceeding.
(c) If the indemnification provided for in this Section 8 is unavailable
to an indemnified party under Section 8(a) or Section 8(b) hereof (other than by
reason of exceptions provided in those Sections) in respect of any losses,
claims, damages, liabilities or expenses referred to therein, then each
applicable indemnifying party, in lieu of indemnifying such indemnified party,
shall contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages, liabilities or expenses in such
proportion as is appropriate to reflect the relative fault of the Company and
the Guarantor on the one hand and of the Indemnified Holder on the other in
connection with the statements or omissions which resulted in such losses,
claims, damages, liabilities or expenses, as well as any other relevant
equitable considerations. The relative fault of the Company and the Guarantor on
the one hand and of the Indemnified Holder on the other shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company or the Guarantor or by the
Indemnified Holder and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The amount paid or payable by a party as a result of the losses, claims,
damages, liabilities and expenses referred to above shall be deemed to include,
subject to the limitations set forth in the second paragraph of Section 8(a),
any legal or other fees or expenses reasonably incurred by such party in
connection with investigating or defending any action or claim.
The Company, the Guarantor and each Holder of Transfer Restricted
Securities agree that it would not be just and equitable if contribution
pursuant to this Section 8(c) were determined by pro rata allocation (even if
the Holders were treated as one entity for such purpose) or by any other method
of allocation which does not take account of the equitable considerations
referred to in the immediately preceding paragraph. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Holders' obligations to contribute pursuant to
this Section 8(c) are several in proportion to the respective principal amount
of Transfer Restricted Securities held by each of the Holders hereunder and not
joint.
Section 9. Rule 144A.
Upon the request of any Holder, the Company shall deliver to such holder
following the receipt by the Company of such request, the information required
by Rule (d)(4) of Rule 144A under the Act, as such rule may be amended from time
to time or any similar rule or regulation hereafter adopted by the Commission
("Rule 144A"), and will take such further action as any Holder may request, all
to the extent required from time to time by Rule 144A to enable such Holder to
sell Transfer Restricted Securities without registration under the Act within
the limitations or the exemptions provided by Rule 144A. All information shall
be "reasonably
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<PAGE> 22
current" as defined in Rule 144A. The Company shall also furnish such
information during the pendency of any suspension of the effectiveness of the
Registration Statement.
Section 10. Participation In Underwritten Registrations.
No Holder may participate in any Underwritten Registration hereunder
unless such Holder (a) agrees to sell such Holder's Transfer Restricted
Securities on the basis provided in any underwriting arrangements approved by
the Persons entitled hereunder to approve such arrangements and (b) completes
and executes all reasonable questionnaires, powers of attorney, indemnities,
underwriting agreements, lock-up letters and other documents required under the
terms of such underwriting arrangements.
Section 11. Selection Of Underwriters.
The Holders of Transfer Restricted Securities covered by the Shelf
Registration Statement who desire to do so may sell such Transfer Restricted
Securities in an Underwritten Offering. In any such Underwritten Offering, the
investment banker or investment bankers and manager or managers that will
administer the offering will be selected by the Holders of a majority in
aggregate principal amount of the Transfer Restricted Securities included in
such offering; provided, that such investment bankers and managers must be
reasonably satisfactory to the Company.
Section 12. Miscellaneous.
(a) Remedies. To the extent permitted by law, the Company and the
Guarantor agree that monetary damages (including the liquidated damages
contemplated hereby) would not be adequate compensation for any loss incurred by
reason of a breach by it of the provisions of this Agreement and hereby agree to
waive the defense in any action for specific performance that a remedy at law
would be adequate.
(b) No Inconsistent Agreements. The Company will not, and will cause the
Guarantor not to, on or after the date of this Agreement, enter into any
agreement with respect to its securities that is inconsistent with the rights
granted to the Holders in this Agreement or otherwise conflicts with the
provisions hereof. The rights granted to the Holders hereunder do not in any way
conflict with and are not inconsistent with the rights granted to the holders of
the Company's securities under any agreement in effect on the date hereof.
(c) Adjustments Affecting the Notes. The Company will not take any action,
or permit any change to occur, with respect to the Notes that would materially
and adversely affect the ability of the Holders to Consummate any Exchange
Offer.
(d) Amendments and Waivers. The provisions of this Agreement may not be
amended, modified or supplemented, and waivers or consents to or departures from
the provisions
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<PAGE> 23
hereof may not be given unless the Company and the Guarantor have obtained the
written consent of Holders of not less than a majority of the outstanding
principal amount of Transfer Restricted Securities. Notwithstanding the
foregoing, a waiver or consent to departure from the provisions hereof that
relates exclusively to the rights of Holders whose securities are being tendered
pursuant to the Exchange Offer and that does not affect directly or indirectly
the rights of other Holders whose securities are not being tendered pursuant to
such Exchange Offer may be given by the Holders of not less than a majority of
the outstanding principal amount of Transfer Restricted Securities being
tendered or registered.
(e) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, first-class mail
(registered or certified, return receipt requested), telex, telecopier, or air
courier guaranteeing overnight delivery:
(i) if to a Holder, at the address set forth on the records of the
registrar under the Indenture, with a copy to the registrar under the Indenture;
and
(ii) if to the Company or the Guarantor:
Horseshoe Gaming, L.L.C.
4024 Industrial Road
Las Vegas, Nevada 89103
Telecopier No.: (702) 650-0080
Attention: Chief Financial Officer
with a copy to:
Riordan & McKinzie
695 Town Center Drive, Suite 1500
Costa Mesa, California 92626
Telecopier No.: (714) 549-3244
Attention: James H. Shnell, Esq.
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five business
days after being deposited in the mail, postage prepaid, if mailed; when
answered back, if telexed; when receipt acknowledged, if telecopied; and on the
next business day, if timely delivered to an air courier guaranteeing overnight
delivery.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee at the
address specified in the Indenture.
(f) Successors and Assigns. This Agreement shall inure to the benefit of
and be binding upon the successors and assigns of each of the parties, including
without limitation
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<PAGE> 24
and without the need for an express assignment subsequent Holders of Transfer
Restricted Securities; provided, however, that this Agreement shall not inure to
the benefit of or be binding upon a successor or assign of a Holder unless and
to the extent such successor or assign acquired Transfer Restricted Securities
from such Holder.
(g) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(h) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(i) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE
CONFLICT OF LAW RULES THEREOF.
(j) Severability. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.
(k) Entire Agreement. This Agreement together with the other Operative
Documents (as defined in the Purchase Agreement) is intended by the parties as a
final expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein
with respect to the registration rights granted by the Company with respect to
the Transfer Restricted Securities. This Agreement supersedes all prior
agreements and understandings between the parties with respect to such subject
matter.
(l) Notes Held by the Company or its Affiliates. Whenever the consent or
approval of Holders of a specified percentage of Transfer Restricted Securities
is required hereunder, Transfer Restricted Securities held by the Company, the
Guarantor or their respective Affiliates shall not be counted in determining
whether such consent or approval was given by the Holders of such required
percentage.
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<PAGE> 25
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
HORSESHOE GAMING, L.L.C.
By: HORSESHOE GAMING, INC., its Manager
By: /s/ PAUL R. ALANIS
-------------------------------------
Paul Alanis
President
ROBINSON PROPERTY GROUP LIMITED
PARTNERSHIP
By: HORSESHOE GP, INC., its General Partner
By: /s/ PAUL R. ALANIS
-------------------------------------
Paul Alanis
President
WASSERSTEIN PERELLA SECURITIES, INC.
By: /s/ JAMES C. KINGSBERY
-------------------------------------
Name: James C. Kingsbery
Title: Treasurer
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<PAGE> 1
EXHIBIT 4.46
ROBINSON PROPERTY GROUP LIMITED PARTNERSHIP,
A MISSISSIPPI LIMITED PARTNERSHIP
INTERCOMPANY SENIOR SECURED NOTE DUE JUNE 15, 2007
$25,000,000
New York, New York
June 25, 1997
________________________________________________________________________________
FOR VALUE RECEIVED, Robinson Property Group Limited
Partnership (the "Company"), a Mississippi limited partnership with its
principal place of business located at 1021 Casino Center Drive, Robinsonville,
Mississippi 38664, hereby promises to pay, jointly, severally and solidarity,
to the order of Horseshoe Gaming, L.L.C. (the "Payee"), a Delaware limited
liability company with its principal place of business located at 4024
Industrial Road, Las Vegas, Nevada 89103, or its registered assigns, the
principal amount of TWENTY-FIVE MILLION DOLLARS ($25,000,000), or such lesser
amount as shall equal the aggregate unpaid principal amount of this Note, and
to pay interest thereon, as provided herein. This Note is referred to herein
individually as this "Note" and, collectively, together with any other Notes
which may be issued pursuant to Section 5 hereof, as the "Notes." Certain
capitalized terms used in this Note are defined in Section 10 below.
________________________________________________________________________________
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR REGISTERED OR QUALIFIED UNDER ANY STATE SECURITIES
LAWS. THIS SECURITY MAY NOT BE SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED
UNLESS THE PROPOSED TRANSACTION DOES NOT REQUIRE REGISTRATION OR QUALIFICATION
UNDER FEDERAL OR STATE SECURITIES LAWS OR UNLESS THE PROPOSED TRANSACTION IS
REGISTERED OR QUALIFIED AS REQUIRED.
THIS SECURITY IS SUBJECT TO REPURCHASE IF THE OWNERSHIP OF
THIS SECURITY BY ANY PERSON OR ENTITY WILL PRECLUDE, INTERFERE WITH, THREATEN
OR DELAY THE ISSUANCE, MAINTENANCE, EXISTENCE OR REINSTATEMENT OF ANY GAMING OR
LIQUOR LICENSE, OR PERMIT OR APPROVAL OF ANY GAMING AUTHORITY OR RESULT IN THE
IMPOSITION OF BURDENSOME TERMS ON SUCH LICENSE, PERMIT OR APPROVAL.
THIS SECURITY IS SUBJECT TO REPURCHASE BY THE COMPANY, IN THE
EVENT THE MISSISSIPPI GAMING COMMISSION (OR ITS SUCCESSOR) FINDS THAT THE
BENEFICIAL OWNER OF SUCH SECURITY IS UNSUITABLE TO BE CONNECTED WITH A LICENSED
GAMING ENTERPRISE. REFERENCE IS MADE TO SECTION 75- 76-233 OF THE MISSISSIPPI
GAMING CONTROL ACT AND REGULATION II(F)(2) OF THE REGULATIONS OF THE
MISSISSIPPI GAMING COMMISSION FOR A COMPLETE DESCRIPTION OF THE FOREGOING
RESTRICTIONS.
________________________________________________________________________________
<PAGE> 2
1. Payments of Interest. Interest (computed on the
basis of a 360-day year of twelve 30 day months) on the unpaid principal amount
shall be payable at the rate of 9.39% per annum from the date hereof, payable
semi-annually in arrears on each June 15 and December 15 of each year,
commencing on December 15, 1997, until said principal amount shall have become
due and payable.
2. Payments of Principal.
2.1 Optional Redemption. The Notes may be redeemed, in
whole or in part, on a pro rata basis, at any time or from time to time, at the
option of the Company at 100% of the outstanding principal amount hereof,
together with interest accrued thereon to the date fixed for such optional
redemption, without premium or penalty. Upon receipt of any redemption
payment, the holder of this Note (the "Holder"; together with the holders of
other Notes, the "Holders") shall make a notation on this Note of such payment
received and shall provide the Company with evidence acceptable to the Company
that the payment has been received by the Holder and so noted.
2.2 Mandatory Redemptions.
a. The Company shall be required to apply 100% of Cash
Flow Available for Redemption to redeem the Notes, in inverse order of
maturity, on a pro rata basis; in each case at 100% of the principal amount of
Notes so to be redeemed, together with accrued interest thereon to the date of
such redemption, within 45 days of the end of each of the Company's first three
fiscal quarters and within 75 days after the end of each of the Company's
fiscal years. The end of year redemption payment shall take account of all
payments made in the preceding three quarters and appropriate adjustments shall
be taken.
b. The remaining outstanding principal balance of the
Notes plus all interest accrued thereon is due in full on June 15, 2007.
c. The Company will give written notice of any
redemption of the Notes pursuant to paragraph (a) of this Section 2.2 to the
Holders of Notes not less than 30 days, nor more than 60 days, prior to the
date fixed for such redemption in such notice, which notice shall specify the
principal amount of the Notes so to be redeemed, together with the amount of
interest accrued thereon, and the date fixed for such redemption.
2.3 Redemption Pursuant to Gaming Laws.
a. Subject to the provisions of subsection (b) below
with regard to the Mississippi Gaming Commission and notwithstanding any other
provision of this Agreement, if the ownership of this Note by any person or
entity will preclude, interfere with, threaten or delay the issuance,
maintenance, existence or reinstatement of any gaming or liquor license, or
permit or approval of any Gaming Authority, or result in the imposition of
burdensome terms or conditions on such license, permit or approval, as
determined by any
2
<PAGE> 3
Governmental Authority or the general partner of the Company (including,
without limitation, such Holder failing to qualify or to be found suitable
under applicable Gaming Laws), such Holder shall be obligated, at the request
of the Company, to dispose of this Note (subject to any restrictions on the
transfer of this Note set forth herein or otherwise provided by applicable law
and subject to any approvals by any Gaming Authority that may be required)
within thirty (30) days (or such other time period required by any Gaming
Authority) after receipt of notice of such determination by any Governmental
Authority or the general partner (in which event the Company shall have no
obligation to pay any interest to such Holder), and if this Note is not so
disposed of within the required period, the Company shall have the right to
redeem such Holder's Note at a redemption price equal to the principal amount
of this Note, without accrued interest, if any. Any Holder or beneficial owner
of this Note that is 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.
b. Each Holder, by accepting this Note, 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 this Note 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
Holder 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 this Note 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 this Note at a price equal to the principal
amount of this Note, excluding accrued and unpaid interest 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.
c. Any redemption notice given by the Company under this
Section 2.3 shall state (i) that this Note is being called for redemption as a
result of the Holder's or beneficial owner's status under the relevant Gaming
Laws, (ii) the redemption date, (iii) the redemption price and (iv) the place
or places where this Note is to be surrendered for payment of the redemption
price.
3. Repurchase of Notes at the Option of the Holder Upon
a Change of Control.
a. In the event that a Change of Control has occurred,
each Holder of Notes will have the right to require the Company to repurchase
all or any part of such Holder's Notes on the date that is no later than thirty
(30) Business Days after the occurrence of such Change of Control (the "Change
of Control Payment Date"), at a cash price equal to one hundred one percent
(101%) of the principal amount thereof (the "Change of Control Offer Price"),
plus accrued and unpaid interest, if any, to and including the Change of
Control Payment Date.
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<PAGE> 4
b. In the event that, pursuant to this Section 3, the
Company shall be required to commence a Change of Control Offer, the Company
shall deliver a notice to each of the Holders, which shall govern the terms of
any Change of Control Offer and shall state:
(i) that the Change of Control Offer is being
made pursuant to this Section 3 and that all Notes or portions thereof tendered
on or prior to the Change of Control Payment Date will be accepted for payment;
(ii) the Change of Control Offer Price (including
the amount of accrued and unpaid interest) and the Change of Control Payment
Date;
(iii) that any Note, or portion thereof, not
tendered or accepted for payment will continue to accrue interest;
(iv) that the tender of any Note, or portion
thereof, shall be irrevocable; and
(v) a brief description of the events resulting
in such Change of Control.
c. On the Change of Control Payment Date, the Company
shall redeem all Notes, or parts thereof, tendered in response to the Change of
Control Offer.
4. Security Interest. The obligations of the Company
under the Notes to the Payee, as Payee of the Notes, and to the holders of the
Senior Secured Credit Facility Notes and the Senior Notes, as assignees of the
Notes are secured, inter alia, by (a) the Tunica County Deed of Trust granting
a first mortgage in all of the land in Tunica County, Mississippi on which the
Horseshoe Tunica Casino is located, all such other land owned by the Company
which is included on an exhibit to the Tunica County Deed of Trust and all
personal property used in connection with such real property, (b) the Tunica
County Second Deed of Trust, (c) the Tunica County Preferred Ship Mortgage, (d)
the Tunica County Second Ship Mortgage, (e) the Tunica County Security
Agreement and (f) the Tunica County Second Security Agreement.
5. Registration, Transfer and Exchange of Notes. The
Company will keep at its principal executive office a note register in which,
subject to such reasonable regulations as it may prescribe, but at its expense
(other than transfer taxes, if any), it will provide for the registration and
transfer of this Note.
This Note may not be sold, transferred, pledged or
hypothecated unless the proposed transaction does not require registration or
qualification under the Securities Act or an applicable state securities or
blue sky law or unless an exemption from such registration is available. The
transferor of this Note shall be required to deliver an opinion as to the
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<PAGE> 5
applicable exception in connection with any such transfer. The transferee of
this Note shall be required to deliver an acknowledgement of Section 2.3.
The Company shall not be required to register any transfer of
this Note if the Company reasonably believes such transferee would not be
approved as a transferee by the relevant Gaming Authority.
The Holder of this Note, at such Holder's option, may
surrender the same for transfer or exchange either at the principal executive
office of the Company or at the place of payment named herein, accompanied in
the case of a transfer or assignment by a written instrument of transfer or
assignment in form satisfactory to the Company duly executed by the registered
Holder thereof or by such Holder's attorney duly authorized in writing. In
case any Holder shall so request the transfer, assignment or exchange of this
Note, the Company, at its expense, will execute and deliver (in each case
insured to your reasonable satisfaction) in exchange therefor one or more new
Notes, as may be requested by such Holder, in the same aggregate unpaid
principal amount as the aggregate unpaid principal amount of the Note or Notes
so surrendered. Any Note issued in exchange for any other Note or upon
transfer thereof shall carry the rights to unpaid interest and interest to
accrue which were carried by the Note so exchanged or transferred, and neither
gain nor loss of interest shall result from any such transfer or exchange.
Notwithstanding the foregoing, Notes may not be issued in denominations of less
than $50,000 (except if the entire outstanding principal balance of the Notes
of such Holder is less than $50,000, in which case one Note for the entire
outstanding principal amount of the Notes of such Holder may be issued).
The Company and any agent of the Company may treat the Holder
in whose name any Note is registered as the owner of such Note for the purpose
of receiving payment of the principal of and premium (if any) and interest on
such Note and for all other purposes whatsoever, whether or not such Note be
overdue.
Notwithstanding anything contained herein to the contrary, the
provisions of this Section 5 shall not apply in connection with any of the
transactions contemplated by the HG Note Assignment.
6. Events of Default; Remedies.
6.1 Events of Default Defined; Acceleration of Maturity.
If any of the following events ("Events of Default") shall occur and be
continuing (for any reason whatsoever and whether it shall be voluntary or
involuntary or by operation of law or otherwise):
a. default shall be made in the payment of the principal
of this Note when and as the same shall become due and payable, whether at
stated maturity, by acceleration, by mandatory redemption or otherwise;
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<PAGE> 6
b. default shall be made in the payment of any interest
on this Note when and as such interest shall become due and payable, and such
default shall have continued for a period of thirty (30) days; or
c. An "Event of Default," as defined in either the
Senior Secured Credit Facility Note Purchase Agreement, the Senior Indenture or
the Indenture, shall have occurred and be continuing;
then upon the occurrence of any Event of Default, the Majority Noteholders by
written notice to the Company, may declare the unpaid principal amount of all
Notes to be, and the same shall forthwith become, due and payable, together
with the interest accrued thereon and all other amounts payable by the Company
hereunder, provided, during the existence of an Event of Default under clause
(a) or (b) of this Section 6.1 with respect to any Note, the Holder of such
Note, by written notice to the Company, may declare such Note to be, and the
same shall forthwith become, due and payable, together with the interest
accrued thereon and all other amounts payable by the Company hereunder. If any
Holder of any Note shall exercise the option specified in the proviso to the
preceding sentence, the Company will forthwith give written notice thereof to
the Holders of all other outstanding Notes and each such Holder (whether or not
such notice is given or received), by written notice to the Company, may
declare the principal of all Notes held by it to be, and the same shall
forthwith become, due and payable, together with the interest accrued thereon
and all other amounts payable by the Company hereunder.
The provisions of this Section are subject, however, to the
condition that if, at any time after any Note shall have so become due and
payable, the Company shall pay all arrears of interest on such Note and all
payments on account of the principal on such Note and any other amounts owing
which shall have become due otherwise than by acceleration (with interest on
such principal, and, to the extent permitted by law, on overdue payments of
interest, at the rate specified in the Notes) and all Events of Default (other
than nonpayment of principal of and accrued interest on Notes, due and payable
solely by virtue of acceleration) shall be remedied or waived pursuant to
Section 7, then, and in every such case, the Majority Noteholders, by written
notice to the Company, may rescind and annul any such acceleration and its
consequences; but no such action shall affect any subsequent Event of Default
or impair any right consequent thereon.
7. Amendment and Waiver. a. Any term, covenant,
agreement or condition of the Notes, with the consent of the Company may be
amended, or compliance therewith may be waived (either generally or in a
particular instance and either retroactively or prospectively), by one or more
substantially concurrent written instruments signed by the Majority
Noteholders; provided, however, that
(i) no such amendment or waiver shall
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<PAGE> 7
(x) reduce the principal of, or reduce the rate
of or change the time for payment of interest on or any
premium payable with respect to, any Note, or extend the
maturity of any Note, without the consent of the Holder of
each Note so affected, or
(y) modify any of the provisions of the Notes
with respect to the payment or prepayment thereof, or reduce
the percentage of Holders of Notes required to approve any
such amendment or effectuate any such waiver, or amend this
Section 7 without the consent of the Holders of all of the
Notes at the time outstanding; and
(ii) no such waiver shall extend to or affect any
obligation not expressly waived or impair any right consequent thereon; and
provided, further, until the pledge of the Notes under the HG Note Assignment
has been released, no action may be taken by the Majority Noteholders or at
their direction or pursuant to their consent by the Company or the Majority
Noteholders under the Notes without the consent of the pledgees under the HG
Pledge Agreement.
b. Any amendment or waiver pursuant to subsection (a) of
this Section 7 shall apply equally to all the Holders of the Notes and shall be
binding upon them, upon each future holder of any Note and upon the Company, in
each case whether or not a notation thereof shall have been placed on any Note.
c. So long as any outstanding Notes are owned by the
Payee or any other Holder, the Company will not solicit, request or negotiate
for or with respect to any proposed waiver or amendment of any of the
provisions of the Notes unless each Holder of any Note (irrespective of the
amount of Notes then owned by it) shall be informed thereof by the Company and
shall be afforded the opportunity of considering the same and shall be supplied
by the Company with sufficient information to enable it to make an informed
decision with respect thereto. Executed or true and correct copies of any
amendment or waiver effected pursuant to the provisions of this Section 7 shall
be delivered by the Company to each Holder of outstanding Notes forthwith
following the date on which the same shall have been executed and delivered as
set forth herein.
8. Notices. All notices and other communications
provided for in this Note shall be in writing and delivered, telecopied or
mailed, first class postage prepaid, addressed:
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<PAGE> 8
(i) if to the Company:
ROBINSON PROPERTY GROUP LIMITED PARTNERSHIP,
A MISSISSIPPI LIMITED PARTNERSHIP
1021 Casino Center Drive
Robinsonville, Mississippi 38664
Attention: Chief Financial Officer
(ii) if to the Payee, at the address set forth on the
first page of this Note or at such other address as the Payee
may hereafter designate by notice to the Company, and
(iii) if to any other Holder of the Notes, at the address
of such Holder as it appears on the note register.
Any such notice or communication shall be deemed to have been duly
given when delivered or telecopied and, if mailed, two days after deposit in
the U.S. mail.
9. Remedies Cumulative. No remedy herein conferred upon
the Holder of this Note is intended to be exclusive of any other remedy and
each and every such remedy shall be cumulative and shall be in addition to
every other remedy given hereunder or now or hereafter existing at law or in
equity or by statute or otherwise.
10. Definitions. Except as otherwise specified or as the
context may otherwise require, the following terms shall have the respective
meanings set forth below when used in this Note:
"Affiliate" means (i) any person directly or indirectly
controlling or controlled by or under direct or indirect common control with HG
or any of its Subsidiaries (other than Horseshoe Club Operating Company, a
Nevada corporation), including, without limitation, Jack Binion and Phyllis
Cope, (ii) any spouse, immediate family member or other relative as 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 an
entity, unless some other person beneficially owns a greater percentage of any
class of voting Capital of such entity.
"Available Cash Flow" shall mean for any fiscal year the sum
of pre-tax net income of the Company and the aggregate of depreciation,
amortization and depletion of the
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<PAGE> 9
Horseshoe Tunica Casino for such fiscal year, less the aggregate Permitted Tax
Distributions of the Company for such fiscal year.
"beneficial owner" for purposes of the definition of Change of
Control has the meaning attributed to it in Rules 13d-3 and 13d-5 under the
Exchange Act, whether or not applicable, except that a "person" shall be deemed
to have "beneficial ownership" of all shares that any such person has the right
to acquire, whether such right is exercisable immediately or only after the
passage of time.
"Board of Managers" means, with respect to any person that is
a limited liability company, the Board of Managers of such person, acting as a
group, or any committee of the Board of Managers of such person authorized,
with respect to any particular matter, to exercise the power of the Board of
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 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.
"Cash Flow Available for Redemption" shall mean for any fiscal
year the remainder of Available Cash Flow for such fiscal year, less amounts
credited to the Operating Reserve Account for such fiscal year.
"Change of Control" means (i) prior to the completion of a
bona fide underwritten initial public offering by HG, the failure at any time
of Excluded Persons as a group to own and control at least 40% of the issued
and outstanding Capital of HG; (ii) after the completion of a bona fide
underwritten initial public offering by HG, the acquisition, in one or more
transactions, of beneficial ownership by (A) any person or entity (other than
an Excluded Person) or (B) any group of persons or entities (excluding any
group in which Excluded Persons beneficially own in the aggregate at least 75%
of the equity and voting interests beneficially owned by the group) who
constitute a group (within the meaning of Section 13(d)(3) of the Exchange
Act), in either case, of Capital of HG such that, as a result of such
acquisition, such person, entity or group beneficially owns (within the meaning
of Rule 13d-3 under the Exchange Act), directly or indirectly, 30% or more of
the Capital of HG then outstanding; provided, however, that no Change of
Control shall be deemed to have occurred if (A) Excluded Persons beneficially
own, in the aggregate, at such time, a greater percentage of Capital of HG than
such other person, entity or group or (B) at the time of such acquisition,
Excluded Persons (or any of them) possess the ability (by contract or
otherwise) to elect, or cause the election, of a majority of the members of
HG's Board of Managers; (iii) any merger or consolidation of HG with or into
any person or any sale,
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<PAGE> 10
transfer or other conveyance, whether direct or indirect, of all or
substantially all of the assets of HG, on a consolidated basis, in one
transaction or a series of related transactions, if immediately after giving
effect to such transaction or transactions, any person or group (other than
Excluded Persons or groups including Excluded Persons to the extent
contemplated by clause (i) or (ii) above, whichever is then applicable) is or
becomes the beneficial owner, directly or indirectly, of more than the
percentage of the Capital of HG contemplated by clause (i) or (ii) above,
whichever is then applicable; or (iv) during any period of 12 consecutive
months after June 15, 1997, individuals who at the beginning of any such 12-
month period constituted the Board of Managers of HG (together with any new
managers whose election by such Board or whose nomination for election by the
members of HG was approved by a vote of a majority of the managers then still
in office who were either managers at the beginning of such period or whose
election or nomination for election was previously so approved), cease for any
reason to constitute a majority of the managers of HG then in office.
"Collateral Agent" means United States Trust Company of New
York, as collateral agent for the holders of the Senior Notes.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated by the Securities and
Exchange Commission thereunder.
"Excluded Person" means (a) HG or any Subsidiary of HG, (b)
any employee benefit plan of HG or any trustee or similar fiduciary holding
Capital of HG for or pursuant to the terms of any such plan, (c) Jack 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.
"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 the Company or any entity in which the Company has a
direct or indirect beneficial, legal or voting interest conducts casino gaming,
now or in the future.
"Gaming Law" means any law, rule, regulation or ordinance
governing gaming activities (including, without limitation, the Mississippi
Gaming Control Act, 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.
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<PAGE> 11
"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.
"HG" means Horseshoe Gaming, L.L.C., a Delaware limited
liability company.
"HG Note Assignment" means the Note Assignment, executed as of
October 10, 1995, by HG in favor of the holders of the Senior Secured Credit
Facility Notes and the Collateral Agent, for the benefit of the holders of the
Senior Notes.
"Indenture" means the Indenture, dated as of June 15, 1997,
among HG, the Company, as guarantor, and U.S. Trust Company of Texas, N.A., as
trustee.
"Investments" shall have the meaning set forth in the Senior
Secured Credit Facility Note Purchase Agreement.
"Majority Noteholders" means, at any time, the holders of a
majority of the aggregate principal amount of Notes then outstanding.
"Permitted Tax Distributions" shall have the meaning set forth
in the Senior Secured Credit Facility Note Purchase Agreement.
11. "Senior Indenture" means the Indenture, dated as of October
10, 1995, among HG, the Company, as guarantor, and U.S. Trust Company of
California, N.A., as trustee.
"Senior Notes" means the 12.75% Senior Notes due September 30,
2000, issued by HG, pursuant to Senior Indenture.
"Senior Secured Credit Facility Note Purchase Agreement" means
the Senior Secured Credit Facility Note Purchase Agreement, dated as of October
10, 1995, among HG, the Company, as guarantor, and the purchasers named
therein.
"Senior Secured Credit Facility Notes" means the notes issued
by HG pursuant to the Senior Secured Credit Facility Note Purchase Agreement.
"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 or
one or more of the other Subsidiaries of that person (or a combination thereof)
and (ii) any partnership (a) the sole general partner or the managing general
partner
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<PAGE> 12
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). When used with respect to HG, "Subsidiary" shall
be deemed to include any direct Subsidiary of HG and each indirect Subsidiary
that is a direct Subsidiary of HG or one or more of its direct or indirect
Subsidiaries. Notwithstanding the foregoing, no Unrestricted Subsidiary (as
defined in the Senior Secured Credit Facility Note Purchase Agreement) shall be
a Subsidiary of HG or any of its Subsidiaries.
"Tunica County Deed of Trust" means the Deed of Trust,
Security Agreement and Assignment of Leases and Rents, dated as of October 10,
1995, executed by the Company in favor of HG and the holders of the Senior
Secured Credit Facility Notes, as the same may be amended from time to time in
accordance with its terms.
"Tunica County Preferred Ship Mortgage" means the preferred
ship mortgage, executed by the Company in favor of HG and the holders of the
Senior Secured Credit Facility Notes, as the same may be amended from time to
time in accordance with its terms.
"Tunica County Second Deed of Trust" means the Second Deed of
Trust, Security Agreement and Assignment of Leases and Rents, dated as of
October 10, 1995, executed by the Company in favor of HG and the Collateral
Agent, for the benefit of the holders of the Senior Notes as the same may be
amended from time to time in accordance with its terms.
"Tunica County Second Security Agreement" means the financing
statement and second security agreement, dated as of October 10, 1995, executed
by the Company in favor of HG and the Collateral Agent, for the benefit of the
holders of the Senior Notes, as the same may be amended from time to time in
accordance with its terms.
"Tunica County Second Ship Mortgage" means the Second Ship
Mortgage, executed by the Company in favor of HG and the Collateral Agent, for
the benefit of the holders of the Senior Notes, as the same may be amended from
time to time in accordance with its terms.
"Tunica County Security Agreement" means the financing
statement and security agreement, dated as of October 10, 1995, executed by the
Company in favor of HG and the holders of the Senior Secured Credit Facility
Notes, as the same may be amended from time to time in accordance with its
terms.
"Vessel Trustee" means Chemical Trust Company of California,
as vessel trustee for the holders of the Senior Secured Credit Facility Notes
with respect to the Tunica County Preferred Ship Mortgage.
12. Governing Law. This Note shall be governed by and
construed in accordance with the internal laws of the State of New York.
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13. Severability. If any provision of this Note shall be
held to be invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any of the provisions hereof
and this Note shall be construed as if such invalid, illegal or unenforceable
provisions had never been contained herein.
14. Miscellaneous.
a. Payments of all amounts owing under this Note are to
be made at the address of the Payee stated on the first page of this Note or at
such other address as the Holder of this Note may designate from time to time
in writing. Any payment date occurring on any day other than a Business Day
shall be deemed to be the next succeeding Business Day.
b. The Company promises to pay all costs and expenses,
including reasonable attorneys' fees, incurred in the collection and
enforcement of this Note. The Company hereby consents to renewals and
extensions of time at or after the maturity hereof, without notice, and hereby
waives diligence, presentment, protest, demand and notice of every kind and, to
the full extent permitted by law, the right to plead any statute of limitations
as a defense to any demand hereunder.
ROBINSON PROPERTY GROUP LIMITED
PARTNERSHIP, A MISSISSIPPI LIMITED
PARTNERSHIP
By: Horseshoe GP, Inc., its General Partner
By: /s/ WALTER J. HAYBERT
-----------------------------------
Name: Walter J. Haybert
Title: Treasurer
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<PAGE> 1
EXHIBIT 4.47
HORSESHOE ENTERTAINMENT,
A LOUISIANA LIMITED PARTNERSHIP
INTERCOMPANY SENIOR SECURED NOTE DUE JUNE 15, 2007
$50,000,000 New York, New York
June 25, 1997
________________________________________________________________________________
FOR VALUE RECEIVED, Horseshoe Entertainment, a Louisiana
Limited Partnership (the "Company"), with its principal place of business
located at 415 Traffic Street, Bossier City, Louisiana 71111, hereby promises
to pay jointly, severally and solidarity to the order of Horseshoe Gaming,
L.L.C. (the "Payee"), a Delaware limited liability company with its principal
place of business located at 4024 Industrial Road, Las Vegas, Nevada 89103, or
its registered assigns, the principal amount of FIFTY MILLION DOLLARS
($50,000,000), or such lesser amount as shall equal the aggregate unpaid
principal amount of this Note, and to pay interest thereon, as provided herein.
This Note is referred to herein individually as this "Note" and, collectively,
together with any other Notes which may be issued pursuant to Section 5 hereof,
as the "Notes." Certain capitalized terms used in this Note are defined in
Section 12 below.
________________________________________________________________________________
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR REGISTERED OR QUALIFIED UNDER ANY STATE SECURITIES
LAWS. THIS SECURITY MAY NOT BE SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED
UNLESS THE PROPOSED TRANSACTION DOES NOT REQUIRE REGISTRATION OR QUALIFICATION
UNDER FEDERAL OR STATE SECURITIES LAWS OR UNLESS THE PROPOSED TRANSACTION IS
REGISTERED OR QUALIFIED AS REQUIRED.
THIS SECURITY IS SUBJECT TO REPURCHASE IF THE OWNERSHIP OF
THIS SECURITY BY ANY PERSON OR ENTITY WILL PRECLUDE, INTERFERE WITH, THREATEN
OR DELAY THE ISSUANCE, MAINTENANCE, EXISTENCE OR REINSTATEMENT OF ANY GAMING OR
LIQUOR LICENSE, OR PERMIT OR APPROVAL OF ANY GAMING AUTHORITY OR RESULT IN THE
IMPOSITION OF BURDENSOME TERMS ON SUCH LICENSE, PERMIT OR APPROVAL.
________________________________________________________________________________
<PAGE> 2
1. Payments of Interest. Interest (computed on the
basis of a 360-day year of twelve 30 day months) on the unpaid principal amount
shall be payable at the rate of 9.39% per annum from the date hereof, payable
semi-annually in arrears on each June 15 and December 15 of each year,
commencing on December 15, 1997, until said principal amount shall have become
due and payable.
2. Payments of Principal.
2.1 Optional Redemption. The Notes may not be redeemed,
in whole or in part, at any time at the option of the Company.
2.2 Maturity. The outstanding principal balance of the
Notes plus all interest accrued thereon is due in full on June 15, 2007.
2.3 Redemption Pursuant to Gaming Laws.
a. If the ownership of this Note by any person or entity
will preclude, interfere with, threaten or delay the issuance, maintenance,
existence or reinstatement of any gaming or liquor license, or permit or
approval of any Gaming Authority, or result in the imposition of burdensome
terms or conditions on such license, permit or approval, as determined by any
Governmental Authority or the general partner of the Company (including,
without limitation, such Holder failing to qualify or to be found suitable
under applicable Gaming Laws), such Holder shall be obligated, at the request
of the Company, to dispose of this Note (subject to any restrictions on the
transfer of this Note set forth herein or otherwise provided by applicable law
and subject to any approvals by any Gaming Authority that may be required)
within thirty (30) days (or such other time period required by any Gaming
Authority) after receipt of notice of such determination by any Governmental
Authority or the general partner (in which event the Company shall have no
obligation to pay any interest to such Holder), and if this Note is not so
disposed of within the required period, the Company shall have the right to
redeem such Holder's Note at a redemption price equal to the principal amount
of this Note, without accrued interest, if any. Any Holder or beneficial owner
of this Note that is 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.
b. Any redemption notice given by the Company under this
Section 2.3 shall state (i) that this Note is being called for redemption as a
result of the Holder's or beneficial owner's status under the relevant Gaming
Laws, (ii) the redemption date, (iii) the redemption price and (iv) the place
or places where this Note is to be surrendered for payment of the redemption
price.
3. Repurchase of Notes at the Option of the Holder Upon
a Change of Control.
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<PAGE> 3
a. In the event that a Change of Control has occurred,
each Holder of Notes will have the right to require the Company to repurchase
all or any part of such Holder's Notes on the date that is no later than thirty
(30) Business Days after the occurrence of such Change of Control (the "Change
of Control Payment Date"), at a cash price equal to one hundred one percent
(101%) of the principal amount thereof (the "Change of Control Offer Price"),
plus accrued and unpaid interest, if any, to and including the Change of
Control Payment Date.
b. In the event that, pursuant to this Section 3, the
Company shall be required to commence a Change of Control Offer, the Company
shall deliver a notice to each of the Holders, which shall govern the terms of
any Change of Control Offer and shall state:
(i) that the Change of Control Offer is being
made pursuant to this Section 3 and that all Notes or portions thereof tendered
on or prior to the Change of Control Payment Date will be accepted for payment;
(ii) the Change of Control Offer Price (including
the amount of accrued and unpaid interest) and the Change of Control Payment
Date;
(iii) that any Note, or portion thereof, not
tendered or accepted for payment will continue to accrue interest;
(iv) that the tender of any Note, or portion
thereof, shall be irrevocable; and
(v) a brief description of the events resulting
in such Change of Control.
c. On the Change of Control Payment Date, the Company
shall redeem all Notes, or parts thereof, tendered in response to the Change of
Control Offer.
4. Security Interest. The obligations of the Company
under the Notes are secured by (a) the Bossier City Mortgage encumbering all of
the land in Bossier City, Louisiana on which the Horseshoe Bossier City Casino
is located, all such other land owned by the Company which is included on an
exhibit to the Bossier City Mortgage and all personal property used in
connection with the Horseshoe Bossier City Casino and (b) the Bossier City
Preferred Ship Mortgage, granting a first priority security interest in the
Bossier City riverboat casino owned by the Company, (c) the Bossier City Second
Ship Mortgage, (d) the Bossier City Security Agreement and (e) the Bossier City
Second Security Agreement. Such security interests are being assigned for the
benefit of the holders of the Senior Secured Credit Facility Notes and, on a
subordinated basis, for the benefit of the holders of the Senior Notes.
5. Registration, Transfer and Exchange of Notes. The
Company will keep at its principal executive office a note register in which,
subject to such reasonable regulations
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as it may prescribe, but at its expense (other than transfer taxes, if any), it
will provide for the registration and transfer of this Note.
This Note may not be sold, transferred, pledged or
hypothecated unless the proposed transaction does not require registration or
qualification under the Securities Act or an applicable state securities or
blue sky law or unless an exemption from such registration is available. The
transferor of this Note shall be required to deliver an opinion as to the
applicable exception in connection with any such transfer. The transferee of
this Note shall be required to deliver an acknowledgement of Section 2.3.
The Company shall not be required to register any transfer of
this Note if the Company reasonably believes such transferee would not be
approved as a transferee by the relevant Gaming Authority.
The Holder of this Note, at such Holder's option, may
surrender the same for transfer or exchange either at the principal executive
office of the Company or at the place of payment named herein, accompanied in
the case of a transfer or assignment by a written instrument of transfer or
assignment in form satisfactory to the Company duly executed by the registered
Holder thereof or by such Holder's attorney duly authorized in writing. In
case any Holder shall so request the transfer, assignment or exchange of this
Note, the Company, at its expense, will execute and deliver (in each case
insured to your reasonable satisfaction) in exchange therefor one or more new
Notes, as may be requested by such Holder, in the same aggregate unpaid
principal amount as the aggregate unpaid principal amount of the Note or Notes
so surrendered. Any Note issued in exchange for any other Note or upon
transfer thereof shall carry the rights to unpaid interest and interest to
accrue which were carried by the Note so exchanged or transferred, and neither
gain nor loss of interest shall result from any such transfer or exchange.
Notwithstanding the foregoing, Notes may not be issued in denominations of less
than $50,000 (except if the entire outstanding principal balance of the Notes
of such Holder is less than $50,000, in which case one Note for the entire
outstanding principal amount of the Notes of such Holder may be issued).
The Company and any agent of the Company may treat the Holder
in whose name any Note is registered as the owner of such Note for the purpose
of receiving payment of the principal of and premium (if any) and interest on
such Note and for all other purposes whatsoever, whether or not such Note be
overdue.
Notwithstanding anything contained herein to the contrary, the
provisions of this Section 5 shall not apply in connection with any of the
transactions contemplated by the HG Note Assignment.
6. Representations of the Company. The Company represents
and warrants to you as follows:
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6.1 Organization and Authority. The Company is a limited
partnership duly organized, validly existing and in good standing under the
laws of the State of Louisiana. The Company has the requisite power and
authority to own or hold under lease the property it purports to own or hold
under lease and to transact the business it transacts and proposes to transact.
The Company has the requisite power and authority to execute and deliver this
Note and the other documents and agreements contemplated hereby to be executed
and delivered by the Company, and to perform the provisions hereof and thereof
to be performed by the Company. The Company is duly qualified and is in good
standing in each jurisdiction in which the character of the properties owned or
held under lease by it or the nature of the business transacted by it requires
such qualification, except where the failure to so qualify would not have a
Material Adverse Effect.
The execution, delivery and performance of this Note and the
other Operative Documents and any other documents or agreements contemplated
hereby and thereby, and the consummation of the transactions contemplated
hereby and thereby, have been duly authorized and approved by the Company and
each is the valid and binding obligation of the Company, enforceable in
accordance with its terms, except as may be limited by applicable bankruptcy,
reorganization, insolvency, moratorium or other similar laws or by legal or
equitable principles relating to or limiting creditors' rights generally or as
rights to indemnification may be limited by applicable securities laws.
6.2 Ownership of the Company. Except as set forth on
Schedule 6.2, on the date hereof, NGCP will be the only general partner of the
Company and the persons named on Schedule 6.2 will be the only limited partners
of the Company. The partnership interests of NGCP and the limited partners in
the Company have been duly authorized and validly issued and all required
contributions in respect of all such partnership interests have been made.
Except as set forth on Schedule 6.2, the Company has no
outstanding securities convertible into or exchangeable for any interests in
the Company or any rights to subscribe for or to purchase, or any options for
the purchase of, or any agreements (contingent or otherwise) providing for the
issuance of, or any calls, commitments or claims of any character relating to,
any interest in the Company or any securities convertible into or exchangeable
for any interest in the Company. Except as set forth on Schedule 6.2, the
Company is not subject to any obligation (contingent or otherwise) to
repurchase or otherwise acquire or retire any interest in the Company or
obligation evidencing the right of the Holder thereof to purchase any interest
in the Company.
6.3 Subsidiaries. Except as set forth on Schedule 6.3,
the Company does not have any Subsidiaries and does not have any equity
interest in any other entity.
6.4 Litigation; Observance of Statutes, Regulations and
Orders. Except as disclosed on Schedule 6.4, there are no actions, suits or
proceedings pending or, to the knowledge of the Company, threatened, against or
affecting the Company or any property of the Company or any of the partners of
the Company in any court or before any arbitrator of
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any kind or before or by any Governmental Body (except actions, suits or
proceedings arising in the ordinary course of business which individually or in
the aggregate, if adversely determined, would not cause a Material Adverse
Effect).
Except as set forth on Schedule 6.4, the Company is not in
default under any Order of any court, arbitrator or Governmental Body, and is
not subject to or a party to any Order of any court or Governmental Body
arising out of any action, suit or proceeding under any statute or other law.
The Company is not in violation of any statute or other rule or regulation of
any Governmental Body, the violation of which could cause a Material Adverse
Effect.
6.5 Title to Property; Leases. On the date hereof, the
Company will have good, marketable and insurable title to the real properties
owned by the Company including, without limitation, good, marketable and
insurable title to the real properties which are the subject of the Bossier
City Mortgage, except for Permitted Liens which do not interfere with the
intended use of the property. All real property owned by the Company is
reflected on Schedule 6.5.
On the date hereof, the Company enjoys full and undisturbed
possession under all leases necessary in any material respect for the operation
of the business of the Company, each of which is listed on Schedule 6.5 (the
"Leases"). None of the Leases contain any unusual or burdensome provisions
which, individually or in the aggregate, could materially impair the operation
of the business of the Company. Schedule 6.5 sets forth a correct and complete
list of all Leases of the Company existing on the Closing Date. The Leases are
valid and subsisting and are in full force and effect and the Company is not in
default on any of the terms and obligations of any Lease, and no event over the
passage of time shall constitute such default.
6.6 Taxes. Except as set forth on Schedule 6.6, the
Company has filed all tax returns which are required to have been filed in any
jurisdiction, and has paid all material taxes including, but not limited to,
real estate taxes shown to be due and payable on such returns and all other
taxes and assessments payable by the Company, to the extent the same have
become due and payable and before they have become delinquent, except for any
taxes and assessments the amount, applicability or validity of which is
currently being contested in good faith by appropriate proceedings and with
respect to which the Company has set aside on its books reserves (to the extent
required by GAAP) deemed by it to be adequate. Except as set forth in Schedule
6.6, the Company does not know of any proposed tax assessment against the
Company. The tax returns filed by the Company are true, complete and accurate
in all material respects and all tax liabilities are adequately provided for on
the books of the Company. Except as set forth on Schedule 6.6, there are no
tax certiorari proceedings pending in connection with the real properties which
are the subject of the Bossier City Mortgage.
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6.7 Compliance with Laws and Other Instruments.
a. Except as disclosed on Schedule 6.7, the consummation of
the transactions contemplated by this Note and the execution, delivery and
performance of the terms and provisions of this Note and the Bossier City
Mortgage, will not (i) contravene, result in any breach of, or constitute a
default under, or result in the creation of any Lien in respect of any property
of the Company under (x) any indenture, mortgage, deed of trust, bank loan or
credit agreement, License or other material agreement or instrument to which
the Company is a party or by which the Company or any of its properties may be
bound or affected or (y) the organizational documents of the Company or (ii)
conflict with or result in a breach of any of the terms, conditions or
provisions of any Order of any court, arbitrator or Governmental Body
applicable to the Company or (iii) violate any provision of any statute or
other rule or regulation of any Governmental Body applicable to the Company,
the violation of which would have a Material Adverse Effect.
b. The Company is not in violation of any law, rule,
regulation, Order, indenture, mortgage, deed of trust, bank loan, credit
agreement, License or other agreement or instrument to which the Company is a
party or by which the Company or any of its properties may be bound or
affected, which violation would have a Material Adverse Effect.
c. The Company has all licenses required under any
Gaming Law in connection with the operation of the Horseshoe Bossier City
Casino, including, without limitation, the Louisiana License. Except as set
forth on Schedule 6.7, all such licenses are in full force and effect and no
action has been taken by any party to appeal, review, amend or revoke any such
license.
6.8 Consents. Except as disclosed on Schedule 6.8, no
consent, approval or authorization of, or registration, filing or declaration
with or delivery of notice to, any Governmental Body or any third party
(including, but not limited to, the Leases) is required for the validity,
execution and delivery or for the performance by the Company of this Note and
the other Operative Documents, except for filings required by Federal or state
securities laws and the filings and recordings required to perfect the Bossier
City Mortgage.
6.9 Intellectual Property; Licenses. Schedule 6.9 lists
each trademark, service mark, trade name, brand, copyright, patent, patent
application and right with respect to any of the foregoing (collectively, the
"Intellectual Property") owned, licensed or used by the Company in the conduct
of its business. The Company owns or possesses the right to use each item of
its Intellectual Property. Except as set forth in Schedule 6.9, the Company
does not know of any conflict with any right of any other Person with respect
to any of the Intellectual Property. The Company has not received any notice
of (and no executive officer of the Company or its Affiliates is otherwise
aware of) any conflict with respect to any of the Intellectual Property. The
Company is not a party to or bound by any license or other agreement with
respect to any of the Intellectual Property, except as set forth in Schedule
6.9. Schedule 6.9 also lists each license, franchise, permit or other
authorization (collectively, the
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"Licenses" and individually, a "License") which is necessary for the conduct of
the business of the Company and briefly describes each License, including the
licensor, royalty payments, fees or other payment obligations, the terms of the
License and the expiration date thereof. Except as set forth in Schedule 6.9,
the Company has obtained and complied in all material respects with all of the
provisions of each License held by such Person. Except as set forth in
Schedule 6.9, each License is valid and in full force and effect. The
continuation, validity and effectiveness of each item of Intellectual Property
and each License will in no way be affected by the execution and delivery of
this Note or the other Operative Documents or the consummation of the
transactions contemplated hereby or thereby. The Company has not breached any
material provision of, and is not in default in any material respect under the
terms of, and has not engaged in any activity that would cause the revocation,
termination or suspension of, any License, and no action or proceeding seeking
the revocation or suspension of any License is pending or, to the knowledge of
the Company, threatened. There is no material default or claimed or purported
or alleged material default or state of facts that with giving of notice or the
lapse of time or both would constitute a default on the part of any party under
any contract or arrangement with respect to any of the Intellectual Property or
Licenses.
6.10 Compliance with ERISA. Schedule 6.10 identifies each
"employee benefit plan", as defined in Section 3(3) of ERISA, currently
maintained for the benefit of, or related to any or all of the employees or
former employees of the Company or any ERISA Affiliate (the "Employee Plans").
Each of the Employee Plans is in compliance, in form and operation, with the
requirements of ERISA and the Code, and all other applicable Federal, state and
local statutes, orders, rules or regulations. No Employee Plan constitutes a
Multiemployer Plan. No "prohibited transaction", as defined in Section 406 of
ERISA or 4975 of the Code, has occurred with respect to any Employee Plan which
has or will make the Company or any employee of the Company liable for any tax
or penalty pursuant to Section 502 of ERISA or Section 4975 of the Code. All
applicable contributions to all Employee Plans have been made or will be made
when due. Neither the Company, nor any ERISA Affiliate of the Company has
incurred (i) any "accumulated funding deficiency", within the meaning of
Section 412 of the Code or Section 302 of ERISA, or (ii) any liability to the
PBGC or any Multiemployer Plan under Title IV of ERISA.
6.11 Environmental Laws. Except as set forth on Schedule
6.11, to the knowledge of the Company, the Company (i) has no liability under
any applicable environmental or health and safety-related law, regulation,
rule, ordinance, or legally enforceable requirement at the Federal, state, or
local level (each an "Environmental Law") or common law cause of action
relating to or arising from environmental conditions which is reasonably likely
to have a Material Adverse Effect and any facilities and operations of the
Company comply with and will continue to comply with all applicable
Environmental Laws to the extent that failure to comply is reasonably likely to
have a Material Adverse Effect; (ii) is not subject to any outstanding
judgment, consent decree, compliance order, or administrative order with
respect to any environmental or health and safety matter or received any
written request for information, notice, demand letter, administrative inquiry,
or formal or informal complaint or claim with respect to any environmental or
health and safety matter or the
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enforcement of any Environmental Law which if adversely determined, is
reasonably likely to have a Material Adverse Effect; and (iii) has no reason to
believe that any of the items enumerated in clause (ii) of this paragraph will
be forthcoming. Except as set forth on Schedule 6.11, to the knowledge of the
Company: (i) the Company has never and will never generate, transport, use,
store, treat, dispose of, or manage any hazardous waste as defined or regulated
under any Environmental Law ("Hazardous Waste"), except in accordance with
applicable Environmental Laws and except to the extent that failure to comply
with applicable Environmental Laws is not reasonably likely to have a Material
Adverse Effect; (ii) the Company is not aware of and has not caused any release
or threat of release of a hazardous waste, hazardous material, hazardous
substance, petroleum product, oil, toxic substance, pollutant, contaminant, or
other human health or safety, as defined or regulated under any Environmental
Law ("Hazardous Material") at any site presently or formerly owned, operated,
or leased by the Company except in accordance with applicable Environmental
Laws, and except to the extent that failure to comply with applicable
Environmental Laws is not reasonably likely to have a Material Adverse Effect;
(iii) the Company has never had Hazardous Material transported from any site
presently or formerly owned, operated or leased by the Company for treatment,
storage, or disposal at any other place, except in accordance with applicable
Environmental Laws and except to the extent that failure to comply with
applicable Environmental Laws is not reasonably likely to have a Material
Adverse Effect; (iv) the Company does not presently own, operate, lease or use
any site on which underground storage tanks are or were located except where
the presence and/or removal of such underground storage tanks is not reasonably
likely to have a Material Adverse Effect; (v) the Company has never placed
underground tanks on any site owned, operated, leased or used by the Company
except where the presence and/or removal of such underground storage tanks is
not reasonably likely to have a Material Adverse Effect; (vi) the Company has
never removed underground tanks from any site presently or formerly owned,
operated, leased or used by the Company except where the presence and/or
removal of such underground storage tanks is not reasonably likely to have a
Material Adverse Effect; and (vii) the Company has never had a Lien imposed by
any Governmental Body on any property, facility, machinery, or equipment
currently owned, operated or leased by the Company in connection with the
presence of any Hazardous Material.
6.12 Solvency. As of the date hereof, after giving effect
to the transactions contemplated by this Note and the other Operative Documents
and the other transactions related hereto and thereto, and the payment of fees
and expenses in connection therewith, the Company in good faith after due
inquiry believes that:
a. The fair market going concern value of all of the
assets (including goodwill), of the Company (that is, the amount which could be
realized for the Company within a reasonable time, either through collection or
sale of such assets as a going concern at the regular market value) will be
greater than the total amount of liabilities, including contingent,
subordinated, absolute, fixed, matured or unmatured and liquidated or
unliquidated liabilities, of the Company.
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b. The fair market going concern value of all of the
assets (including goodwill), of the Company (that is, the amount which could be
realized for the Company within a reasonable time, either through collection or
sale of such assets as a going concern at the regular market value) is
sufficient to pay the probable liability of the Company on its existing debts
as such debts become absolute and matured. The Company currently pays and
expects it will be able to pay its debts and other liabilities, contingent
obligations and other commitments as they mature or come due in the normal
course of business.
c. The Company is not engaged in, or is about to engage
in, business or transactions for which it has unreasonably small capital.
No transfer of property is being made and no obligation is
being incurred in connection with the transactions contemplated by this Note,
the other Operative Documents or any other document contemplated herein or
therein with the intent to hinder, delay or defraud either present or future
creditors the Company.
7. Covenants. The Company covenants and agrees that on and
after the date hereof, so long as any Note shall be outstanding or any amount
shall be due and unpaid thereunder:
7.1 Maintenance of Existence. Except to the extent that
failing to do so is not prohibited by the Senior Secured Credit Facility Note
Purchase Agreement, the Senior Indenture and the Indenture, the Company shall
do or cause to be done all things necessary to preserve and keep in full force
and effect its existence in accordance with, respectively, the rights (charter
and statutory), Licenses and franchises of the Company; provided, however, that
the Company shall not be required to preserve any such right, License or
franchise if the Company shall determine that the preservation thereof is no
longer desirable in the operation of the business of the Company and that the
loss thereof is not adverse in any respect to the Holders of the Notes.
7.2 Payment of Taxes and Other Claims. The Company
shall, and shall cause each of its Subsidiaries to, pay or discharge or cause
to be paid or discharged, before the same shall become delinquent, (i) all
taxes, assessments and governmental charges (including withholding taxes and
any penalties, interest and additions to taxes) levied or imposed upon the
Company or any of its Subsidiaries or properties and assets of the Company or
any of its Subsidiaries and (ii) all lawful claims, whether for labor,
materials, supplies, services or anything else, that have become due and
payable and that by law have or may become a Lien upon the property and assets
of the Company or any of its Subsidiaries; provided, however, that the Company
shall not be required to pay or discharge or cause to be paid or discharged any
such tax, assessment charge or claim whose amount, applicability or validity is
being contested in good faith by appropriate proceedings and for which disputed
amounts adequate reserves have been established in accordance with GAAP.
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7.3 Maintenance of Insurance. From and at all times
after the date hereof, the Company and its Subsidiaries shall have in effect
customary property and comprehensive general liability insurance, in each case
in compliance with the terms and conditions of the Bossier City Mortgage, the
Bossier City Preferred Ship Mortgage and the Bossier City Second Ship Mortgage
and, in any event, on terms and in an amount reasonably sufficient (taking into
account, among other factors, the creditworthiness of the insurer) to avoid a
Material Adverse Effect.
7.4 Maintenance of Properties. Except to the extent that
failure to do so is not prohibited by the Senior Secured Credit Facility Note
Purchase Agreement, the Senior Indenture and the Indenture, the Company shall,
and shall cause each of its Subsidiaries to, maintain, preserve, protect and
keep the properties material to the operation of the business of the Company
and each of its Subsidiaries in good repair, working order and condition
(ordinary wear and tear excepted), and make necessary and proper repairs,
renewals and replacements so that its business carried on in connection
therewith may be properly conducted at all times consistent with past practices
of the Company and such Subsidiaries.
7.5 Compliance with ERISA. The Company shall not, nor
shall the Company permit any ERISA Affiliate to (a) engage in any transaction
in connection with which the Company could be subject to either a material
penalty or excise tax imposed by ERISA or the Code, (b) terminate or withdraw
from any Employee Plan (other than a Multiemployer Plan) in a manner which
could result in any material liability to the Company to the PBGC, (c) fail to
make full payment when due of all material amounts which, under the provisions
of any Employee Plan, the Company is required to make as contributions thereto,
or (d) permit to exist any material accumulated funding deficiency with respect
to any Employee Plan.
7.6 Compliance with Environmental Laws. The Company
shall, and shall cause each of its Subsidiaries to, at all times maintain in
full force and effect all material licenses and permits which are required
under applicable Environmental Laws in connection with the conduct of the
business or operations of the Company and its Subsidiaries. Each of the
Company and its Subsidiaries shall at all times remain in compliance with the
terms and conditions of all such licenses and permits and with all
Environmental Laws, except where the failure to comply is not reasonably likely
to have a Material Adverse Effect.
7.7 Limitation on Liens. The Company shall not, and
shall not permit any of its Subsidiaries to, directly or indirectly create,
receive, assume or permit to exist or otherwise cause or permit to become in
effect any Lien, other than those which are permitted under the Senior Secured
Credit Facility Note Purchase Agreement, the Senior Indenture and the Indenture
and the Bossier City Mortgage.
7.8 Compliance with Laws. The Company shall at all times
maintain in full force and effect the Louisiana License and all other licenses
and permits which are required under gaming laws in Louisiana and the United
States and comply, and cause each of its
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Subsidiaries to comply, with all other applicable laws, rules, regulations
(provided this covenant shall not be deemed to have been breached in respect of
the non-compliance with any such other law, rule or regulation if such
non-compliance in the aggregate would not cause a Material Adverse Effect) and
Orders; such compliance to include, without limitation, compliance with ERISA
and the Racketeer Influenced and Corrupt Organizations Chapter of the Organized
Crime Control Act of 1970.
8. Events of Default; Remedies.
8.1 Events of Default Defined; Acceleration of Maturity.
If any of the following events ("Events of Default") shall occur and be
continuing (for any reason whatsoever and whether it shall be voluntary or
involuntary or by operation of law or otherwise):
a. default shall be made in the payment of the principal
of this Note when and as the same shall become due and payable, whether at
stated maturity, by acceleration, by mandatory redemption or otherwise;
b. default shall be made in the payment of any interest
on this Note when and as such interest shall become due and payable, and such
default shall have continued for a period of thirty (30) days; or
c. default shall be made in the performance or
observance of any covenant, agreement or condition contained in this Note and
such default shall have continued unremedied for a period of thirty (30) days
or such longer period (but in no event longer than a total of sixty (60)
unremedied days) during which the Company is diligently pursuing a remedy to
such default; or
d. a default in the payment of principal, premium or
interest when due that 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 (other than Indebtedness
of the Company to any Subsidiary of HG or of a Subsidiary of the Company to the
Company or another Subsidiary of HG) with an aggregate principal amount in
excess of ten million dollars ($10,000,000); or
e. an order for relief shall be entered in a proceeding
under the Bankruptcy Code in respect of the Company; a decree, judgment or
order by a court of competent jurisdiction shall have been entered adjudging
the Company or any of its Subsidiaries that individually or as a group
constitute a Significant Subsidiary, as bankrupt or insolvent; or such decree,
judgment or order shall have been entered approving as properly filed a
petition seeking reorganization of the Company or such Significant Subsidiary
under any bankruptcy or similar law, and such decree or order shall have
continued undischarged and unstayed for a period of sixty (60) days; or a
decree or order of a court of competent jurisdiction over the appointment of a
receiver, liquidator, trustee or assignee in bankruptcy or insolvency of the
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Company or such Significant Subsidiary, or of the property of any such person,
or for the winding up or liquidation of the affairs of any such person, shall
have been entered, and such decree, judgment or order shall have remained in
force undischarged and unstayed for a period of sixty (60) days; or
f. the Company or any of its Subsidiaries that
individually or as a group constitute a Significant Subsidiary, shall institute
proceedings to be adjudicated a voluntary bankrupt, or shall consent to the
filing of a bankruptcy proceeding against it, or shall file a petition or
answer or consent seeking reorganization under, any bankruptcy or similar law
or similar statute, or shall consent to the filing of any such petition, or
shall consent to the appointment of a custodian, receiver, liquidator, trustee
or assignee in bankruptcy or insolvency of it or any of its assets or property,
or shall make a general assignment for the benefit of creditors, or shall admit
in writing its inability to pay its debts generally as they become due, or
shall, within the meaning of any Bankruptcy Law, become insolvent or fail
generally to pay its debts as they become due; or
g. final, non-appealable, unsatisfied judgments not
covered by insurance aggregating in excess of one million dollars ($1,000,000),
at any one time being rendered against the Company or any of its Subsidiaries
and not stayed, bonded or discharged within sixty (60) days; or
h. for any reason, the Holders shall cease to hold,
pursuant to the Bossier City Mortgage, a valid enforceable mortgage and
security interest in and to the Mortgaged Property (as defined in the Bossier
City Mortgage) subject to no prior lien, mortgage or security interest in favor
of any third party, except as permitted in Bossier City Mortgage; provided,
however, if the potential detrimental effect on the Holders in the case of a
lien, mortgage or security interest in favor of a third party is covered by
title insurance, then such lien, mortgage or security interest shall only
constitute an Event of Default hereunder if such lien, mortgage or security
interest shall have continued unremoved for a period of thirty (30) days or
such longer period (but in no event longer than a total of sixty (60)
unremedied days) during which the Company is diligently pursuing a remedy to
such default; or
i. the legal right of the Company to operate the gaming
establishment within any Horseshoe Bossier City Casino is suspended or lost and
such loss or suspension shall continue for more than thirty (30) consecutive
days.
then upon the occurrence of any Event of Default, the Majority Noteholders by
written notice to the Company, may declare the unpaid principal amount of all
Notes to be, and the same shall forthwith become, due and payable, together
with the interest accrued thereon and all other amounts payable by the Company
hereunder, provided, during the existence of an Event of Default under clause
(a) or (b) of this Section 8.1 with respect to any Note, the Holder of such
Note, by written notice to the Company, may declare such Note to be, and the
same shall forthwith become, due and payable, together with the interest
accrued thereon and all other amounts payable by the Company hereunder. If any
Holder of any Note shall exercise the
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option specified in the proviso to the preceding sentence, the Company will
forthwith give written notice thereof to the Holders of all other outstanding
Notes and each such Holder (whether or not such notice is given or received),
by written notice to the Company, may declare the principal of all Notes held
by it to be, and the same shall forthwith become, due and payable, together
with the interest accrued thereon and all other amounts payable by the Company
hereunder. Notwithstanding the foregoing, the unpaid principal amount of the
Notes may not be accelerated pursuant to an Event of Default described in
subsection d if prior to such acceleration, all amounts due under such other
indebtedness as described in such subsection shall have been repaid.
The provisions of this Section are subject, however, to the
condition that if, at any time after any Note shall have so become due and
payable, the Company shall pay all arrears of interest on such Note and all
payments on account of the principal on such Note and any other amounts owing
which shall have become due otherwise than by acceleration (with interest on
such principal, and, to the extent permitted by law, on overdue payments of
interest, at the rate specified in the Notes) and all Events of Default (other
than nonpayment of principal of and accrued interest on Notes, due and payable
solely by virtue of acceleration) shall be remedied or waived pursuant to
Section 9, then, and in every such case, the Majority Noteholders, by written
notice to the Company, may rescind and annul any such acceleration and its
consequences; but no such action shall affect any subsequent Event of Default
or impair any right consequent thereon.
9. Amendment and Waiver. a. Any term, covenant,
agreement or condition of the Notes, with the consent of the Company may be
amended, or compliance therewith may be waived (either generally or in a
particular instance and either retroactively or prospectively), by one or more
substantially concurrent written instruments signed by the Majority
Noteholders; provided, however, that
(i) no such amendment or waiver shall
(x) reduce the principal of, or reduce the rate
of or change the time for payment of interest on or any
premium payable with respect to, any Note, or extend the
maturity of any Note, without the consent of the Holder of
each Note so affected, or
(y) modify any of the provisions of the Notes
with respect to the payment or prepayment thereof, or reduce
the percentage of Holders of Notes required to approve any
such amendment or effectuate any such waiver, or amend this
Section 9 without the consent of the Holders of all of the
Notes at the time outstanding; and
(ii) no such waiver shall extend to or affect any
obligation not expressly waived or impair any right consequent thereon; and
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<PAGE> 15
provided, further, until the pledge of the Notes under the HG Note Assignment
has been released, no action may be taken by the Majority Noteholders or at
their direction or pursuant to their consent by the Company or the Majority
Noteholders under the Notes without the consent of the pledgees under the HG
Note Assignment.
b. Any amendment or waiver pursuant to subsection (a) of
this Section 9 shall apply equally to all the Holders of the Notes and shall be
binding upon them, upon each future holder of any Note and upon the Company, in
each case whether or not a notation thereof shall have been placed on any Note.
c. So long as any outstanding Notes are owned by the
Payee or any other Holder, the Company will not solicit, request or negotiate
for or with respect to any proposed waiver or amendment of any of the
provisions of the Notes unless each Holder of any Note (irrespective of the
amount of Notes then owned by it) shall be informed thereof by the Company and
shall be afforded the opportunity of considering the same and shall be supplied
by the Company with sufficient information to enable it to make an informed
decision with respect thereto. Executed or true and correct copies of any
amendment or waiver effected pursuant to the provisions of this Section 9 shall
be delivered by the Company to each Holder of outstanding Notes forthwith
following the date on which the same shall have been executed and delivered as
set forth herein.
10. Notices. All notices and other communications
provided for in this Note shall be in writing and delivered, telecopied or
mailed, first class postage prepaid, addressed:
(i) if to the Company:
HORSESHOE ENTERTAINMENT,
A LOUISIANA LIMITED PARTNERSHIP
415 Traffic Street
Bossier City, Louisiana 71111
Attention: Chief Financial Officer
(ii) if to the Payee, at the address set forth on the
first page of this Note or at such other address as the Payee
may hereafter designate by notice to the Company, and
(iii) if to any other Holder of the Notes, at the address
of such Holder as it appears on the note register.
Any such notice or communication shall be deemed to have been duly
given when delivered or telecopied and, if mailed, two days after deposit in
the U.S. mail.
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<PAGE> 16
11. Remedies Cumulative. No remedy herein conferred upon
the Holder of this Note is intended to be exclusive of any other remedy and
each and every such remedy shall be cumulative and shall be in addition to
every other remedy given hereunder or now or hereafter existing at law or in
equity or by statute or otherwise.
12. Definitions. Except as otherwise specified or as the
context may otherwise require, the following terms shall have the respective
meanings set forth below when used in this Note:
"Affiliate" means (i) any person directly or indirectly
controlling or controlled by or under direct or indirect common control with HG
or any of its Subsidiaries, including, without limitation, Jack Binion and
Phyllis Cope, (ii) any spouse, immediate family member or other relative as 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 an entity, unless some other person beneficially owns a
greater percentage of any class of voting Capital of such entity.
"Bankruptcy Law" means Title 11, U.S. Code or any similar
Federal, state or foreign law for the relief of debtors.
"beneficial owner" for purposes of the definition of Change of
Control has the meaning attributed to it in Rules 13d-3 and 13d-5 under the
Exchange Act, whether or not applicable, except that a "person" shall be deemed
to have "beneficial ownership" of all shares that any such person has the right
to acquire, whether such right is exercisable immediately or only after the
passage of time.
"Board of Managers" means, with respect to any person that is
a limited liability company, the Board of Managers of such person, acting as a
group, or any committee of the Board of Managers of such person authorized,
with respect to any particular matter, to exercise the power of the Board of
Managers.
"Bossier City Mortgage" shall mean a first mortgage
encumbering all of the land in Bossier City, Louisiana on which the Horseshoe
Bossier City Casino is located, and all other land owned by the Company, as the
same may be amended or modified from time to time in accordance with its terms.
"Bossier City Preferred Ship Mortgage" shall mean the
preferred ship mortgage on the Bossier City riverboat casino owned by the
Company, as the same may be amended or modified from time to time in accordance
with its terms.
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<PAGE> 17
"Bossier City Second Security Agreement" means the financing
statement and second security agreement, dated as of October 10, 1995, executed
by the Company in favor of HG, as the same may be amended from time to time in
accordance with its terms.
"Bossier City Second Ship Mortgage" means the Second Ship
Mortgage, executed by the Company in favor of HG, as the same may be amended
from time to time in accordance with its terms.
"Bossier City Security Agreement" means the financing
statement and security agreement, dated as of October 10, 1995, executed by the
Company in favor of HG, as the same may be amended from time to time in
accordance with its terms.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday
and Friday that is not a day on which banking institutions in New York, New
York 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.
"Capitalized Lease Obligation" shall mean any obligation
payable under a lease of real or personal property to the extent such
obligation, in accordance with GAAP, should be capitalized on the lessee's
balance sheet or for which the amount of the asset and liability thereunder as
if so capitalized should be disclosed in a note to such balance sheet.
"Change of Control" means (i) prior to the completion of a
bona fide underwritten initial public offering by HG, the failure at any time
of Excluded Persons as a group to own and control at least 40% of the issued
and outstanding issued and outstanding Capital of HG; (ii) after the completion
of a bona fide underwritten initial public offering by HG, the acquisition, in
one or more transactions, of beneficial ownership by (A) any person or entity
(other than an Excluded Person) or (B) any group of persons or entities
(excluding any group in which Excluded Persons beneficially own in the
aggregate at least 75% of the equity and voting interests beneficially owned by
the group) who constitute a group (within the meaning of Section 13(d)(3) of
the Exchange Act), in either case, of Capital of HG such that, as a result of
such acquisition, such person, entity or group beneficially owns (within the
meaning of Rule 13d-3 under the Exchange Act), directly or indirectly, 30% or
more of the voting Capital of HG entitled to vote in the election of directors,
managers, general partners or other similar governing bodies of HG then
outstanding; provided, however, that no Change of Control shall be deemed to
have occurred if (A) Excluded Persons beneficially own, in the aggregate, at
such time, a greater percentage of voting Capital of HG entitled to vote in the
election of directors, managers, general partners or other similar governing
bodies of HG than such other person, entity or group or (B) at the time of such
acquisition, Excluded Persons (or any of them) possess the ability (by contract
or otherwise) to elect, or cause the election, of a
17
<PAGE> 18
majority of the members of HG's Board of Managers; (iii) any merger or
consolidation of HG with or into any person or any sale, transfer or other
conveyance, whether direct or indirect, of all or substantially all of the
assets of HG, on a consolidated basis, in one transaction or a series of
related transactions, if immediately after giving effect to such transaction or
transactions, any person or group (other than Excluded Persons or groups
including Excluded Persons to the extent contemplated by clause (i) or (ii)
above, whichever is then applicable) is or becomes the beneficial owner,
directly or indirectly, of more than the percentage of the Capital of HG
contemplated by clause (i) or (ii) above, whichever is then applicable; or (iv)
during any period of 12 consecutive months after June 15, 1997, individuals who
at the beginning of any such 12- month period constituted the Board of Managers
of HG (together with any new managers whose election by such Board or whose
nomination for election by the members of HG was approved by a vote of a
majority of the managers then still in office who were either managers at the
beginning of such period or whose election or nomination for election was
previously so approved), cease for any reason to constitute a majority of the
managers of HG then in office.
"Code" shall mean the Internal Revenue Code of 1986, as
amended.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended.
"ERISA Affiliate" shall mean any corporation that is a member
of the same controlled group of corporations (within the meaning of Section
414(b) of the Code) as the Company or any corporation or trade or business that
is under common control (within the meaning of Section 414 (c) of the Code)
with the Company or, solely for purposes of liability under Section 412 of the
Code or Section 302 of ERISA, any entity treated as a single employer with the
Company under Section 414(m) or (o) of the Code.
"Employee Plans" shall have the meaning ascribed thereto in
Section 6.10.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated by the Securities and
Exchange Commission thereunder.
"Excluded Person" means (a) HG or any Subsidiary of HG, (b)
any employee benefit plan of HG or any trustee or similar fiduciary holding
Capital of HG for or pursuant to the terms of any such plan, (c) Jack 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" shall mean generally accepted accounting principles as
in effect on the date hereof.
"Gaming Authority" means any Governmental Authority with the
power to regulate gaming in any Gaming Jurisdiction, and the corresponding
Governmental Authorities
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<PAGE> 19
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 the Company or any entity in which the Company has a
direct or indirect beneficial, legal or voting interest conducts casino gaming,
now or in the future.
"Gaming Law" means any law, rule, regulation or ordinance
governing gaming activities (including, without limitation, the Louisiana
Riverboat Economic Development and Gaming Control Act, 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.
"Governmental Body" shall mean any Federal, State, municipal
or other governmental department, commission, board, bureau, agency or
instrumentality, foreign or domestic.
"HG" means Horseshoe Gaming, L.L.C., a Delaware limited
liability company.
"HG Note Assignment" means the Note Assignment, executed as of
October 10, 1995, by HG in favor of the holders of the Senior Secured Credit
Facility Notes and United States Trust Company of New York, as Collateral Agent
for the benefit of the holders of the Senior Notes.
"Holder" or "Holders" shall mean the holder or holders of this
Note.
"Horseshoe Bossier City Casino" shall mean the dockside casino
owned by the Company in Bossier City/Shreveport, Louisiana.
"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 ninety (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)
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<PAGE> 20
evidenced by bankers' acceptances or similar instruments issued or adapted 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,
refinancings 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.
"Indenture" means the Indenture, dated as of June 15, 1997,
among HG, RPG, as guarantor, and U.S. Trust Company of Texas, N.A., as trustee.
"Intellectual Property" shall have the meaning ascribed
thereto in Section 6.9.
"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.
"Investments" shall have the meaning set forth in the Senior
Secured Credit Facility Note Purchase Agreement.
"Leases" shall have the meaning ascribed thereto in Section
6.5.
"License" shall have the meaning ascribed thereto in Section
6.9.
"Lien" shall mean, as to any Person, any mortgage, lien,
pledge, charge, security interest or other encumbrance in or on, or any
interest or title of any vendor, lessor, lender or other secured party to or of
the Person under any Indebtedness, conditional sale or other title retention
agreement or Capitalized Lease Obligation with respect to, any property or
20
<PAGE> 21
asset of the Person, or the signing or filing of a financing statement which
names the Person as debtor, or the signing of any security agreement
authorizing any other party as the secured party thereunder to file any
financing statement.
"Louisiana License" shall mean all gaming licenses required to
operate the Horseshoe Bossier City Casino.
"Majority Noteholders" means, at any time, the holders of a
majority of the aggregate principal amount of Notes then outstanding.
"Material Adverse Effect" shall mean a material adverse effect
on the business, condition (financial or otherwise), operations, earnings,
performance, properties or prospects of the Company and its Subsidiaries taken
as a whole or the ability of the Company to perform its obligations under this
Note.
"Multiemployer Plan" shall mean any employee benefit plan
described in Section 3(37) of ERISA.
"NGCP" shall mean New Gaming Capital Partnership, a Nevada
limited partnership.
"Operative Documents" means this Note, the Bossier City
Mortgage, the Bossier City Preferred Ship Mortgage, the Bossier City Second
Ship Mortgage, the Bossier City Security Agreement and the Bossier City Second
Security Agreement.
"Order" shall mean any order, writ, injunction, decree,
judgment, award, determination, direction or demand.
"PBGC" shall mean the Pension Benefit Guaranty Corporation.
"Permitted Liens" shall mean all Liens which may be incurred
by the Company under the Senior Secured Credit Facility Note Purchase
Agreement, the Senior Indenture and the Indenture.
"Permitted Tax Distributions" shall have the meaning set forth
in the Senior Secured Credit Facility Note Purchase Agreement.
"Person" shall mean an individual, partnership, trust,
corporation, a government or agency or political subdivision or any agency,
department or instrumentality thereof or other person or entity.
"RPG" shall mean Robinson Property Group Limited Partnership,
a Mississippi limited partnership.
21
<PAGE> 22
"Senior Indenture" means the Indenture, dated as of October
10, 1995, among HG, RPG, as guarantor, and U.S. Trust Company of California,
N.A., as trustee.
"Senior Secured Credit Facility Note Purchase Agreement" means
the Senior Secured Credit Facility Note Purchase Agreement, dated as of October
10, 1995, among HG, the Company, as guarantor, and the purchasers named
therein.
"Senior Secured Credit Facility Notes" means the notes issued
by HG pursuant to the Senior Secured Credit Facility Note Purchase Agreement.
"Senior Notes" means the 12.75% Senior Notes due September 30,
2000 of HG, issued pursuant to the Senior 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 of 1933, as amended, as such
regulation is in effect on the date hereof.
"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 or
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). When used
with respect to HG, "Subsidiary" shall be deemed to include any direct
Subsidiary of HG and each indirect Subsidiary that is a direct Subsidiary of HG
or one or more of its direct or indirect Subsidiaries. Notwithstanding the
foregoing, no Unrestricted Subsidiary (as defined in the Senior Secured Credit
Facility Note Purchase Agreement) shall be a Subsidiary of HG or any of its
Subsidiaries.
13. Governing Law. This Note shall be governed by and
construed in accordance with the internal laws of the State of New York.
14. Severability. If any provision of this Note shall be
held to be invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any of the provisions hereof
and this Note shall be construed as if such invalid, illegal or unenforceable
provisions had never been contained herein.
15. Miscellaneous.
a. Payments of all amounts owing under this Note are to
be made at the address of the Payee stated on the first page of this Note or at
such other address as the Holder of this Note may designate from time to time
in writing. Any payment date occurring
22
<PAGE> 23
on any day other than a Business Day shall be deemed to be the next succeeding
Business Day.
b. The Company promises to pay all costs and expenses,
including reasonable attorneys' fees, incurred in the collection and
enforcement of this Note. The Company hereby consents to renewals and
extensions of time at or after the maturity hereof, without notice, and hereby
waives diligence, presentment, protest, demand and notice of every kind and, to
the full extent permitted by law, the right to plead any statute of limitations
as a defense to any demand hereunder.
HORSESHOE ENTERTAINMENT,
A LOUISIANA LIMITED PARTNERSHIP
By: New Gaming Capital Partnership, a Nevada
limited partnership, its General Partner
By: Horseshoe GP, Inc., its General Partner
By: /s/ WALTER J. HAYBERT
----------------------------------------
Name: Walter J. Haybert
Title: Treasurer
23
<PAGE> 1
EXHIBIT 5.2
Riordan & McKinzie
A Professional Corporation
695 Town Center Drive, Suite 1500
Costa Mesa, CA 92626
(714) 433-2900
Fax (714) 549-3244
August 4, 1997
08-203-007
Horseshoe Gaming, L.L.C.
Robinson Property Group Limited Partnership
4024 Industrial Road
Las Vegas, Nevada 89103
Re: Horseshoe Gaming, L.L.C. -- 9 3/8% Senior Subordinated Notes due
June 15, 2007, Series B -- Registration Statement on Form S-4
Ladies and Gentlemen:
We have acted as counsel to Horseshoe Gaming, L.L.C., a Delaware limited
liability company (the "Company") and to Robinson Property Group Limited
Partnership, a Mississippi limited partnership ("RPG"), in connection with the
registration under the Securities Act of 1933, as amended (the "Securities
Act"), of, and the offer to exchange (the "Exchange Offer"), the Company's
9 3/8% Senior Subordinated Notes due June 15, 2007, Series B (the "New Notes"),
for its outstanding 9 3/8% Senior Subordinated Notes due June 15, 2007, Series A
and the guarantee of the New Notes by RPG (the "Guarantee"). This opinion is
delivered to you in connection with the Registration Statement on Form S-4 for
the aforementioned New Notes, the Exchange Offer and the Guarantee, being filed
with the Securities and Exchange Commission (the "Commission") under the
Securities Act concurrently herewith (the "Registration Statement"). Capitalized
terms used herein without definition shall have the meanings given to them in
the Registration Statement.
In rendering this opinion, we have examined copies identified to our
satisfaction as being copies of the form of the New Notes and the Indenture,
each as attached as an exhibit to the Registration Statement, and originals,
counterparts or copies identified to our satisfaction as being true copies of
such other documents as we have deemed necessary or appropriate to render the
opinions given below. We have assumed the authenticity of all documents
submitted to us as originals and the conformity to authentic original documents
of all documents submitted to us as certified, conformed or photostatic copies.
<PAGE> 2
Horseshoe Gaming, L.L.C.
August 4, 1997
Page 2
We have investigated such questions of law for the purpose of rendering
this opinion as we have deemed necessary. We are opining herein only as to the
effect on the subject transaction of United States Federal law, the law of the
State of New York and the General Corporation Law of the State of Delaware. In
opining as to the effect of the law of the State of New York, we are opining
thereon solely in reliance upon, to the extent set forth in and subject to all
of the limitations and assumptions set forth in the opinion of Richards &
O'Neil, LLP to the Initial Purchaser, dated June 25, 1997 (a copy of which is
attached), in accordance with the consent of Richards & O'Neil, LLP to such
reliance, dated August 1, 1997 (a copy of which is also attached).
Based upon the foregoing and subject to the qualifications, exceptions
and limitations set forth herein, we are of the opinion that:
1. The Indenture constitutes the legally valid and binding agreement of
the Company.
2. The New Notes will, when they have been duly executed, authenticated
and issued as specified in the Indenture, constitute the legally valid and
binding obligations of the Company.
3. The Guarantee constitutes the legally valid and binding obligation of
RPG.
4. The discussion set forth in the Prospectus which is a part of the
Registration Statement under the heading "Certain Federal Income Tax
Considerations" accurately describes the material Federal income tax
consequences to an acquiror of the New Notes of the Exchange Offer and of a
purchase of the New Notes from a person other than the Company, provided,
however, that we express no opinion as to any statement of fact included in such
discussion.
The enforceability of the Indenture, the New Notes and the Guarantee is
subject to the following exceptions, limitations and qualifications:
(a) the effect upon the Indenture, the New Notes or the Guarantee of
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or
other similar laws now or hereafter in effect relating to creditors rights
generally;
<PAGE> 3
Horseshoe Gaming, L.L.C.
August 4, 1997
Page 3
(b) general principles of equity, whether considered in a proceeding
in equity or at law, and the discretion of the court before which any proceeding
therefor may be brought;
(c) the enforceability, under certain circumstances, of certain
remedial and exculpatory provisions including (i) certain self-help provisions
and provisions which purport to create evidentiary standards; (ii) provisions
which purport to restrict access to legal or equitable remedies or to waive or
release any statutory provisions or common law rights or benefits that may not
be waived or released; (iii) under certain circumstances, provisions declaring
that the failure to exercise or delay in exercising rights or remedies will not
operate as a waiver of any such right or remedy; and (iv) provisions imposing
penalties, forfeitures, late payment charges or an increase in interest rate
upon delinquency in payment or the occurrence of a default;
(d) the enforceability of provisions in agreements which purport to
bind persons or entities not parties thereto;
(e) the enforceability of provisions which purport to establish
consent to the subject matter jurisdiction of any court;
(f) the enforceability of provisions regarding indemnification
against liabilities where such indemnification is contrary to public policy;
(g) provisions that permit any person to take action or make
determinations, or to benefit from indemnities or similar undertakings, may be
subject to requirements that such action be taken or such determinations be
made, or that any action or inaction by such person that may give rise to a
request for payment under such an indemnity or similar undertaking be taken or
not taken, on a reasonable basis and in good faith;
(h) under certain circumstances, the requirement that provisions may
be modified or waived only in writing or only in a specific instance may be
unenforceable to the extent that an oral agreement has been effected or a course
of dealing has occurred modifying such provisions;
(i) the authority of a court to modify or limit contractual awards
of attorneys fees;
<PAGE> 4
Horseshoe Gaming, L.L.C.
August 4, 1997
Page 4
(j) statutory provisions and case law that provide that, in certain
circumstances, a surety or guarantor may be exonerated if the creditor
materially alters the original obligation of the principal without the consent
of the guarantor, elects remedies for default which impair the subrogation
rights of the surety or guarantor against the principal or otherwise takes any
action without notifying the guarantor which materially prejudices the surety or
guarantor; and
(k) the enforceability under certain circumstances of provisions
waiving vaguely or broadly stated rights or unknown future rights and of
provisions stating that rights or remedies are not exclusive, that every right
or remedy is cumulative and may be exercised in addition to or with any other
right or remedy or that election of some particular remedy or remedies does not
preclude recourse to one or more others.
This opinion is given in respect of the Indenture, the New Notes and the
Guarantee only, and we express no opinion as to the legality, validity or
binding effect of any collateral agreement or other document or any other matter
beyond the matters expressly set forth herein. We assume that RPG has received
adequate consideration in connection with the Guarantee. We assume that the
creation and performance of the Guarantee bears a reasonable relation to the
State of Mississippi and the State of New York. To the extent that the
obligations of the Company under the Indenture or of RPG under the Guarantee may
be dependent upon such matters, we assume for purposes of this opinion that the
Trustee is duly organized, validly existing and in good standing under the laws
of its jurisdiction of organization; that the Trustee is duly qualified to
engage in the activities contemplated by the Indenture; that the Indenture has
been duly authorized, executed and delivered by the Trustee and constitutes the
valid, binding and enforceable obligation of the Trustee; that the Trustee is in
compliance, generally and with respect to acting as a trustee under the
Indenture, with all applicable laws and regulations; and that the Trustee has
the requisite corporate and legal power and authority to perform its obligations
under the Indenture. We also assume, for purposes of the opinion relating to
Federal income tax considerations, that the facts are as set forth in the
Registration Statement. This opinion is based on various statutory provisions,
regulations promulgated thereunder and interpretations thereof by the Internal
Revenue Service and the courts having jurisdiction in such matters, all of which
are subject to change prospectively and retroactively. Also, any variation or
difference in the facts from those set forth in the Registration Statement may
affect the conclusions stated herein.
<PAGE> 5
Horseshoe Gaming, L.L.C.
August 4, 1997
Page 5
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to this firm under the caption
"Legal Matters" and under the caption "Certain Federal Income Tax
Considerations" in the Prospectus which is a part of the Registration Statement.
Very truly yours,
/s/ RIORDAN & MCKINZIE
<PAGE> 6
RICHARDS & O'NEIL, LLP
885 Third Avenue
New York, N.Y. 10022
(212) 207-1200
Fax: (212) 750-9022 & (212) 755-7874
June 25, 1997
To the Initial Purchaser under that certain
Purchase Agreement, dated as of June 18,
1997 and to the Trustee as defined in that
certain Indenture dated as of June 15, 1997
Ladies and Gentlemen:
We have acted as special New York counsel to Horseshoe Gaming, L.L.C., a
Delaware limited liability company (the "Company"), and Robinson Property Group
Limited Partnership, a Mississippi limited partnership ("RPG"), in connection
with that certain Purchase Agreement, dated June 18, 1997 (the "Purchase
Agreement"), by and among the Company, RPG and Wasserstein Perella Securities,
Inc. (the "Note Purchaser"), relating to the sale by the Company of up to
$160,000,000 aggregate principal amount of the Company's 9-3/8% Series A Senior
Subordinated Notes due 2007 (the "Notes"). This opinion is delivered pursuant to
Section 7(a) of the Purchase Agreement. Capitalized terms used herein and not
defined herein shall have the meanings given to them in the Purchase Agreement
or, if noted herein, in that certain Indenture dated as of June 15, 1997 (the
"Indenture"), by and among the Company, RPG and U.S. Trust Company of Texas,
N.A., as Trustee.
In rendering this opinion, we have examined copies, certified or
otherwise identified to our satisfaction as being true copies, of each of the
following documents:
(i) the Purchase Agreement;
(ii) the Indenture;
(iii) the Notes;
(iv) the Guarantee;
(v) the HE Intercompany Note;
<PAGE> 7
To the Initial Purchaser under that certain
Purchase Agreement, dated as of June 18,
1997 and to the Trustee as defined in that
certain Indenture dated as of June 15, 1997
Page 2
(vi) the RPG Intercompany Note; and
(vii) the Registration Rights Agreement.
The documents listed in items (i)-(vii) above, together with the Series B Notes,
shall be hereinafter referred to as the "Operative Documents."
As to various questions of fact material to this opinion, we have been
furnished with, and with your consent have relied exclusively upon, without any
independent investigation or verification of any kind, the representations and
warranties contained in the Operative Documents and other documents executed and
delivered in connection therewith and upon certificates and other documents of
officers of the Company, HE and RPG, and of public officials and we have made
such other investigations as we have deemed relevant or necessary as the basis
for the opinions hereinafter set forth. In our examination of the documents
referred to above, we have assumed the genuineness of all signatures, and the
incumbency, authority and power, of all persons signing the Operative Documents
as or on behalf of the parties thereto, the authenticity and completeness of all
documents submitted to us as original or certified documents, and the conformity
to authentic original documents of all documents submitted to us as certified,
conformed, facsimiled or photostatic copies.
To the extent that the obligations of the Company, HE, RPG or any
Additional Guarantor may be dependent upon such matters, we have assumed for
purposes of this opinion that: (i) each party to the Operative Documents is or
will be duly organized, validly existing and in good standing under the laws of
its jurisdiction of organization; (ii) each such party has full corporate or
other organizational power and authority to execute, deliver and perform its
obligations under the Operative Documents to which it is a party and each other
document and agreement executed by it in connection therewith; (iii) the Notes
have been duly authenticated by the Trustee in accordance with the Indenture;
and (iv) each Operative Document executed by any of the parties has been duly
authorized, executed and delivered by such party and, except with respect to the
Company, HE, PPG and any Additional Guarantor, constitutes the legal, valid and
binding obligation of such party, enforceable against it in accordance with its
terms. In rendering the opinion set forth in paragraph 7 below, we have assumed,
with your consent, that the assumptions made in clauses (i)-(iv) of this
paragraph are true and correct as of the date the Series IS Notes are issued and
that, as of such date, each of the Operative Documents (other than the Series B
Notes) constitutes the legal, valid and binding obligation of each party
thereto, enforceable against such party in accordance with its terms. In
rendering the opinion set forth in paragraph 8
<PAGE> 8
To the Initial Purchaser under that certain
Purchase Agreement, dated as of June 18,
1997 and to the Trustee as defined in that
certain Indenture dated as of June 15, 1997
Page 3
below, we have assumed, with your consent, that the assumptions made in clauses
(i)-(iv) of this paragraph are true and correct as of the date of the Indenture
and Guarantee are executed and delivered by any Additional Guarantor and that,
as of such date, each of the Operative Documents (other than such Guarantee)
constitutes the legal, valid and binding obligation of each party thereto,
enforceable against such party in accordance with its terms.
You also have advised us that in rendering the opinions set forth below
we may assume that: (i) the purchase price for the Notes, the HE Intercompany
Note and the PPG Intercompany Note has been delivered to and received by the
Company, HE and PPG, respectively, in accordance with the provisions of the
Purchase Agreement, the HE Intercompany Note and the PPG Intercompany Note,
respectively; (ii) RPG has received adequate consideration in connection with
its obligations under the Guarantee, Indenture and the Notes; (iii) at the time
any Additional Guarantor executes the Indenture (or a counterpart thereto) and a
Guarantee, it will have received adequate consideration in connection with its
obligations under the Indenture and the Notes or Series B Notes (as the case may
be) and its Guarantee; and (iv) all parties to the Operative Documents have
acted and will act in good faith.
We have investigated such questions of law for the purpose of rendering
this opinion as we have deemed necessary. We are attorneys admitted to practice
only in the State of New York and we opine herein only as to the effect of the
law of the State of New York on the subject transactions. We do not opine on,
and we assume no responsibility as to, the applicability to or the effect on any
of the matters covered herein of, the laws of any other jurisdiction, including,
without limitation, federal laws. In addition, we do not express any opinion as
to any law of the State of New York applicable to securities, "blue sky" or
antifraud matters.
The opinions set forth below are subject to the following additional
limitations, qualifications and exceptions:
(a) the enforceability of the Operative Documents may be limited by
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium, or similar laws now or hereafter in effect relating to creditors'
rights and remedies generally;
(b) the remedies of specific performance and injunctive and other forms
of relief are subject to general equitable principles (regardless of whether
such matters
<PAGE> 9
To the Initial Purchaser under that certain
Purchase Agreement, dated as of June 18,
1997 and to the Trustee as defined in that
certain Indenture dated as of June 15, 1997
Page 4
are considered in a proceeding at law or in equity) and may be subject to the
discretion of the court before which any proceeding therefor may be brought;
(c) certain remedial and exculpatory provisions contained in the
Operative Documents may be unenforceable (including (i) certain self-help
provisions and provisions which purport to create evidentiary standards; (ii)
provisions which purport to restrict access to legal or equitable remedies or to
waive or release any statutory provisions or common law rights or benefits that
may not be waived or released; (iii) under certain circumstances, provisions
declaring that the failure to exercise or delay in exercising rights or remedies
will not operate as a waiver of any such right or remedy; and (iv) provisions
allowing for the acceleration of indebtedness due under debt instruments upon
the occurrence of certain events where such provisions are found to be
unconscionable or to impose restrictions or obligations on the debtor and it
cannot be demonstrated that the enforcement of such restrictions or obligations
upon the occurrence of such events is reasonably necessary for the protection of
the creditor), but the remedies provided in such Operative Documents, taken as a
whole, should not be inadequate for the practical realization of the benefits
intended to be afforded thereby;
(d) we express no opinion with respect to the enforceability of
provisions in the Operative Documents which purport to bind persons or entities
not parties thereto;
(e) we express no opinion with respect to the enforceability of
provisions which purport to establish consent to the subject matter jurisdiction
of any court, waive trial by jury, or waive objections to venue or the choice of
forum;
(f) we express no opinion with respect to the enforceability of
provisions regarding indemnification against liabilities where such
indemnification is contrary to public policy; and
(g) we express no opinion with respect to the enforceability of the
provisions of Section 5 of the Registration Rights Agreement, insofar as
liquidated damages provided therein may be deemed to be a penalty.
Based upon and subject to the foregoing, after giving effect to the
consummation of the transaction contemplated by the Operative Documents, we are
of the opinion that:
<PAGE> 10
To the Initial Purchaser under that certain
Purchase Agreement, dated as of June 18,
1997 and to the Trustee as defined in that
certain Indenture dated as of June 15, 1997
Page 5
1. Each of the Purchase Agreement, the Indenture, the Notes, and the
Registration Rights Agreement constitutes the legal, valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms.
2. The HE Intercompany Note constitutes the legal, valid and binding
obligation of HE, enforceable against HE in accordance with its terms.
3. Each of the Purchase Agreement, the Indenture, the RPG Intercompany
Note and the Registration Rights Agreement constitutes the legal, valid and
binding obligation of RPG, enforceable against RPG in accordance with its terms.
The Guarantee, as set forth in Section 12.1 of the Indenture, constitutes the
legal, valid and binding obligation of RPG, enforceable against RPG in
accordance with its terms.
4. The consummation of the transactions contemplated by the Purchase
Agreement and the Indenture and the execution, delivery and performance of the
Purchase Agreement, the Indenture and the other Operative Documents will not
violate any New York law or statute or any New York rule or regulation binding
upon the Company, HE or RPG.
5. No consent, approval or authorization of, or any registration, filing
or declaration with, or delivery of notice to, any Governmental Body of the
State of New York is required for the validity, execution and delivery or for
the performance by any of the Company, HE and RPG of the Purchase Agreement and
the other Operative Documents to which any of them is a party.
6. The interest payable with respect to the Notes is not usurious under
the laws of the State of New York.
7. When executed and authenticated in accordance with the terms of the
Indenture and issued in accordance with the terms of the Exchange Offer as
contemplated by the Registration Rights Agreement, each of the Series IS Notes
will constitute legal, valid and binding obligations of the Company, enforceable
against the Company in accordance with its terms.
8. Upon execution and delivery by an Additional Guarantor of the
Indenture (or a counterpart thereto) and the notation by such Additional
Guarantor of its Guarantee thereunder, each of the Indenture and such Guarantee
will constitute a legal valid
<PAGE> 11
To the Initial Purchaser under that certain
Purchase Agreement, dated as of June 18,
1997 and to the Trustee as defined in that
certain Indenture dated as of June 15, 1997
Page 6
and binding obligation of such Additional Guarantor, enforceable against it in
accordance with its terms.
Our opinions as expressed in paragraphs 4 and 5 are limited to those
laws, statutes and regulations that a lawyer exercising customary professional
diligence would reasonably recognize as being directly applicable to the parties
and the transactions contemplated by the Operative Documents.
The opinions set forth herein are as of the date of this letter and,
except as expressly set forth in paragraph 7 and 8 above, we do not render any
opinion as to the effect of any matter which may occur subsequent to the date
hereof. In addition, as to the opinions set forth in paragraphs 7 and 8 above,
we assume that the laws in effect as of the date the Series IS Notes are issued
and as of the date a Guarantee is executed and delivered by an Additional
Guarantor (as the case may be) are the same as the laws in effect on the date
hereof.
This opinion is rendered only to you and is solely for the benefit of
you in connection with the Purchase Agreement and Indenture. This opinion may
not be relied upon by you for any other purpose, nor may it be quoted,
circulated, referred or delivered to, or relied upon by any other person, firm
or corporation for any purpose without our prior express written consent.
Very truly yours,
/s/ RICHARDS & O'NEIL
<PAGE> 12
RICHARDS & O'NEIL, LLP
885 Third Avenue
New York, N.Y. 10022
(212) 207-1200
Fax: (212) 750-9022 & (212) 755-7874
August 1, 1997
Riordan & McKinzie
300 South Grand Avenue
29th Floor
Los Angeles, CA 90071
Ladies and Gentlemen:
We have acted as special counsel to Horseshoe Gaming, L.L.C., a Delaware
limited liability company (the "Company"), and Robinson Property Group Limited
Partnership, a Mississippi limited partnership ("RPG"), in connection with that
certain Purchase Agreement dated as of June 18, 1997 (the "Purchase Agreement"),
by and among the Company, RPG and Wasserstein Perella Securities, Inc. (the
"Initial Purchaser"), relating to the sale by the Company of up to $160,000,000
aggregate principal amount of the Company's 9-3/8% Senior Subordinated Notes due
June 15, 2007 (the "Notes"). In that capacity, we have delivered to the Initial
Purchaser our opinion, dated June 25, 1997 (the "R&O Opinion") pursuant to
Section 7(a) of the Purchase Agreement.
You have been requested to render your opinion (the "R&M Opinion") in
your capacity as special counsel to the Company and to RPG, in connection with
the Registration Statement on Form 5-4 filed by the Company and RPG in respect
of the Notes and RPG's guarantee thereof. You have requested our consent to your
reliance on the R&O Opinion in connection with your delivery of the R&M Opinion.
We hereby consent, notwithstanding the restrictions set forth in the
final paragraph of the R&O Opinion, to your reliance on the R&O Opinion in
connection with your delivery of the R&M Opinion. The R&O Opinion may not be
relied upon by you for any other purpose, nor may it be quoted, circulated,
referred or delivered to, or relied upon except in connection with the R&M
Opinion or as set forth in the last paragraph of the R&O Opinion.
Very truly yours,
/s/ RICHARDS & O'NEIL
<PAGE> 1
EXHIBIT 10.37
SECOND AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
THIS AGREEMENT is entered into as of the 1st day of October, 1995 by
and between HORSESHOE GAMING, INC., a Nevada corporation ("Employer" or
"Company") and Mr. JOHN MICHAEL ALLEN ("Employee"), and is made with reference
to the following recitals of fact:
RECITALS
WHEREAS, Employer is the Manager of Horseshoe Gaming, L.L.C., a
Delaware limited liability company (the "LLC"), whose subsidiaries and
affiliates have developed and are currently operating casino facilities in
Tunica County, Mississippi (the "Tunica Facility") and in Bossier City,
Louisiana (the "Bossier City Facility"), and intends to develop numerous other
casino facilities in emerging gaming jurisdictions;
WHEREAS, Employee has heretofore served as the General Manager of the
Tunica Facility pursuant to an Employment Agreement dated May 11, 1994 by and
between Robinson Property Group Limited Partnership and Employee (the "Prior
Employment Agreement"), which Prior Employment Agreement is being terminated
concurrent with the effectiveness of this Agreement;
WHEREAS, Employee has extensive experience in the gaming industry, and
based upon his knowledge, experience and skill is capable of performing each
and all of the duties and responsibilities to be assigned to Employee pursuant
to the terms of this Agreement; and
WHEREAS, Employer wishes to hire and employ Employee, and Employee
desires to accept such employment pursuant to the terms of this Agreement;
NOW, THEREFORE, for good and valuable consideration, the receipt and
adequacy of which is hereby acknowledged, and in consideration of the mutual
covenants, promises and agreements herein contained, the parties hereto agree
as follows:
AGREEMENT
1. Definitions. All capitalized words referenced or used in this
Agreement and not specifically defined herein shall have the meanings set forth
on Exhibit A, attached hereto and made a part hereof.
2. Term. This Agreement shall become effective and Employee's
term of employment with Employer shall commence, for all purposes, on October
1, 1995 (the "Commencement Date") and shall terminate on May 11, 1999, unless
terminated sooner by Employer or Employee pursuant to the terms set forth
herein.
<PAGE> 2
3. Position to be Held by Employee. Employee is hereby employed
and hired by Employer to serve and act as the Senior Vice President-Operations
of Employer and shall perform each and all of the duties and shall have all of
the responsibilities described herein. Employee shall at all times report
directly to and take directives from the Chief Executive Officer ("CEO") of the
Company, which presently is Mr. Jack B. Binion.
4. Duties and Responsibilities.
A. General Duties. In his capacity as Senior Vice
President-Operations of the Company, Employee shall have responsibility for
overseeing the operations of the Tunica Facility and assisting in the opening
of any to-be-developed casino and hotel facilities owned by subsidiaries or
affiliates of the LLC (individually, a "Facility" and collectively, the
"Facilities") in a manner so as to maximize, to the best of his ability, the
profitability of each Facility, for and on behalf of the LLC in accordance with
applicable laws and regulations. The authority of Employee to bind Employer
shall be as broad or as limited as may be determined from time to time by the
Board of Directors of the Company. Within salary and policy guidelines
established by the CEO and/or the Board and with the reasonable concurrence of
the CEO, Employee, while performing as General Manager of a Facility, shall
have the authority to hire and fire employees of each Facility at all levels
below departmental head positions, and with the concurrence of the CEO,
departmental heads as well.
B. Specific Duties.
(a) Employee shall continue to serve and act as
the General Manager and Chief Operating Officer of the casino and hotel owned
by Robinson Property Group Limited Partnership in Tunica, Mississippi (the
"Tunica Facility"), having responsibility for supervising and directing the
day-to-day activities and affairs of the Tunica Facility, including, without
limitation, customer relations, marketing, employee relations, service and
quality of the casino and hotel operation, service and quality of all food and
beverage facilities, cash management, compliance with all Governmental
Requirements, and all other similar functions typically performed by a general
manager of a major casino and hotel facility. In all instances, Employee shall
coordinate with and oversee the various department heads charged with direct
responsibility for various facets of the casino and hotel operations, and
assure that all such employees are performing their respective assignments and
such departments are consequently being run in a thorough, competent, efficient
and professional manner.
(b) Employer understands and agrees that it is
intended that Employee will not remain the General Manager of the Tunica
Facility, but rather, as the operations of the Tunica Facility become
stabilized and companies or partnerships owned or
2
<PAGE> 3
controlled by the LLC continue to expand into other new gaming jurisdictions,
Employee shall be involved actively in assisting in the acquisition,
development and opening of such new facility, including, if determined
necessary by the CEO of the Company, serving as General Manager of a new
facility until such time as the operations of the new facility become
stabilized. Accordingly, Employee may be relocated to different cities (other
than the city in which the Company's headquarters are located) and assigned
significantly different responsibilities from those set forth herein.
C. Fiduciary Duty. In every instance, Employee shall
carry out his various duties and responsibilities in a fiduciary capacity on
behalf of Employer, in an effort to maximize the profitability of the
Facilities. In no event whatsoever shall Employee enter into any commitments
or obligations, written or verbal, or take any other action or omit to take any
action, the result of which would be to create a conflict of interest between
Employer and Employee, or the result of which would benefit Employee, or any
person associated with or affiliated with Employee, to the detriment of
Employer.
D. Full Time Effort. Employee acknowledges and agrees
that the duties and responsibilities to be discharged by Employee require a
full time effort on the part of Employee, and accordingly, Employee agrees to
devote his full time effort and resources for and on behalf of Employer and the
LLC, and agrees that he will not, during the term hereof, enter into any other
business activities or ventures, other than those which are passive in nature
and which will not require the active participation of Employee.
E. Directives from CEO. In all instances, Employee
agrees to carry out all of his duties and responsibilities as set forth herein
pursuant to the guidance, reasonable and lawful directives and instructions of
the CEO of the Company, Mr. Jack B. Binion, or his successor, and agrees that
at all times his authority shall be subordinate to such CEO. With respect to
any decisions as to which there is a disagreement between Employee and the CEO,
the wishes and directives of the CEO shall prevail in all instances, and
Employee shall carry out any and all reasonable and lawful directives from the
CEO to the best of his ability.
5. Compensation. As compensation for the services to be rendered
by Employee pursuant to the terms of this Agreement, Employee shall he entitled
to receive the following:
A. A base salary of Three Hundred Fifty Thousand Dollars
($350,000) per year (the "Base Compensation"), payable semi-monthly.
3
<PAGE> 4
B. A one time bonus of sixty-seven Thousand Dollars
($67,000), payable on or before January 15, 1996.
C. Employer and Employee acknowledge that Employee has
held a one percent (1%) partnership interest in Robinson Property Group Limited
Partnership and a one-half percent (0.5%) partnership interest in New Gaming
Capital Partnership pursuant to the terms of the Prior Employment Agreement,
and that such interests have been contributed to the LLC pursuant to the terms
of that certain Assignment Agreement dated effective September 1, 1995,
executed by Employee in favor of the LLC in exchange for a .805506% interest in
the LLC or 815,714 Units in the LLC (the "Old Units"). Subject to the
provisions of Section 11 hereof, Employee's interest in the LLC shall increase
to 1.293423% by the grant, as of the date hereof, of 500,489 Units in the LLC
(the "New Units"; the Old Units and the New Units constitute the "Ownership
Interest"). Subject to the limitations of this Section 5.C, the Ownership
Interest shall entitle Employee to receive allocations of Profits and Losses
and distributions of Excess Cash of the LLC in accordance with the Limited
Liability Company Agreement of the LLC (the "Operating Agreement") to which
Employee is a party, including Net Profits and Excess Cash generated as a
result of the LLC's interests in the Bossier City, Louisiana and Tunica,
Mississippi casinos presently in operation as well as all other future
operating subsidiaries to be owned in whole or in part by the LLC.
The Old Units shall include for all purposes
hereunder and under the terms of the Operating Agreement, a right to
distributions based upon a share of Net Profits from and after September 1,
1995 (the "Old Units Grant Date"), including appreciation in the assets of the
LLC over their fair market value as of the Old Units Grant Date, but not
including a share of any appreciation in the assets of the LLC up to the Old
Units Grant Date (except to the extent of the capital account associated with
the Old Units as of the Old Units Grant Date).
Notwithstanding any other provision of this Agreement
to the contrary, for all purposes hereunder and under the Operating Agreement,
the New Units shall entitle Employee only to a share of the LLC's Net Profits
generated after the date of this Agreement (the "New Grant Date"). The New
Units shall entitle Employee to a share of the appreciation in the value of the
assets of the LLC over their fair market value as of the New Grant Date, which
is $273,678,894, but shall not entitle Employee to a share of the capital of
the LLC as of the New Grant Date, including any appreciation in the value of
the assets of the LLC up to the Grant Date.
6. Fringe Benefits. Employee shall be entitled to participate in
such health and pension plans as Employer shall adopt for all of the executives
of the Company; it being understood
4
<PAGE> 5
and agreed that the only retirement plan that Employer anticipates adopting at
this time is a Section 401(k) form of retirement plan. In addition, it is
understood and agreed that the Base Compensation to be received by Employee is
to be all-inclusive of other typical fringe benefits provided to executives in
a similar position as Employee; provided, however, that Employee shall be
entitled to the following benefits at no cost to Employee and/or entitled to
reimbursement for all reasonable out-of-pocket expenses incurred in connection
with the following:
A. to the extent Employer establishes a bonus plan(s)
offering cash and/or equity ownership in the LLC, Employee shall be eligible to
be considered for a bonus under such plan(s). Employee understands that the
grant of any bonus, however, shall be in the sole discretion of the Board of
Directors of the Company;
B. reasonable rental housing expenses, air
transportation expenses and other similar expense, incurred by Employee and/or
Employee's spouse during Employee's temporary relocations as General Manager of
any new Facility;
C. on an ongoing basis, all reasonable entertainment,
traveling and other similar expenses incurred in the performance of his duties
and responsibilities as Senior Vice President-Operations and as General Manager
of a Facility, such expenses to be subject to budgets established for such
purpose;
D. participation in Employer's health coverage plan for
Employee and all members of his immediate family, with such policy to be on
terms and conditions typically provided by major gaming companies, and subject
to the maximum benefit limitations typically included in such plans, such
insurance coverage shall include insurance for disability in an amount and upon
terms to be reasonably agreed upon and determined by Employer and Employee
within sixty (60) days from and after the date hereof. Employer and Employee
agree that Employer shall be obligated to continue the payment of Employee's
base salary during any short term disability, i.e., one continuing for a period
of 180 days or less, provided that such payments and obligations shall be
reduced by the amount of any disability insurance payments Employee is entitled
to receive during such period of time; and
E. paid vacation of three (3) weeks per year; provided
that Employee may not accumulate more than six (6) weeks of vacation,
regardless of the amount of vacation actually taken by Employee during the
course of his employment.
7. Gaming License. Employer and Employee understand that it may
be necessary for Employee to apply for and obtain, and maintain in full force
and effect at all times, a gaming license in various jurisdictions in which
subsidiaries or affiliates of the LLC are conducting gaming operations for
persons serving in a similar
5
<PAGE> 6
capacity as Employee. Accordingly, Employee shall, promptly after the date
hereof, make application for any and all of such required gaming licenses,
fully cooperate in the investigation or investigations to be conducted in
connection therewith, and otherwise use his best efforts to obtain such gaming
licenses in a timely fashion. Employer shall fully cooperate with Employee in
such regard and provide all necessary information required in connection
therewith, and pay all costs associated with such gaming licenses, including
application fees, investigation fees, or any other similar expenses such as
attorneys' fees, reasonably approved by Employer and incurred in connection
therewith. If Employee should fail to obtain any such license due to his lack
of suitability or failure to submit information in a timely manner (the
"License Denial"), and such License Denial prevents Employee from being able to
carry out, in a reasonable manner, his duties and responsibilities set forth
herein, then this Agreement may be immediately terminated by Employer, in which
event Employee shall have no right to any further compensation hereunder and
the divestiture provisions set forth in Section 11 hereof shall become
effective. During the course of his employment, Employee shall fully comply
with all requirements of applicable Gaming Authorities and Governmental
Authorities.
8. Termination.
A. Termination for Cause. Employee may be terminated
by Employer solely for "cause" in which event the provisions of Section 8.A(i)
through (iv) below shall apply.
For purposes or this agreement "cause" is herein defined
solely as one or more of the following events:
(a) the failure of Employee to initially obtain a
gaming license or the revocation, or suspension for a period in excess of
ninety (90) days, of any of Employee's gaming licenses due to an act or
omission of Employee, which was not caused by Employer or any of its
representatives;
(b) failure or refusal by Employee to observe or
perform any of the material provisions of this Agreement or any other written
agreement with Employer, or to perform in a reasonably satisfactory manner all
of the material duties required of Employee under this agreement or any other
written agreement with Employer;
(c) commission of fraud, misappropriation,
embezzlement or other acts of dishonesty, alcoholism, drug addition or
dependency or conviction for any crime punishable as a felony or a gross
misdemeanor involving dishonesty or moral turpitude, or the commission of any
act or acts which have a material adverse effect upon Employee's ability to
perform the duties which are assumed or
6
<PAGE> 7
assigned to him pursuant to this Agreement, or which actions or occurrences are
materially adverse to the interests of Employer;
(d) failure or refusal by Employee to comply with
the reasonable and lawful directives of and/or procedures established by the
CEO, Jack B. Binion, or his successor, or the Board of Directors; or
(e) the death of Employee or the "long-term"
mental or physical disability of Employee to such a degree that Employee, in
the reasonable judgment of responsible physicians retained by Employer, is
unable to carry out all of his obligations, duties and responsibilities set
forth herein. For purposes of this Agreement, "long-term" shall be defined as
exceeding a period of one hundred eighty (180) days.
Termination of Employee's employment for cause under
Sections 8.A(c) or (e) above shall be effective upon notice. Termination of
Employee's employment for cause under Sections 8.A(a), (b) or (d) above shall
be effective upon thirty (30) days prior written notice to Employee; provided
that prior to the giving of such notice of termination, Employer shall notify
Employee that a factual basis for termination for cause exists, specifying such
basis.
Upon any termination of Employee's employment with
Employer, the following shall apply:
(i) Employee shall be paid his Base
Compensation through the effective date of such termination;
(ii) Employee shall be entitled to retain
his Fully Vested Ownership Interest in the LLC (as hereinafter defined in
Section 11);
(iii) The covenant not to compete and
confidentiality agreement set forth in Sections 9 and 10 hereinbelow shall
apply in the manner and to the extent set forth herein; and
(iv) The put/call option described in
Section 12 hereinbelow shall become effective for all purposes.
B. Additional Benefit. Upon the termination of
Employee's employment with Employer for whatever reason (including a failure to
renew this Employment Agreement or to enter into a new Employment Agreement
with Employer), Employee shall also be paid the following amounts in cash (the
"Severance Benefits"):
(a) (i) $0, if Employee is terminated before May
15, 1997; (ii) $486,630, if Employee is terminated on or after May 15, 1997,
but before May 15, 1998; (iii) $1,025,606, if
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<PAGE> 8
Employee is terminated on or after May 15, 1998, but before May 11, 1999 and
(iv) $1,366,923, if Employee is terminated after May 11, 1999.
(b) Notwithstanding the foregoing, within ninety
(90) days of the occurrence of a Binion Disposition Event (defined in Section
11 below), unless Employee has been previously paid a Severance Benefit,
Employee shall be paid $1,366,923 and Employee shall have no further right to
receive a Severance Benefit.
(c) If on the date of the termination of
Employee's employment (the "Termination Date") the maximum federal income tax
rate on net capital gains applicable to individuals who engage in transactions
(the "Capital Gain Rate") is less than the maximum federal income tax rate on
ordinary income applicable to individuals with respect to income earned on the
Termination Date (the "Ordinary Income Rate"), then the amount payable pursuant
to the other provisions of this Section 8.B shall be increased by:
(i) a sum equal to the amount payable
pursuant to the other provisions of this Section 8.B multiplied by the
difference, expressed as a percentage, between the Ordinary Income Rate and the
Capital Gain Rate, divided by
(ii) the difference between one (1) and
the Ordinary Income Rate.
For example, if Employee is terminated after May 11, 1999 and on the
Termination Date the Capital Gain Rate is 28% and the Ordinary Income Rate is
39.6%, then the amount payable pursuant to this Section 8.B would be:
$1,366,923 + ($1,366,923 x 11.6%) = $1,629,445
--------------------
60.4%
9. Covenant Not to Compete.
A. Covenant. Upon any resignation by Employee or
termination of the employment of Employee with cause, Employee agrees that for
a period not to exceed one year from and after the date of such termination, he
will not serve in any capacity, whether as an officer, director, employee or
consultant, to any other casino company which is either (i) competing directly
against the LLC, the Company or any of their subsidiaries or affiliates at the
time of such termination; or (ii) in any "RFP" process under way on the
Termination Date or any other similar competitive process under way on the
Termination Date in which a limited number of gaming licenses are available for
issuance to one or more gaming companies selected out of a group of competing
companies, such as the competitive licensing process in which one of the LLC's
subsidiaries is presently engaged in Harrison County, Indiana. Such covenant
not to compete has been given by Employee to Employer
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<PAGE> 9
for full and adequate consideration including, without limitation, the
Ownership Interest, and such covenant not to compete will expire on the earlier
to occur of: (i) one year after the Termination Date; or (ii) the date upon
which all competitive licensing processes under way on the Termination Date are
completed and a specific company or companies are selected for award of such
license or licenses.
B. Modification. If any court of competent jurisdiction
determines that the term or the business or geographic scope of the covenant
contained in Section 9.A above is impermissible due to the extent thereof, said
covenant shall be modified to reduce its term, business scope or geographic
scope, as the case may be, to the extent necessary to make such covenant valid,
and such covenant shall be enforced as modified.
C. Injunctive Relief. It would be difficult or
impossible to ascertain the measure of damages to Employer and/or the LLC
resulting from any breach of this covenant not to compete, injury to Employer
from any such breach may be irreparable, and money damages therefor may be an
inadequate remedy. Accordingly, in the event of a breach or threatened breach
by Employee of the provisions of this Section 9, Employer shall be entitled to
seek and obtain, in addition to monetary damages, injunctive relief against
Employee, in a court of competent jurisdiction, restraining Employee from
breaching this Section 9.
10. Disclosure of Confidential Information.
A. Definition of Confidential Information. For purposes
of this Agreement, "Confidential Information" means any information that is not
generally known to the public that relates to the existing or reasonably
foreseeable business of Employer and/or the LLC which has been expressly or
implicitly protected by Employer and/or the LLC or which, from all of the
circumstances, Employee knows or has reason to know that Employer or the LLC
intend or expect to keep secret. Confidential Information includes, but is not
limited to, information contained in or relating to the customer lists, account
lists, price lists, product designs, marketing plans or proposals, customer
information, merchandising, selling, accounting, finances, knowhow, trademarks,
trade names, trade practices, trade secrets and other proprietary information
of Employer.
B. Employee Shall Not Disclose Confidential Information.
Employee will not, during the term of Employee's employment and for two (2)
years following the Termination Date, use, show, display, release, discuss,
communicate divulge or otherwise disclose Confidential Information to any
unauthorized person, firm, corporation, association or other entity for any
reason or purpose whatsoever, without the prior written consent or
authorization of Employer. Nothing contained herein shall be
9
<PAGE> 10
interpreted or construed as restraining or preventing Employee from using
Confidential Information in the proper conduct of services to be rendered by
Employee on behalf of Employer and/or the LLC pursuant to this Agreement.
C. Scope. Employee's covenant in Section 10.B above to
not disclose Confidential Information shall not apply to information which, at
the time of such disclosure, may be obtained from sources outside of Employer,
or from its agents, lawyers or accountants, so long as those sources did not
receive the information in an improper manner or against the wishes of
Employer.
D. Title. All documents and other tangible or
intangible property (including business opportunities which Employer and/or the
LLC is pursuing) relating in any way to the business of Employer and/or the LLC
which are conceived or generated by Employee or come into Employee's possession
or knowledge during the employment period shall be and remain the exclusive
property of Employer and/or the LLC, and Employee shall return immediately to
Employer and/or the LLC, upon their request, all such documents and tangible
and intangible property, including, but not limited to, all records, manuals,
books, blank forms, documents, letters, memoranda, notes, notebooks, reports,
data, tables, magnetic tapes, computer disks, calculations or copies thereof,
which are the property of Employer and/or the LLC and which relate in any way
to the business, customers, products, practices or techniques of Employer
and/or the LLC, as well as all other property of Employer and/or the LLC,
including but not limited to, all documents which in whole or in part contain
any confidential information of Employer and/or the LLC which in any of these
cases are in Employee's possession or under Employee's control.
E. Compelled Disclosure. If a third party seeks to
compel disclosure of confidential information by Employee by judicial or
administrative process, Employee shall promptly notify Employer of such
occurrence and furnish to Employer a copy of the demand, summons, subpoena or
other process served upon Employee to compel such disclosure, and will permit
Employer to assume, at its expense, but with Employee's cooperation, defense of
such disclosure demand. If Employer refuses to contest such a third party
disclosure demand under judicial or administrative process, or a final judicial
judgment is issued compelling disclosure of Confidential information by the
Employee, Employee shall be entitled to disclose such information in compliance
with the terms of such administrative or judicial process or order.
F. Injunctive Relief. The disclosure, use or usurpation
of Confidential Information would cause significant economic detriment to the
business of Employer and/or the LLC which may be irreparable and for which
monetary damages may be an
10
<PAGE> 11
inadequate remedy. Accordingly, Employer and/or the LLC shall be entitled to
seek and obtain, in addition to monetary damages, injunctive relief against
Employee, in a court of competent jurisdiction restraining Employee from the
disclosure, use or usurpation in any manner of any confidential Information.
11. Possible Divestiture of Ownership Interest. Employee's
Ownership Interest in the LLC, which Employee is entitled to receive in
accordance with the terms of this Agreement, shall be conveyed in its entirety
to and held by Employee within thirty (30) days after the date of execution of
this Agreement, subject to the approval of applicable Gaming Authorities and
compliance with Governmental Requirements. A portion of the Ownership
Interest shall, nevertheless, be subject to divestiture based upon the
following terms and conditions:
A. Forty-five percent (45%) of the Ownership Interest,
represented by 592,453 Old Units, shall not be subject to divestiture and shall
be deemed fully vested for all purposes upon execution of this Agreement;
provided that the remaining fifty-five percent (55%) of the Ownership Interest
shall be subject to possible divestiture and shall only become fully vested
based upon the following provisions;
B. Fifteen percent (15%) of such Ownership Interest of
Employee represented by 197,485 Old Units in the LLC shall be subject to
divestiture in the event that Employee is terminated or voluntarily resigns
prior to May 15, 1996;
C. Fifteen percent (15%) of such Ownership Interest of
Employee, represented by 25,776 Old Units and 171,484 New Units in the LLC
shall be subject to divestiture in the event that Employee is terminated or
voluntarily resigns prior to May 15, 1997;
D. Fifteen percent (15%) of such Ownership Interest of
Employee, represented by 197,484 New Units, shall be subject to divestiture in
the event that Employee is terminated or voluntarily resigns prior to May 15,
1998;
E. The final ten percent (10%) of such Ownership
Interest of Employee, represented by 131,656 New Units, shall be subject to
divestiture in the event that Employee is terminated or voluntarily resigns
prior to May 11, 1999.
The Ownership Interest of Employee in the LLC which is not
subject to divestiture pursuant to the provisions set forth above is referred
to herein as the "Fully Vested Ownership Interest."
Such divestiture of the Ownership Interest shall be automatic
upon the occurrence of the event giving rise to such divestiture, and shall not
require the consent, acknowledgement or
11
<PAGE> 12
concurrence of Employee. Upon any such event causing divestiture of all or a
portion of the Ownership Interest, Employer and/or the LLC shall send a written
notice to Employee specifying the amount of the Ownership Interest that has
been divested and the reason for such divestiture. Employee agrees to execute
any and all documents reasonably requested by counsel for Employer to evidence
such divestiture. Such divestiture shall be made without payment of any type
whatsoever to Employee, and shall be effective for all purposes from the date
of the event giving rise to such divestiture. In no event shall such
divestiture be deemed a "forfeiture," but rather the possibility of such
divestiture is part of the bargained for consideration to Employer in entering
into this Agreement; it being clearly understood and agreed that Employee's
performance of services in a manner satisfactory to Employer for the entire
term of this Agreement is the consideration to be provided by Employee to
Employer for the Ownership Interest to be conveyed to Employee pursuant to this
Agreement.
Notwithstanding the provisions of Sections 11.B through 11.E
hereof, if Jack B. Binion (including any entities through which Jack B. Binion
holds his ownership interest in the LLC, family members of Jack B. Binion
and/or trusts established for the benefit of his heirs) transfers a controlling
interest in the LLC to a third party in a transaction other than a public
offering (a "Binion Disposition Event"), the entire Ownership Interest of
Employee shall immediately become a Fully Vested Ownership Interest and no
longer subject to divestiture.
12. Put/Call Option Upon Termination. In the event of termination
of Employee's employment with Employer, for whatever reason, then the LLC shall
have the right to purchase the Fully Vested Ownership Interest of Employee at
the fair market value of such Ownership Interest as determined pursuant to the
terms of this Agreement (the "Call Option"). In a similar fashion, Employee
shall have an option to require the LLC to purchase back his entire Fully
Vested Ownership Interest in the LLC at the fair market value of such Ownership
Interest as determined pursuant to the terms of this Agreement (the "Put
Option"). The LLC or Employee, as the case may be, may exercise their
respective options provided for in this Section 12, by tendering written notice
to the other party of exercise of such option within thirty (30) days after the
date of the termination of this Agreement.
In the event that either option described herein should be exercised
by Employee or the LLC, then Employee and the LLC agree to promptly convene and
attempt in good faith to determine the fair market value of the Ownership
Interest to be purchased by the LLC from Employee. Such fair market value of
the Fully Vested Ownership Interest shall take into account that the New Units
constitute an interest only in future profits and asset appreciation and not
capital, as provided in Section 5.C hereof. In the event that the LLC and
Employee are unable to agree upon
12
<PAGE> 13
such fair market value, then the parties hereto agree to submit such matter to
an independent appraisal to be conducted in Las Vegas, Nevada in accordance
with the terms set forth below. Either party may initiate such appraisal
process by delivery of written notification to the other party to such effect,
designating the name of an appraiser that is to represent it in such appraisal
process. Thereafter, within ten (10) days of receipt of such notice, the other
party shall designate an appraiser to represent it in such process. Within ten
(10) days after designation of the second appraiser, the two appraisers shall
convene and agree upon a third appraiser. In the event that said two
appraisers are unable to agree upon a third appraiser, then the third appraiser
shall be selected by lottery, with each appraiser to submit the name of another
reputable appraiser, and with the appraiser whose name is drawn in such lottery
being designated for all purposes as the third appraiser.
Within ten (10) days after selection of the third appraiser, the three
appraisers shall convene and attempt to agree upon the fair market value of the
Ownership Interest to be purchased the LLC. If unable to agree, then each
appraiser shall within thirty (30) days thereafter prepare his own independent
appraisal report and such reports shall be submitted to the LLC and Employee.
Provided that the middle appraisal is within ten percent (10%) of either the
high or low appraisal, then the middle appraisal (the highest and lowest
appraisals being disregarded) shall be deemed to be the fair market value and
thus the valuation to be used for purposes of the LLC's acquisition of
Employee's Fully Vested Ownership Interest.
In the event that the middle appraisal is not within ten percent (10%)
of either the high or low appraisal, then the determination of the fair market
value of Employee's Ownership Interest shall be submitted to arbitration in
accordance with the provisions of Section 17 hereinbelow, and in such
arbitration, each of the appraisers shall be entitled to submit their appraisal
report and testify on behalf of the LLC or Employee. The arbitration panel,
after hearing all evidence desired to be submitted by the LLC and Employee,
shall determine said fair market value, and such decision by said arbitration
panel shall be binding upon the LLC and Employee.
The purchase price to be paid by the LLC as determined by agreement or
appraisal as described herein shall be paid in three (3) equal annual principal
installments, with the first payment being due on the first anniversary date of
termination. Such obligation shall bear interest at the prime rate of interest
as quoted from time to time by the largest commercial bank (in terms of assets)
in the State of Nevada, and accrued but unpaid interest shall be due and
payable together with each annual principal payment. Notwithstanding the
foregoing, in the event any of the LLC's lenders prohibit payment of the
purchase price to be made
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<PAGE> 14
over as short as a three (3) year period, then Employee agrees that the
purchase price shall be paid in equal principal installments over the time
period permitted by such lender but in no event over a period in excess of five
(5) years.
The LLC and Employee agree that any persons chosen to represent them
as appraisers shall be qualified and competent MAI appraisers or a certified
public accountant with one of the "Big Six" accounting firms, experienced in
valuing closely held partnerships or corporations. In the event that the LLC
is a publicly traded company at the time of termination, then the provisions of
this Section 12 shall be inapplicable, and accordingly, the Put and Call Option
described herein shall terminate for all purposes.
In the event that the LLC exercises its Call Option, then the LLC
agrees to pay for all of the reasonable expenses incurred in connection with
such appraisal process, including the cost associated with the appraiser
selected by Employee, provided that the amount charged by such appraiser is a
fair and reasonable fee. In the event that Employee exercises his Put Option,
then Employer shall bear the cost of its appraiser, Employee shall bear the
cost of his appraiser and the LLC and Employee shall each bear one-half (1/2)
of the cost of the third appraiser.
13. Distributions; Public Offering. Employee shall become a
member of the LLC subject to all rights, conditions and other provisions of the
Operating Agreement which governs the relationship among all of the members of
the LLC. Accordingly, Employee shall be entitled to receive distributions from
the LLC with respect to Employee's Ownership Interest in the same manner and at
the same time as other members of the LLC under the terms of the Operating
Agreement or the terms of any credit agreement or other financing to which the
LLC or any of its subsidiaries or affiliates is a party. One of the credit
agreements currently in effect restricts the members of the LLC from receiving
distributions in an amount in excess of that intended to be sufficient to
discharge federal and state income taxes that may be levied against the income
allocated to each of such members pursuant to the provisions of applicable law.
In addition, if the LLC, its business or any portion thereof is at
some point in the future included in a public offering, which public offering
involves all or substantially all of the gaming interests or ventures owned or
controlled by Jack B. Binion, then in such event, the valuation to be placed
upon the business of the LLC shall be that which is determined in good faith by
the investment banking firm acting as the lead underwriter in such public
offering. Such valuation shall be based upon such firm's fair market appraisal
of the value of the business of the LLC in comparison to the other assets to be
included in such public offering. In such event, Employee shall receive a
percentage of
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<PAGE> 15
stock in the resulting public company equal to the percentage that the value of
the Ownership Interest (as determined taking into account that a portion of
such Interest constitutes an interest only in future profits and asset
appreciation, and not capital, all as provided in Section 5.C hereof) bears to
the value of the LLC (subject to dilution as a result of such offering) times
the amount determined by dividing the value of the LLC, as determined by such
investment banking firm, by the value of all assets (including the LLC)
included in and cash raised by the public company in the public offering. By
way of example, if Employee's Ownership Interest was valued at one-half of one
percent (.5%) of the LLC's value and the total value of the LLC was
$400,000,000 and the value of the other assets included in the public offering,
including cash raised in the public offering, was $200,000,000, then the
ownership or stock interest of Employee in the public company after the public
offering would be equal to one-third of one percent (.333%).
In the event that the LLC is involved in a public offering at any time
during the term of this Agreement, then that portion of the stock of the public
company that Employee is entitled to receive, but which is still not fully
vested and thus subject to divestiture pursuant to the terms of this Agreement,
shall be escrowed in the custody of the public company and shall not be
released to Employee until such time as such stock becomes free from potential
divestiture. Accordingly, during the time that such stock is escrowed with the
public company, Employee shall not margin, pledge, sell, transfer or otherwise
attempt to encumber or dispose of such stock, except to the public company. At
the time that such stock is no longer subject to divestiture, then it shall be
immediately released by the public company to Employee.
14. Representations and Warranties. Employer, as the following
relate to Employer, and the LLC, as the following relate to the LLC, hereby
represent and warrant to Employee as follows:
(a) The LLC is a limited liability company, duly
organized and validly existing under the laws of the state of Delaware.
Employer is a Nevada corporation, duly organized and validly existing under the
laws of the State of Nevada;
(b) This Agreement, when executed by Jack B.
Binion, as CEO and Chairman of the Company, will constitute a legal, valid, and
binding agreement on the part of Employer and the LLC, having been duly
authorized by all requisite corporate and company resolutions or
authorizations; and
(c) This Agreement, when executed by Employer and
the LLC, will not conflict with, violate the terms of or create a default under
any other agreement, contract or other obligation Employer and/or the LLC is a
party to or by which Employer or the LLC is bound.
15
<PAGE> 16
Employee hereby represents and warrants to Employer and the
LLC as follows:
(i) this Agreement, when executed by
Employee, will not conflict with, violate the terms of or create a default
under Employee's present employment arrangements and/or agreement, whether oral
or written;
(ii) Employee has never been denied a
gaming application by any Gaming Authority and Employee currently knows of no
reason why Employee would not be qualified to receive a gaming license from any
jurisdiction in which the LLC and/or any of its affiliates or subsidiaries
conducts gaming operations;
(iii) Employee is unaware of any mental,
physical or emotional condition, including, without limitation, substance or
alcohol abuse problems, which currently affects Employee, and which might
result in Employee's being unable to carry out all of his duties, obligations
and responsibilities set forth herein; and
(iv) Employee has read the Operating
Agreement and agrees to be bound thereby with respect to the Ownership
Interest. Employee specifically confirms that the representations and
warranties set forth in Section 14 of the Operating Agreement are accurate as
to Employee.
Employer, the LLC and Employee understand and agree that each is
entering into this Agreement in strict reliance upon the representations and
warranties set forth herein, and that a breach of any of said representations
and warranties by any of the parties hereto would constitute a default
hereunder.
15. Entire Agreement. This Agreement constitutes the entire
agreement of the parties hereto with respect to the subject matter set forth
herein, and supersedes any and all previous oral or written agreements,
understandings or discussions between the parties hereto with respect to the
subject matter set forth herein, including without limitation the Amended and
Restated Employment Agreement between the parties hereto also dated as of
October 1, 1995.
16. All Amendments in Writing. This Agreement may not be amended
orally, but only pursuant to a written instrument executed by Employer, the LLC
and Employee.
17. Arbitration. In the event of any dispute or controversy
between Employer and/or the LLC and Employee with respect to any of the matters
set forth herein, then such dispute or controversy shall be submitted to
binding arbitration, to be conducted in Las Vegas, Nevada pursuant to the then
prevailing rules and regulations of the American Arbitration Association. In
such arbitration, the
16
<PAGE> 17
prevailing party shall be entitled, in addition to any award made in such
proceeding, to recover all of its costs and expenses incurred in connection
therewith, including, without limitation, attorneys' fees.
18. Governing Laws. This agreement shall be governed by and
construed in accordance with the laws of the State of Nevada.
19. Notices. Any notice required or permitted to be given in
connection with this Agreement shall be given by either: (a) depositing the
same in the United States Mail, postage prepaid, registered or certified,
return receipt requested; or (b) by depositing it with a recognized overnight
courier service for delivery the following day to the other party; or (c) by
facsimile transmission, provided the other party acknowledges receipt of such
transmission.
All such notices shall be deemed received as of the date of
acknowledgment of receipt by the other party. All such notices shall be
addressed to the parties at the following addresses, or to such other address
as may be provided from time to time by one party to the other:
If to the LLC: Horseshoe Gaming, L.L.C.
330 S. Fourth Street
Las Vegas, Nevada 89101
Attn: Jack B. Binion
If to Employer: Horseshoe Gaming, Inc.
330 S. Fourth Street
Las Vegas, Nevada 89101
Attn: Jack B. Binion
If to Employee: Mr. J. Michael Allen
8408 Turtle Creek Circle
Las Vegas, Nevada 89113
20. Assignment. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective
17
<PAGE> 18
heirs, successors, administrators and assigns. Notwithstanding the foregoing,
Employee understands and agrees that the nature of this Agreement is a personal
services agreement, and that Employer is entering into this Agreement based
upon the specific services to be rendered personally by Employee hereunder; and
accordingly, Employee shall not assign, transfer or delegate in any manner any
of his duties, responsibilities or obligations hereunder.
21. Waiver. No waiver of any term, condition or covenant of this
Agreement by a Party shall be deemed to be a waiver of any subsequent breaches
of the same or other terms, covenants or conditions hereof by such party.
22. Construction. Whenever possible, each provision of this
Agreement shall be interpreted in such a manner as to be effective or valid
under applicable law, but if any provision of this Agreement shall be
prohibited by or invalid under applicable law, such provision shall be
ineffective only to the beat of such prohibition or invalidity without
invalidating the remainder of such provision or the remaining provisions of
this Agreement.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the day and year first above written.
"EMPLOYER" HORSESHOE GAMING, INC.
a Nevada corporation,
By /s/ JACK B. BINION
-------------------------------
Jack B. Binion
Chief Executive Officer
and Chairman
"EMPLOYEE"
/s/ JOHN M. ALLEN
-------------------------------
J. MICHAEL ALLEN
AGREED AND ACCEPTED as of the 1st
day of October, 1995
HORSESHOE GAMING, L.L.C.,
a Delaware Limited Liability Company
By: HORSESHOE GAMING, INC.
a Nevada corporation
Manager
By /s/ JACK B. BINION
--------------------------
Jack B. Binion
Chief Executive Officer
and Chairman
18
<PAGE> 19
EXHIBIT A
DEFINITIONS
All capitalized terms referenced or used in this Agreement and
not specifically defined therein shall have the meanings set forth below in
this Exhibit A, which is attached to and made a part of this Agreement for all
purposes.
Excess Cash. The term "Excess Cash" shall have the same meaning as
the term "Excess Cash" has in the Limited Liability Company Agreement of the
LLC.
Gaming Authorities. The term "Gaming Authorities" or "Gaming
Authority" shall mean 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 or any State.
Governmental Authorities. The term "Governmental Authorities" means
the Government of the United States, and all states, counties and political
subdivisions in which any of the Company's casino facilities are located, and
all courts or political subdivisions, agencies, commissions, boards or
instrumentalities or officers thereof, whether federal, state or local, having
or exercising jurisdiction over Employer or any of the Company's gaming
facilities, including, without limitation, all Gaming Authorities.
Governmental Requirements. The term "Governmental Requirements" means
all laws and agreements with any Governmental Authority that are applicable to
the acquisition development construction and/or operation of any of the
Company's gaming facilities including, without limitation, all required
permits, approvals and any rules, guidelines or restrictions created or imposed
by Governmental Authorities (including, without limitation, any Gaming
Authority).
Net Profits. The term "Net Profits" shall have the same meaning as
the term "Profits" has in the Limited Liability Company Agreement of the LLC.
19
<PAGE> 1
EXHIBIT 10.38
SECOND AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
THIS AGREEMENT is entered into as of the 1st day of October, 1995 by
and between HORSESHOE GAMING, INC., a Nevada corporation ("Employer" or
"Company") and MR. WALTER J. HAYBERT ("Employee"), and is made with reference
to the following recitals of fact:
RECITALS
WHEREAS, Employer is the Manager of Horseshoe Gaming, L.L.C., a
Delaware limited liability company (the "LLC"), whose subsidiaries and
affiliates have developed and are currently operating casino facilities in
Tunica County, Mississippi and in Bossier City, Louisiana and intends to
develop numerous other casino facilities in emerging gaming jurisdictions;
WHEREAS, Employee has extensive experience in the gaming industry, and
based upon his knowledge, experience and skill is capable of performing each
and all of the duties and responsibilities to be assigned to Employee pursuant
to the terms of this Agreement; and
WHEREAS, Employer wishes to hire and employ Employee, and Employee
desires to accept such employment pursuant to the terms of this Agreement;
NOW, THEREFORE, for good and valuable consideration, the receipt and
adequacy of which is hereby acknowledged, and in consideration of the mutual
covenants, promises and agreements herein contained, the parties hereto agree
as follows:
AGREEMENT
1. Definitions. All capitalized words referenced or used in this
Agreement and not specifically defined herein shall have the meanings set forth
on Exhibit A, attached hereto and made a part hereof.
2. Term. This Agreement shall become effective and Employee's
term of employment with Employer shall commence, for all purposes, on October
1, 1995 (the "Commencement Date") and shall terminate on July 31, 1998, unless
terminated sooner by Employer or Employee pursuant to the terms set forth
herein.
3. Position to be Held by Employee. Employee is hereby employed
and hired by Employer to serve and act as the Chief Financial Officer of
Employer and the LLC and shall perform each and all of the duties and shall
have all of the responsibilities described herein. Employee shall at all times
report directly to and take directives from the Chief Executive Officer ("CEO")
of the Company, which presently is Mr. Jack B. Binion. Employee shall not
<PAGE> 2
be reassigned to a different position, relocated to a different city (other
than the city in which the company's headquarters are located) or assigned
significantly different responsibilities from those set forth herein, without
the reasonable concurrence and agreement of Employee.
4. Duties and Responsibilities.
A. General Duties. In his capacity as Chief Financial
Officer of the Company and the LLC, Employee shall have responsibility for
overseeing the financial activities and affairs of the Company and the LLC in a
manner so as to maximize, to the best of his ability, the profitability of the
Company and the LLC, for and on behalf of Employer in accordance with
applicable laws and regulations. The authority of Employee to bind Employer
and the LLC shall be as broad or as limited as may be determined from time to
time by the Board of Directors of the Company. Within salary and policy
guidelines established by the CEO and/or the Board and with the reasonable
concurrence of the CEO, Employee shall have the authority to hire and fire
employees of the Company who are assigned to perform financial duties and
functions and who are under the direct or indirect supervision of Employee.
B. Specific Duties. Employee shall be responsible for
the supervision and direction of all of the day-to-day financial activities of
the Company and the LLC, including, without limitation, banking relationships,
relationships with other lenders, relationships with the Company's and the
LLC's independent certified public accountants, relationships with the
Company's and the LLC's investment bankers and other stock analysts and
investment advisors, cash management, overseeing preparation of the Company's
and the LLC's (and their respective subsidiaries and affiliates) tax returns
and other financial reporting requirements, establishment of policy and
oversight of financial officers at property level and other similar functions
typically performed by a Chief Financial Officer of a major casino and hotel
company. In all instances, Employee shall coordinate with and oversee all
department heads charged with direct responsibility for the various facets of
the Company's and the LLC's financial affairs as described above so as to
assure that all such employees are performing their respective assignments and
such departments are being run in a thorough, competent and professional
manner.
C. Fiduciary Duty. In every instance, Employee shall
carry out his various duties and responsibilities in a fiduciary capacity on
behalf of Employer, in an effort to maximize the profitability of the Company
and the LLC. In no event whatsoever shall Employee enter into any commitments
or obligations, written or verbal, or take any other action or omit to take any
action, the result of which would be to create a conflict of interest between
Employer or the LLC and Employee, or the result of which would
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benefit Employee, or any person associated with or affiliated with Employee, to
the detriment of Employer or the LLC.
D. Full-Time Effort. Employee acknowledges and agrees
that the duties and responsibilities to be discharged by Employee require a
full-time effort on the part of Employee, and accordingly, Employee agrees to
devote his full time effort and resources for and on behalf of Employer and the
LLC, and agrees that he will not, during the term hereof, enter into any other
business activities or ventures, other than those which are passive in nature
and which will not require the active participation of Employee.
E. Directives from CEO. In all instances, Employee
agrees to carry out all of his duties and responsibilities as set forth herein
pursuant to the guidance, reasonable and lawful directives and instructions of
the CEO of the Company, Mr. Jack B. Binion, or his successor, and agrees that
at all times his authority shall be subordinate to such CEO. With respect to
any decisions as to which there is a disagreement between Employee and the CEO,
the wishes and directives of the CEO shall prevail in all instances, and
Employee shall carry out any and all reasonable and lawful directives from the
CEO to the best of his ability.
F. Additional Future Responsibilities of Employee.
Employer understands that Employee has significant experience in site selection
and governmental relations in various emerging gaming markets. Accordingly,
Employee agrees to be available, as requested by Employer, and as his other
duties and responsibilities may permit, to assist Employer in pursuing and
obtaining the right to develop new gaming facilities in various emerging gaming
markets throughout the United States and in other countries throughout the
world and to assist in the opening of any to-be-developed casinos and hotel
facilities owned by subsidiaries or affiliates of the LLC (individually, a
"Facility" and collectively, the "Facilities") in a manner so as to maximize
the profitability of each Facility, for and on behalf of the Company and the
LLC in accordance with applicable laws and regulations.
5. Compensation. As compensation for the services to be rendered
by Employee pursuant to the terms of this Agreement, Employee shall be entitled
to receive the following:
A. a base salary of Three Hundred Fifty Thousand Dollars
($350,000) per year (the "Base Compensation"), payable semi-monthly; plus
B. Subject to the provisions of Section 11 hereof, an
ownership interest of 500,489 Units in the LLC ("the Ownership Interest"). The
Ownership Interest shall entitle Employee to receive allocations of Profits and
Losses and distributions of Excess Cash of the LLC in accordance with the
Limited Liability
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Company Agreement of the LLC (the "Operating Agreement") to which Employee is a
party, including Net Profits and Excess Cash generated as a result of the LLC's
interests in the Bossier City, Louisiana and Tunica, Mississippi casinos
presently in operation as well as all other future operating subsidiaries to be
owned in whole or in part (directly or indirectly) by the LLC; provided,
however, that notwithstanding any other provision of this Agreement to the
contrary, for all purposes hereunder and under the Operating Agreement, the
Ownership Interest shall entitle Employee only to a share of the LLC's Net
Profits generated after the date of this Agreement (the "Grant Date"). The
Ownership Interest shall entitle Employee to a share of the appreciation in the
value of the assets of the LLC over their fair market value as of the Grant
Date, which is $273,678,894, but shall not entitle Employee to a share of the
capital of the LLC as of the Grant Date, including any appreciation in the
value of the assets of the LLC up to the Grant Date.
6. Fringe Benefits. Employee shall be entitled to participate in
such health and pension plans as Employer shall adopt for all of the executives
of the Company; it being understood and agreed that the only pension plan that
Employer anticipates adopting at this time is a Section 401(k) form of
retirement plan. In addition, it is understood and agreed that the Base
Compensation to be received by Employee is to be all-inclusive of other typical
fringe benefits provided to executives in a similar position as Employee;
provided, however, that Employee shall be entitled to the following benefits at
no cost to Employee and/or entitled to reimbursement for all reasonable
out-of-pocket expenses incurred in connection with the following:
A. to the extent Employer establishes a bonus plan or
plans offering cash, stock options, stock grants or other equity ownership in
the LLC, Employee shall be eligible for inclusion in such plan(s) on a fair and
equitable basis in comparison to other participants in such plan(s) and on a
basis generally consistent with industry standards and practices. Employee
understands that the grant of any such cash or stock bonus, however, shall be
in the sole discretion of the Board of Directors of the Company;
B. if the CEO determines that Employee should establish
his office at the Company headquarters in Las Vegas, Nevada, the reasonable
expense of moving his family and his personal belongings to Las Vegas, Nevada,
plus reimbursement for any real estate commission paid by Employee to a
licensed broker on the sale of Employee's principal residence in Memphis,
Tennessee, and the closing costs associated with the acquisition by Employee of
a new principal residence in Las Vegas, Nevada, provided that such
reimbursement in the aggregate shall not exceed Fifty Thousand Dollars
($50,000);
C. if the CEO determines that Employee should establish his
office at the Company headquarters in Las Vegas, Nevada,
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reasonable rental housing expenses, air transportation expenses and other
similar expense incurred by Employee and/or Employee's spouse, for a period not
to exceed sixty (60) days during Employee's relocation to Las Vegas, Nevada;
D. on an ongoing basis, all reasonable entertainment,
traveling and other similar expenses incurred in the performance of his duties
and responsibilities as Chief Financial Officer, such expenses to be subject to
budgets established for such purpose;
E. participation in Employer's health coverage plan for
Employee and all members of his immediate family, with such policy to be on
terms and conditions typically provided by major gaming companies, and subject
to the maximum benefit limitations typically included in such plans. Such
insurance coverage shall include insurance for disability in an amount and upon
terms to be reasonably agreed upon and determined by Employer and Employee
within sixty (60) days from and after the date hereof. Employer and Employee
agree that Employer shall be obligated to continue the payment of Employee's
base salary during any short term disability, i.e., one continuing for a period
of 180 days or less, provided that such payments and obligations shall be
reduced by the amount of any disability insurance payments Employee is entitled
to receive during such period of time;
F. paid vacation of three (3) weeks per year; provided
that Employee may not accumulate more than four (4) weeks of vacation,
regardless of the amount of vacation actually taken by Employee during the
course of his employment; and
G. reimbursement for the cost of maintaining an existing
$500,000 term life insurance policy, insuring the life of Employee, provided
that Employee remains insurable at the rate generally established by major life
insurance companies for people who smoke, but are otherwise in good health and
the same age as Employee; provided, however, that if Employee is in a higher
risk category, said policy shall nevertheless continue to be made available to
Employee, but Employer will only be obligated to pay that portion of the
premium payable by a person who smokes, but is otherwise in good health, and
all premiums in excess of such standard premium shall be paid by Employee.
In addition to the foregoing, Employer and LLC agree to make available
and provide to Employee within ten (10) days after request by Employee, a
personal loan on the following terms and conditions:
Amount Up to $200,000
Interest Rate: 10% per annum
Maturity: July 31, 1998
Security: Pledge of Employee's Ownership
Interest in the LLC
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7. Gaming License. Employer and Employee understand that it may
be necessary for Employee to apply for and obtain, and maintain in full force
and effect at all times, a gaming license in various jurisdictions in which
subsidiaries or affiliates of the LLC are conducting gaming operations for
persons serving in a similar capacity as Employee. Accordingly, Employee
shall, promptly after the date hereof, make application for any and all
required gaming licenses, fully cooperate in the investigation or
investigations to be conducted in connection therewith, and otherwise use his
best efforts to obtain such gaming licenses in a timely fashion. Employer
shall fully cooperate with Employee in such regard and provide all necessary
information required in connection therewith, and pay all costs associated with
such gaming licenses, including application fees, investigation fees, or any
other similar expenses such as attorneys' fees, reasonably approved by Employer
and incurred in connection therewith. If Employee should fail to obtain any
such license due to his lack of suitability or failure to submit information in
a timely manner, then this Agreement may be immediately terminated by Employer,
in which event Employee shall have no right to any further compensation
hereunder and the divestiture provisions set forth in Section 11 hereof shall
become effective. During the course of his employment, Employee shall fully
comply with all requirements of applicable Gaming Authorities and Governmental
Authorities.
8. Termination.
A. Termination for Cause. Employee may be terminated
by Employer for "cause" in which event the provisions of Section 8.A(i) through
(iv) below shall apply.
For purposes of this Agreement "cause" is herein defined as
one or more of the following events:
(a) the failure of Employee to initially obtain a
gaming license or the revocation, or suspension for a period in excess of
ninety (90) days, of any of Employee's gaming licenses due to an act or
omission of Employee, which was not caused by Employer or any of its
representatives;
(b) failure or refusal of Employee to observe or
perform any of the material provisions of this Agreement or any other written
agreement with Employer, or to perform in a reasonably satisfactory manner all
of the material duties required of Employee under this Agreement or any other
written agreement with Employer;
(c) commission of fraud, misappropriation,
embezzlement or other acts of dishonesty, alcoholism, drug addiction or
dependency or conviction for any crime punishable as
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a felony or a gross misdemeanor involving dishonesty or moral turpitude, or the
commission of any act or acts which have a material adverse effect upon
Employee's ability to perform the duties which are assumed or assigned to him
pursuant to this Agreement, or which actions or occurrences are materially
adverse to the interests of Employer;
(d) refusal or failure to comply with the
reasonable and lawful directives of and/or procedures established by the CEO,
Jack B. Binion, or his successor, or the Board of Directors; or
(e) the death of Employee or the "long-term"
mental or physical disability of Employee to such a degree that Employee, in
the reasonable judgment of responsible physicians retained by Employer, is
unable to carry out all of his obligations, duties and responsibilities set
forth herein. For purposes of this Agreement, "long-term" shall be defined as
exceeding a period of one hundred eighty (180) days.
Termination of Employee's employment for cause under
Sections 8.A(c) or (e) above shall be effective upon notice. Termination of
Employee's employment for cause under Sections 8.A(a), (b) or (d) above shall
be effective upon thirty (30) days prior written notice to Employee; provided
that prior to the giving of such notice of termination, Employer shall notify
Employee that a factual basis for termination for cause exists, specifying such
basis.
Upon any termination of Employee's employment by
Employer under this Section 8.A, the following shall apply:
(i) Employee shall be paid his Base
Compensation through the effective date of such termination;
(ii) Employee shall be entitled to retain
his Fully Vested Ownership Interest in the LLC (as hereinafter defined in
Section 11);
(iii) The covenant not to compete and
confidentiality agreement set forth in Sections 9 and 10 hereinbelow shall
apply in the manner and to the extent set forth herein; and
(iv) The put/call option described in
Section 12 hereinbelow shall become effective for all purposes.
B. Termination Without Cause. This Agreement may be
terminated at any time by Employer, upon thirty (30) days prior written notice
to Employee, at the will of Employer and without good cause as described in
Section 8.A above. In the event of any such termination without cause, the
following shall apply:
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(i) Employee shall be paid his Base Compensation through
the effective date of such termination;
(ii) Employee shall be entitled to retain that portion of
his Ownership Interest in the LLC which, upon the effective date of such
termination, is fully vested plus Employee shall be entitled to be vested in an
additional 125,122.25 Units in the LLC, as of the effective date of such
termination by Employer (subject to the maximum Ownership Interest of 500,489
Units set forth in Section 5.B above);
(iii) The covenant not to compete and confidentiality
agreement set forth in Sections 9 and 10 hereinbelow shall apply in the manner
and to the extent set forth herein; and
(iv) The put/call option described in Section 12
hereinbelow shall become effective for all purposes.
C. Additional Benefit. Upon the termination of
Employee's employment with Employer for any reason (including a failure to
renew this Employment Agreement or to enter into a new Employment Agreement
with Employer), Employer shall immediately pay Employee the following amounts
in cash (the "Severance Benefit"):
(a) if such termination is by Employer with cause
(i) $300,000, if Employee is terminated on or before July 20, 1996; (ii)
$683,461, if Employee is terminated on or before July 20, 1997; (iii)
$1,025,192, if Employee is terminated on or before July 20, 1998 and (iv)
$1,366,923, if Employee is terminated after July 20, 1998, or
(b) if such termination is by Employee or is by
Employer without cause, (i) $683,461, if Employee is terminated on or before
July 20, 1996; (ii) $1,025,192 if Employee is terminated on or before July 20,
1997; and (iii) $1,366,923, if Employee is terminated after July 20, 1997.
Notwithstanding the foregoing, within ninety (90) days of the
occurrence of a Binion Disposition Event (defined in Section 11 below), unless
Employee has been previously paid a Severance Benefit, Employee shall be paid
$1,366,923 in cash and Employee shall have no further right to receive a
Severance Benefit.
If on the date of the termination of Employee's employment
(the "Termination Date") the maximum federal income tax rate on net capital
gains applicable to individuals who engage in transactions (the "Capital Gain
Rate") is less than the maximum federal income tax rate on ordinary income
applicable to individuals with respect to income earned on the Termination Date
(the "Ordinary Income Rate"), then the amount payable pursuant to the other
provisions of this Section 8.C shall be increased by:
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(i) a sum equal to the amount payable pursuant to
the other provisions of this Section 8.C multiplied by the difference,
expressed as a percentage, between the Ordinary Income Rate and the Capital
Gain Rate, divided by
(ii) the difference between one (1) and the
Ordinary Income Rate.
For example, if Employee's employment is terminated after July 20,
1998 and on the Termination Date the Capital Gain Rate is 28% and the Ordinary
Income Rate is 39.6%, then the amount payable pursuant to this Section 8.C
would be:
$1,366,923 + ($1,366,923 x 11.6%) = $1,629,445
--------------------
60.4%
9. Covenant Not to Compete.
A. Covenant. Upon any resignation by Employee or
termination of the employment of Employee with cause, Employee agrees that for
a period not to exceed one year from and after the date of such termination, he
will not serve in any capacity, whether as an officer, director, employee or
consultant, to any other casino company which is either (i) competing directly
against the LLC, the Company or any of their subsidiaries or affiliates at the
time of such termination; or (ii) in any "RFP" process under way on the
Termination Date or any other similar competitive process under way on the
Termination Date in which a limited number of gaming licenses are available for
issuance to one or more gaming companies selected out of a group of competing
companies, such as the competitive licensing process in which one of the LLC's
subsidiaries is presently engaged in Harrison County, Indiana. Such covenant
not to compete has been given by Employee to Employer and the LLC for full and
adequate consideration including, without limitation, the Ownership Interest,
and such covenant not to compete will expire on the earlier to occur of: (i)
one year after the Termination Date; or (ii) the date upon which all
competitive licensing processes under way on the Termination Date are completed
and a specific company or companies are selected for award of such license or
licenses.
B. Modification. If any court of competent jurisdiction
determines that the term or the business or geographic scope of the covenant
contained in Section 9.A above is impermissible due to the extent thereof, said
covenant shall be modified to reduce its term, business scope or geographic
scope, as the case may be, to the extent necessary to make such covenant valid,
and such covenant shall be enforced as modified.
C. Injunctive Relief. It would be difficult or
impossible to ascertain the measure of damages to Employer and/or the LLC
resulting from any breach of this covenant not to compete,
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injury to Employer and/or the LLC from any such breach may be irreparable, and
money damages therefor may be an inadequate remedy. Accordingly, in the event
of a breach or threatened breach by Employee of the provisions of this Section
9, Employer and/or the LLC shall be entitled to seek and obtain, in addition to
monetary damages, injunctive relief against Employee, in a court of competent
jurisdiction, restraining Employee from breaching this Section 9.
10. Disclosure of Confidential Information.
A. Definition of Confidential Information. For purposes
of this Agreement, "Confidential Information" means any information that is not
generally known to the public that relates to the existing or reasonably
foreseeable business of Employer and/or the LLC which has been expressly or
implicitly protected by Employer and/or the LLC or which, from all of the
circumstances, Employee knows or has reason to know that Employer and/or the
LLC intend or expect to keep secret. Confidential Information includes, but is
not limited to, information contained in or relating to the customer lists,
account lists, price lists, product designs, marketing plans or proposals,
customer information, merchandising, selling, accounting, finances, knowhow,
trademarks, trade names, trade practices, trade secrets and other proprietary
information of Employer and/or the LLC.
B. Employee Shall Not Disclose Confidential Information.
Employee will not, during the term of Employee's employment and for two (2)
years following the Termination Date, use, show, display, release, discuss,
communicate, divulge or otherwise disclose Confidential Information to any
unauthorized person, firm, corporation, association or other entity for any
reason or purpose whatsoever, without the prior written consent or
authorization of Employer. Nothing contained herein shall be interpreted or
construed as restraining or preventing Employee from using Confidential
Information in the proper conduct of services to be rendered by Employee on
behalf of Employer and/or the LLC pursuant to this Agreement.
C. Scope. Employee's covenant in Section 10.B above to
not disclose Confidential Information shall not apply to information which, at
the time of such disclosure, may be obtained from sources outside of Employer,
or from its agents, lawyers or accountants, so long as those sources did not
receive the information in an improper manner or against the wishes of
Employer.
D. Title. All documents and other tangible or
intangible property (including business opportunities which Employer and/or the
LLC is pursuing) relating in any way to the business of Employer and/or the LLC
which are conceived or generated by Employee or come into Employee's possession
during the
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employment period shall be and remain the exclusive property of Employer and/or
the LLC, and Employee shall return immediately to Employer and/or the LLC, upon
their request, all such documents and tangible and intangible property,
including, but not limited to, all records, manuals, books, blank forms,
documents, letters, memoranda, notes, notebooks, reports, data, tables,
magnetic tapes, computer disks, calculations or copies thereof, which are the
property of Employer and/or the LLC and which relate in any way to the
business, customers, products, practices or techniques of Employer and/or the
LLC, as well as all other property of Employer and/or the LLC, including but
not limited to, all documents which in whole or in part contain any
Confidential Information of Employer and/or the LLC which in any of these cases
are in Employee's possession or under Employee's control.
E. Compelled Disclosure. If a third party seeks to
compel disclosure of Confidential Information by Employee by judicial or
administrative process, Employee shall promptly notify Employer of such
occurrence and furnish to Employer a copy of the demand, summons, subpoena or
other process served upon Employee to compel such disclosure, and will permit
Employer to assume, at its expense, but with Employee's cooperation, defense of
such disclosure demand. If Employer refuses to contest such a third party
disclosure demand under judicial or administrative process, or a final judicial
judgment is issued compelling disclosure of Confidential Information by the
Employee, Employee shall be entitled to disclose such information in compliance
with the terms of such administrative or judicial process or order.
F. Injunctive Relief. The disclosure, use or usurpation
of Confidential Information would cause significant economic detriment to the
business of Employer and/or the LLC which may be irreparable and for which
monetary damages may be an inadequate remedy. Accordingly, Employer and/or the
LLC shall be entitled to seek and obtain, in addition to monetary damages,
injunctive relief against Employee, in a court of competent jurisdiction
restraining Employee from the disclosure, use or usurpation in any manner of
any Confidential Information.
11. Possible Divestiture of Ownership Interest. Employee's
Ownership Interest in the LLC, being 500,489 Units, which Employee is entitled
to receive in accordance with the terms of this Agreement, shall be conveyed in
its entirety to and held by Employee on October 1, 1995, subject to the
approval of applicable Gaming Authorities and compliance with Governmental
Requirements. A portion of the Ownership Interest of Employee shall,
nevertheless, be subject to divestiture based upon the following terms and
conditions:
A. Twenty-five percent (25%) of such Ownership Interest
shall not be subject to divestiture and shall be deemed fully vested for all
purposes upon execution of this Agreement;
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provided that the remaining seventy-five percent (75%) shall be subject to
possible divestiture and shall only become fully vested based upon the
following provisions;
B. Subject to the provisions of Section 8.B above,
seventy-five percent (75%) of such Ownership Interest of Employee in the LLC
shall be subject to divestiture in the event that Employee is terminated or
voluntarily resigns prior to July 20, 1996;
C. Subject to the provisions of Section 8.B above, fifty
percent (50%) of such Ownership Interest of Employee in the LLC shall be
subject to divestiture in the event that Employee is terminated or voluntarily
resigns on or after July 20, 1996 and prior to July 20, 1997; and
D. Subject to the provisions of Section 8.B above, the
final twenty-five percent (25%) of such Ownership Interest of Employee in the
LLC shall be subject to divestiture in the event that Employee is terminated or
voluntarily resigns on or after July 20, 1996 and prior to the scheduled
termination date of this Agreement set forth in Section 2 above. The Ownership
Interest of Employee in the LLC which is not subject to divestiture pursuant to
the provisions set forth above is referred to herein as the "Fully Vested
Ownership Interest".
Such divestiture of the Ownership Interest shall be automatic
upon the occurrence of the event giving rise to such divestiture, and shall not
require the consent, acknowledgement or concurrence of Employee. Upon any such
event causing divestiture of all or a portion of the Ownership Interest,
Employer and/or the LLC shall send a written notice to Employee specifying the
amount of the Ownership Interest that has been divested and the reason for such
divestiture. Employee agrees to execute any and all documents reasonably
requested by counsel for the LLC to evidence such divestiture. Such
divestiture shall be made without payment of any type whatsoever to Employee,
and shall be effective for all purposes from the date of the event giving rise
to such divestiture. In no event shall such divestiture be deemed a
"forfeiture", but rather the possibility of such divestiture is part of the
bargained for consideration to Employer in entering into this Agreement; it
being clearly understood and agreed that Employee's performance of services in
a manner satisfactory to Employer for the entire term of this Agreement is the
consideration to be provided by Employee to Employer for the Ownership Interest
to be conveyed to Employee pursuant to this Agreement.
Notwithstanding the provisions of Sections 11.B, 11.C and 11.D
hereof, if Jack B. Binion (including any entities through which Jack B. Binion
holds his ownership interest in the LLC, family members of Jack B. Binion
and/or trusts established for the benefit of his heirs) transfers a controlling
interest in the LLC
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to a third party in a transaction other than a public offering (a "Binion
Disposition Event"), the entire Ownership Interest of Employee shall
immediately become a Fully Vested Ownership Interest and no longer subject to
divestiture.
12. Put/Call Option Upon Termination. In the event of the
termination of Employee's employment with Employer, for whatever reason, and
with or without cause, then the LLC shall have the right to purchase the Fully
Vested Ownership Interest of Employee at the fair market value of such
Ownership Interest as determined pursuant to the terms of this Agreement (the
"Call Option"). In a similar fashion, Employee shall have an option to require
the LLC to purchase back his entire Fully Vested Ownership Interest in the LLC
at the fair market value of such Ownership Interest as determined pursuant to
the terms of this Agreement (the "Put Option"). The LLC or Employee, as the
case may be, may exercise their respective options provided for in this Section
12, by tendering written notice to the other party of exercise of such option
within ninety (90) days after the date of the termination of this Agreement.
In the event that either option described herein should be exercised
by Employee or the LLC, then Employee and the LLC agree to promptly convene and
attempt in good faith to determine the fair market value of the Ownership
Interest to be purchased by the LLC from Employee. Such fair market value of
the Fully Vested Ownership Interest shall take into account that such Interest
constitutes an interest only in future profits and asset appreciation, and not
capital, all as provided in Section 5.B hereof. In the event that the LLC and
Employee are unable to agree upon such fair market value, then the parties
hereto agree to submit such matter to an independent appraisal to be conducted
in Las Vegas, Nevada in accordance with the terms set forth below. Either
party may initiate such appraisal process by delivery of written notice to the
other party to such effect, designating the name of an appraiser that is to
represent it in such appraisal process. Thereafter, within ten (10) days of
receipt of such notice, the other party shall designate an appraiser to
represent it in such process. Within ten (10) days after designation of the
second appraiser, the two appraisers shall convene and agree upon a third
appraiser. In the event that said two appraisers are unable to agree upon a
third appraiser, then the third appraiser shall be selected by lottery, with
each appraiser to submit the name of another reputable appraiser, and with the
appraiser whose name is drawn in such lottery being designated for all purposes
as the third appraiser.
Within ten (10) days after selection of the third appraiser, the three
appraisers shall convene and attempt to agree upon the fair market value of the
Ownership Interest to be purchased by the LLC. If unable to agree, then each
appraiser shall within thirty (30) days thereafter prepare his own independent
appraisal report
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and such reports shall be submitted to the LLC and Employee. Provided that the
middle appraisal is within ten percent (10%) of either the high or low
appraisal, then the middle appraisal (the highest and lowest appraisals being
disregarded) shall be deemed to be the fair market value and thus the valuation
to be used for purposes of the LLC's acquisition of Employee's Fully Vested
Ownership Interest.
In the event that the middle appraisal is not within ten percent (10%)
of either the high or low appraisal, then the determination of the fair market
value of Employee's Ownership Interest shall be submitted to arbitration in
accordance with the provisions of Section 17 hereinbelow, and in such
arbitration, each of the appraisers shall be entitled to submit their appraisal
report and testify on behalf of the LLC or Employee. The arbitration panel,
after hearing all evidence desired to be submitted by the LLC and Employee,
shall determine said fair market value, and such decision by said arbitration
panel shall be binding upon the LLC and Employee.
The purchase price to be paid by the LLC as determined by agreement or
appraisal as described herein shall be paid in cash to Employee upon Employee's
transfer to the LLC of his Fully Vested Ownership Interest in the LLC.
The LLC and Employee agree that any persons chosen to represent them
as appraisers shall be qualified and competent MAI appraisers or a certified
public accountant with one of the "Big Six" accounting firms, experienced in
valuing closely held partnerships or corporations. In the event that the LLC
is a publicly traded company at the time of termination, then the provisions of
this Section 12 shall be inapplicable, and accordingly, the Put and Call Option
described herein shall terminate for all purposes.
In the event that the LLC exercises its Call Option, then the LLC
agrees to pay for all of the reasonable expenses incurred in connection with
such appraisal process, including the cost associated with the appraiser
selected by Employee, provided that the amount charged by such appraiser is a
fair and reasonable fee. In the event that Employee exercises his Put Option,
then the LLC shall bear the cost of its appraiser, Employee shall bear the cost
of his appraiser and the LLC and Employee shall each bear one-half (1/2) of the
cost of the third appraiser.
13. Distributions; Public Offering. Employee shall become a
member of the LLC subject to all rights, conditions and other provisions of the
Operating Agreement which governs the relationship among all of the members of
the LLC. Accordingly, Employee shall be entitled to receive distributions from
the LLC with respect to Employee's Ownership Interest in the same manner and at
the same time as other members of the LLC under the terms of the
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<PAGE> 15
Operating Agreement or the terms of any credit agreement or other financing to
which the LLC or any of its subsidiaries or affiliates is a party. One of the
credit agreements currently in effect restricts the members of the LLC from
receiving distributions in an amount in excess of that intended to be
sufficient to discharge federal and state income taxes that may be levied
against the income allocated to each of such members pursuant to the provisions
of applicable law.
In addition, if the LLC, its business or any portion thereof is at
some point in the future included in a public offering, which public offering
involves all or substantially all of the gaming interests or ventures owned or
controlled by Jack B. Binion, then in such event, the valuation to be placed
upon the business of the LLC shall be that which is determined in good faith by
the investment banking firm acting as the lead underwriter in such public
offering. Such valuation shall be based upon such firm's fair market appraisal
of the value of the business of the LLC in comparison to the other assets to be
included in such public offering. In such event, Employee shall receive a
percentage of stock in the resulting public company equal to the percentage
that the value of the Employee's Ownership Interest (as determined taking into
account that such Interest has an interest only in future profits and asset
appreciation, and not capital, all as provided in Section 5.B hereof) bears to
the value of the LLC (subject to dilution as a result of such offering) times
the amount determined by dividing the value of the LLC, as determined by such
investment banking firm, by the value of all assets (including the LLC)
included in and cash raised by the public company in the public offering. By
way of example, if Employee's Ownership Interest was valued at one-half of one
percent (.5%) of the LLC's value and the total value of the LLC was
$400,000,000 and the value of the other assets included in the public offering,
including cash raised in the public offering, was $200,000,000, then the
ownership or stock interest of Employee in the public company after the public
offering would be equal to one-third of one percent (.333%).
In the event that the LLC is involved in a public offering at any time
during the term of this Agreement, then that portion of the stock of the public
company that Employee is entitled to receive, but which is still not fully
vested and thus subject to divestiture pursuant to the terms of this Agreement,
shall be escrowed in the custody of the public company and shall not be
released to Employee until such time as such stock becomes free from potential
divestiture. Accordingly, during the time that such stock is escrowed with the
public company, Employee shall not margin, pledge, sell, transfer or otherwise
attempt to encumber or dispose of such stock, except to the public company. At
the time that such stock is no longer subject to divestiture, then it shall be
immediately released by the public company to Employee.
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14. Representations and Warranties. Employer, as the following
relate to Employer, and the LLC, as the following relate to the LLC, hereby
represent and warrant to Employee as follows:
(a) The LLC is a limited liability company, duly
organized and validly existing under the laws of the State of Delaware;
Employer is a Nevada corporation, duly organized and validly existing under the
laws of the State of Nevada;
(b) This Agreement, when executed by Jack B.
Binion, as CEO and Chairman of the Company, will constitute a legal, valid, and
binding agreement on the part of Employer and the LLC, having been duly
authorized by all requisite corporate and company resolutions or
authorizations; and
(c) This Agreement, when executed by Employer and
the LLC, will not conflict with, violate the terms of or create a default under
any other agreement, contract or other obligation Employer and/or the LLC is a
party to or by which Employer or the LLC is bound.
Employee hereby represents and warrants to Employer and the
LLC as follows:
(i) this Agreement, when executed by Employee,
will not conflict with, violate the terms of or create a default under
Employee's present employment arrangements and/or agreement, whether oral or
written;
(ii) Employee has never been denied a gaming
application by any Gaming Authority and Employee currently knows of no reason
why Employee would not be qualified to receive a gaming license from any
jurisdiction in which the LLC and/or any of its affiliates or subsidiaries
conducts gaming operations;
(iii) Employee is unaware of any mental, physical
or emotional condition, including, without limitation, substance or alcohol
abuse problems, which currently affects Employee, and which might result in
Employee's being unable to carry out all of his duties, obligations and
responsibilities set forth herein; and
(iv) Employee has read the Operating Agreement and
agrees to be bound thereby with respect to the Ownership Interest. Employee
specifically confirms that the representations and warranties set forth in
Section 14 of the Operating Agreement are accurate as to Employee.
Employer, the LLC and Employee understand and agree that each is
entering into this Agreement in strict reliance upon the representations and
warranties set forth herein, and that a breach
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<PAGE> 17
of any of said representations and warranties by either of the parties hereto
would constitute a default hereunder.
15. Entire Agreement. This Agreement constitutes the entire
agreement of the parties hereto with respect to the subject matter set forth
herein, and supersedes any and all previous oral or written agreements,
understandings or discussions between the parties hereto with respect to the
subject matter set forth herein, including without limitation the Amended and
Restated Employment Agreement between the parties hereto also dated as of
October 1, 1995.
16. All Amendments in Writing. This Agreement may not be amended
orally, but only pursuant to a written instrument executed by Employer, the LLC
and Employee.
17. Arbitration. In the event of any dispute or controversy
between Employer and/or the LLC and Employee with respect to any of the matters
set forth herein, then such dispute or controversy shall be submitted to
binding arbitration, to be conducted in Las Vegas, Nevada pursuant to the then
prevailing rules and regulations of the American Arbitration Association. In
such arbitration, the prevailing party shall be entitled, in addition to any
award made in such proceeding, to recover all of its costs and expenses
incurred in connection therewith, including, without limitation, attorneys'
fees.
18. Governing Laws. This agreement shall be governed by and
construed in accordance with the laws of the State of Nevada.
19. Notices. Any notice required or permitted to be given in
connection with this Agreement shall be given by either: (a) depositing the
same in the United States Mail, postage prepaid, registered or certified,
return receipt requested; or (b) by depositing it with a recognized overnight
courier service for delivery the following day to the other party; or (c) by
facsimile transmission, provided the other party acknowledges receipt of such
transmission.
All such notices shall be deemed received as of the date of
acknowledgment of receipt by the other party. All such notices shall be
addressed to the parties at the following addresses, or to such other address
as may be provided from time to time by one party to the other:
If to Employer: Horseshoe Gaming, Inc.
330 S. Fourth Street
Las Vegas, Nevada 89101
Attn: Jack B. Binion
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<PAGE> 18
If to Employee: Mr. Walter J. Haybert
9636 Fox Hill Circle North
Germantown, TN 38139
If to the LLC: Horseshoe Gaming, L.L.C.
330 S. Fourth Street
Las Vegas, Nevada 89101
Attn: Jack B. Binion
20. Assignment. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective heirs, successors,
administrators and assigns. Notwithstanding the foregoing, Employee
understands and agrees that the nature of this Agreement is a personal services
agreement, and that Employer is entering into this Agreement based upon the
specific services to be rendered personally by Employee hereunder; and
accordingly, Employee shall not assign, transfer or delegate in any manner any
of his duties, responsibilities or obligations hereunder.
21. Waiver. No waiver of any term, condition or covenant of this
Agreement by a party shall be deemed to be a waiver of any subsequent breaches
of the same or other terms, covenants or conditions hereof by such party.
22. Construction. Whenever possible, each provision of this
Agreement shall be interpreted in such a manner as to be effective or valid
under applicable law, but if any provision of this Agreement shall be
prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity without
invalidating the remainder of such provision or the remaining provisions of
this Agreement.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the day and year first above written.
"EMPLOYER" HORSESHOE GAMING, INC.,
a Nevada corporation
By: /s/ JACK B. BINION
-------------------------------
Jack B. Binion
Chief Executive Officer
and Chairman
"EMPLOYEE"
/s/ WALTER J. HAYBERT
----------------------------------
Walter J. Haybert
9636 Fox Hill Circle North
Germantown, TN 38139
18
<PAGE> 19
AGREED AND ACCEPTED as of the
1st day of October, 1995
HORSESHOE GAMING, L.L.C.,
a Delaware Limited Liability Company
By: HORSESHOE GAMING, INC.
a Nevada corporation
Manager
By: /s/ JACK B. BINION
--------------------------------
Jack B. Binion
Chief Executive Officer
and Chairman
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<PAGE> 20
EXHIBIT A
DEFINITIONS
All capitalized terms referenced or used in this Agreement and
not specifically defined therein shall have the meanings set forth below in
this Exhibit A, which is attached to and made a part of this Agreement for all
purposes.
Excess Cash. The term "Excess Cash" shall have the same meaning as
the term "Excess Cash" has in the Limited Liability Company Agreement of the
LLC.
Gaming Authorities. The term "Gaming Authorities" or "Gaming
Authority" shall mean 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 or any State.
Governmental Authorities. The term "Governmental Authorities" means
the Government of the United States, and all states, counties and political
subdivisions in which any of the Company's casino facilities are located, and
all courts or political subdivisions, agencies, commissions, boards or
instrumentalities or officers thereof, whether federal, state or local, having
or exercising jurisdiction over Employer or any of the Company's gaming
facilities, including, without limitation, all Gaming Authorities.
Governmental Requirements. The term "Governmental Requirements" means
all laws and agreements with any Governmental Authority that are applicable to
the acquisition, development, construction and/or operation of any of the
Company's gaming facilities including, without limitation, all required
permits, approvals and any rules, guidelines or restrictions created or imposed
by Governmental Authorities (including, without limitation, any Gaming
Authority).
Net Profits. The term "Net Profits" shall have the same meaning as
the term "Profits" has in the Limited Liability Company Agreement of the LLC.
20
<PAGE> 1
EXHIBIT 10.39
SECOND AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
THIS AGREEMENT is entered into as of the 1st day of October, 1995 by
and between HORSESHOE GAMING, INC., a Nevada corporation ("Employer" or
"Company") and Mr. JOHN J. SCHREIBER ("Employee"), and is made with reference
to the following recitals of fact:
RECITALS
WHEREAS, Employer is the Manager of Horseshoe Gaming, L.L.C., a
Delaware limited liability company (the "LLC"), whose subsidiaries and
affiliates have developed and are currently operating casino facilities in
Tunica County, Mississippi (the "Tunica Facility") and in Bossier City,
Louisiana (the "Bossier City Facility"), and intends to develop numerous other
casino facilities in emerging gaming jurisdictions;
WHEREAS, Employee has heretofore served as the Senior Vice President
pursuant to an Employment Agreement dated April 6, 1994 by and between
Horseshoe Club Operating Company and Employee (the "Prior Employment
Agreement"), which Prior Employment Agreement is being terminated concurrent
with the effectiveness of this Agreement;
WHEREAS, Employee has extensive experience in the gaming industry, and
based upon his knowledge, experience and skill is capable of performing each
and all of the duties and responsibilities to be assigned to Employee pursuant
to the terms of this Agreement; and
WHEREAS, Employer wishes to hire and employ Employee, and Employee
desires to accept such employment pursuant to the terms of this Agreement;
NOW, THEREFORE, for good and valuable consideration, the receipt and
adequacy of which is hereby acknowledged, and in consideration of the mutual
covenants, promises and agreements herein contained, the parties hereto agree
as follows:
AGREEMENT
1. Definitions. All capitalized words referenced or used in this
Agreement and not specifically defined herein shall have the meanings set forth
on Exhibit A, attached hereto and made a part hereof.
2. Term. This Agreement shall become effective and Employee's
term of employment with Employer shall commence, for all purposes, on October
1, 1995 (the "Commencement Date") and shall terminate on September 30, 1998,
unless terminated sooner by Employer or Employee pursuant to the terms set
forth herein.
<PAGE> 2
3. Position to be Held by Employee. Employee is hereby employed
and hired by Employer to serve and act as the Senior Vice
President-Governmental Relations of Employer and shall perform each and all of
the duties and shall have all of the responsibilities described herein.
Employee shall at all times report directly to and take directives from the
Chief Executive Officer ("CEO") of the Company, which presently is Mr. Jack B.
Binion.
4. Duties and Responsibilities.
A. General Duties. In his capacity as Senior Vice
President-Governmental Relations of the Company, Employee shall have
responsibility for overseeing the lobbying and gaming commission relationships
of the Company in a manner so as to maximize to the best of his ability the
profitability of the Company for and on behalf of Employer and the LLC in
accordance with applicable laws and regulations, and assisting in the opening
of any to-be-developed casino and hotel facilities owned by subsidiaries or
affiliates of the LLC (individually, a "Facility" and collectively, the
"Facilities") in a manner so as to maximize, to the best of his ability, the
profitability of each Facility, for and on behalf of the LLC in accordance with
applicable laws and regulations. The authority of Employee to bind Employer
shall be as broad or as limited as may be determined from time to time by the
Board of Directors of the Company. Within salary and policy guidelines
established by the CEO and/or the Board and with the reasonable concurrence of
the CEO, Employee shall have the authority to hire and fire employees of the
Company who are assigned to perform governmental relations/lobbying duties and
functions and who are under the direct or indirect supervision of Employee.
B. Specific Duties. Employee agrees to perform such
duties as may be assigned to him from time to time by the CEO. In particular,
Employee and Employer understand and agree that one of the principal incentives
for Employer to enter into this Agreement with Employee is Employee's
experience in site selection and governmental relations, particularly in
emerging gaming markets. Accordingly, Employee agrees to be available, as
requested by Employer, to actively assist Employer in obtaining the right to
develop casino facilities in various emerging gaming markets throughout the
United States and Canada.
C. Fiduciary Duty. In every instance, Employee shall
carry out his various duties and responsibilities in a fiduciary capacity on
behalf of Employer, in an effort to maximize the profitability of the
Facilities. In no event whatsoever shall Employee enter into any commitments
or obligations, written or verbal, or take any other action or omit to take any
action, the result of which would be to create a conflict of interest between
Employer and Employee, or the result of which would benefit
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<PAGE> 3
Employee, or any person associated with or affiliated with Employee, to the
detriment of Employer.
D. Full Time Effort. Employee acknowledges and agrees
that the duties and responsibilities to be discharged by Employee require a
full time effort on the part of Employee, and accordingly, Employee agrees to
devote his full time effort and resources for and on behalf of Employer and the
LLC, and agrees that he will not, during the term hereof, enter into any other
business activities or ventures, other than those which are passive in nature
and which will not require the active participation of Employee.
E. Directives from CEO. In all instances, Employee
agrees to carry out all of his duties and responsibilities as set forth herein
pursuant to the guidance, reasonable and lawful directives and instructions of
the CEO of the Company, Mr. Jack B. Binion, or his successor, and agrees that
at all times his authority shall be subordinate to such CEO. With respect to
any decisions as to which there is a disagreement between Employee and the CEO,
the wishes and directives of the CEO shall prevail in all instances, and
Employee shall carry out any and all reasonable and lawful directives from the
CEO to the best of his ability.
5. Compensation. As compensation for the services to be rendered
by Employee pursuant to the terms of this Agreement, Employee shall be entitled
to receive the following:
A. a base salary of Three Hundred Fifty Thousand Dollars
($350,000) per year (the "Base Compensation"), payable semi-monthly;
B. a one time bonus of Fifty Thousand Dollars ($50,000),
payable on or before January 15, 1996; plus
C. (i) Employer and Employee acknowledge that
Employee has held a one-half percent (.5%) partnership interest in New Gaming
Capital Partnership pursuant to the terms of the Prior Employment Agreement,
and that such interest has been contributed to the LLC pursuant to the terms of
that certain Assignment Agreement effective September 1, 1995, executed by
Employee in favor of the LLC in exchange for 236,265 Units (the "Old Units") in
the LLC. Subject to the provisions of Section 11 hereof, Employee's interest
in the LLC shall increase by 514,469 Units (the "New Units") to a total of
750,734 Units (the Old Units and the New Units shall constitute the "Ownership
Interest"). Subject to the limitations in Subsections (ii) and (iii) below,
the Ownership Interest shall entitle Employee to receive allocations of Profits
and Losses and distributions of Excess Cash of the LLC in accordance with the
Limited Liability Company Agreement of the LLC (the "Operating Agreement") to
which Employee is a party, including Net Profits and Excess Cash generated as a
result of the LLC's
3
<PAGE> 4
interests in the Bossier City, Louisiana and Tunica, Mississippi casinos
presently in operation as well as all other future operating subsidiaries to be
owned in whole or in part by the LLC.
(ii) The Old Units shall include for
all purposes hereunder and under the terms of the Operating Agreement for the
LLC, only a right to distributions based upon a share of Net Profits after
September 1, 1995 ("Old Grant Date"), including appreciation in the assets of
the LLC over their fair market value as of the Old Grant Date but not including
a share of any appreciation in the assets of the LLC up to the Old Grant Date
(except to the extent of the capital account associated with the Old Units as
of the Old Grant Date).
(iii) Notwithstanding any other
provision of this Agreement to the contrary, for all purposes hereunder and
under the Operating Agreement, the New Units shall entitle Employee only to a
share of the LLC's Net Profits generated after the date of this Agreement (the
"New Grant Date"). The New Units shall entitle Employee to a share of the
appreciation in the value of the assets of the LLC over their fair market value
as of the New Grant Date, which is $273,678,894, but shall not entitle Employee
to a share of the capital of the LLC as of the New Grant Date, including any
appreciation in the value of the assets of the LLC up to the New Grant Date.
6. Fringe Benefits. Employee shall be entitled to participate in
such health and pension plans as Employer shall adopt for all of the executives
of the Company; it being understood and agreed that the only pension plan that
Employer anticipates adopting at this time is a Section 401(k) form of
retirement plan. In addition, it is understood and agreed that the Base
Compensation to be received by Employee is to be all-inclusive of other typical
fringe benefits provided to executives in a similar position as Employee;
provided, however, that Employee shall be entitled to the following benefits at
no cost to Employee and/or entitled to reimbursement for all reasonable
out-of-pocket expenses incurred in connection with the following:
A. to the extent Employer establishes a bonus plan or
plans offering cash, stock options, stock grants or other similar equity
ownership in the LLC, Employee shall be eligible for inclusion in such plan(s)
on a fair and equitable basis in comparison to other participants in such
plan(s) and on a basis generally consistent with industry standards and
practices. Employee understands that the grant of any such cash or stock
bonus, however, shall be in the sole discretion of the Board of Directors of
the Company.
B. the right to designate the beneficiary of a
$1,000,000 term life insurance policy, insuring the life of Employee, such life
insurance policy to be provided to Employee, at
4
<PAGE> 5
no cost to Employee, provided that Employee remains insurable at the rates
normally established by major life insurance companies for term life insurance
policies for persons in good health and the same age as Employee; provided that
if Employee is rated in a higher risk category said policy shall nevertheless
be made available; however, Employer shall only be obligated to pay up to 110%
of the premium payable by a person in good health and all premiums in excess of
such amount shall be paid by Employee.
C. on an ongoing basis, all reasonable entertainment,
traveling and other similar expenses incurred in the performance of his duties
and responsibilities hereunder, such expenses to be subject to budgets
established for such purpose;
D. participation in Employer's health coverage plan for
Employee and all members of his immediate family, with such policy to be on
terms and conditions typically provided by major gaming companies, and subject
to the maximum benefit limitations typically included in such plans. Such
insurance coverage shall include insurance for disability in an amount and upon
terms to be reasonably agreed upon and determined by Employer and Employee
within sixty (60) days from and after the date hereof. Employer and Employee
agree that Employer shall be obligated to continue the payment of Employee's
base salary during any short term disability, i.e., one continuing for a period
of 180 days or less, provided that such payments and obligations shall be
reduced by the amount of any disability insurance payments Employee is entitled
to receive during such period of time; and
E. paid vacation of three (3) weeks per year; provided
that Employee may not accumulate more than six (6) weeks of vacation,
regardless of the amount of vacation actually taken by Employee during the
course of his employment.
Employee shall have the right, upon termination, and subject
to the requirements set forth in the life and/or health insurance policies
described in subparagraphs B. and D. above, to take over such policies and
continue them in full force and effect at his sole cost and expense.
7. Gaming License. Employer and Employee understand that it may
be necessary for Employee to apply for and obtain, and maintain in full force
and effect at all times, a gaming license in various jurisdictions in which
subsidiaries or affiliates of the LLC are conducting gaming operations for
persons serving in a similar capacity as Employee. Accordingly, Employee
shall, promptly after the date hereof, make application for any and all
required gaming licenses, fully cooperate in the investigation or
investigations to be conducted in connection therewith, and otherwise use his
best efforts to obtain such gaming licenses in a timely fashion. Employer
shall fully cooperate with Employee in such regard and provide all necessary
information required in connection therewith,
5
<PAGE> 6
and pay all costs associated with such gaming licenses, including application
fees, investigation fees, or any other similar expenses such as attorneys'
fees, reasonably approved by Employer and incurred in connection therewith. If
Employee should fail to obtain any such license, due to his lack of suitability
or failure to submit information in a timely manner, then this Agreement may
be immediately terminated by Employer, in which event Employee shall have no
right to any further compensation hereunder and the divestiture provisions set
forth in Section 11 hereof shall become effective. During the course of his
employment, Employee shall fully comply with all requirements of applicable
Gaming Authorities and Governmental Authorities.
8. Termination.
A. Termination for Cause. Employee may be terminated
by Employer for "cause" in which event the provisions of Section 8.C(i) through
(iv) below shall apply. For purposes of this Agreement "cause" is herein
defined as one or more of the following events:
(i) the failure of Employee to initially obtain a
gaming license or the revocation, or suspension for a period in excess of
ninety (90) days, of any of Employee's gaming licenses due to an act or
omission of Employee, which was not caused by Employer or any of its
representatives;
(ii) failure or refusal by Employee to observe or
perform any of the material provisions of this Agreement or any other written
agreement with Employer, or to perform in a reasonably satisfactory manner all
of the material duties required of Employee under this Agreement or any other
written agreement with Employer;
(iii) commission of fraud, misappropriation,
embezzlement or other acts of dishonesty, alcoholism, drug addiction or
dependency or conviction for any crime punishable as a felony or a gross
misdemeanor involving dishonesty or moral turpitude, or the commission of any
act or acts which have a material adverse effect upon Employee's ability to
perform the duties which are assumed or assigned to him pursuant to this
Agreement, or which actions or occurrences are materially adverse to the
interests of Employer;
(iv) failure or refusal by Employee to comply with
the reasonable and lawful directives of and/or procedures established by the
CEO, Jack B. Binion, or his successor, or the Board of Directors, or
(v) the death of or the "long-term" mental or
physical disability of Employee to such a degree that Employee, in the
reasonable judgment of responsible physicians retained by
6
<PAGE> 7
Employer, is unable to carry out all of his obligations, duties and
responsibilities set forth herein. For purposes of this Agreement, "long-
term" shall be defined as exceeding a period of one hundred eighty (180) days.
Termination of Employee's employment for cause under Sections
8.A(iii) or (v) above shall be effective upon notice. Termination of
Employee's employment for cause under Sections 8.A(i), (ii) or (iv) above shall
be effective upon thirty (30) days prior written notice to Employee; provided
that prior to the giving of such notice of termination, Employer shall notify
Employee that a factual basis for termination for cause exists, specifying such
basis.
B. Termination Without Cause. So long as the Company is
controlled by Jack B. Binion, this Agreement may be terminated at any time by
Employer, upon thirty (30) days prior written notice to Employee, at the will
of Employer and without good cause as described in Section 8.A above.
C. Effect of Termination. Upon any termination of
Employee's employment with Employer, the following shall apply:
(i) Employee shall be paid his Base Compensation
through the effective date of such termination;
(ii) Employee shall be entitled to retain his
Fully Vested Ownership Interest in the LLC (as hereinafter defined in Section
11);
(iii) The covenant not to compete and
confidentiality agreement set forth in Sections 9 and 10 hereinbelow shall
apply in the manner and to the extent set forth herein; and
(iv) The put/call option described in Section 12
hereinbelow shall become effective for all purposes.
D. Additional Benefit. Upon the termination of
Employee's employment with Employer for whatever reason (including a failure to
renew this Employment Agreement or to enter into a new Employment Agreement
with Employer), Employer shall immediately pay Employee the following amounts
in cash (the "Severance Benefit"):
(i) (A) $892,510, if this Agreement is terminated on
or before October 30, 1995; or (B) if this Agreement is terminated after
October 30, 1995, $892,510 increasing by $28,478 per month until a maximum
payment of $1,405,105 is payable if this Agreement is terminated.
(ii) Notwithstanding the foregoing, within ninety
(90) days of the occurrence of a Binion Disposition Event (defined
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<PAGE> 8
in Section 11 below), unless Employee has been previously paid a Severance
Benefit, Employee shall be paid $1,405,105 in cash and Employee shall have no
further right to receive a Severance Benefit.
(iii) If on the date of the termination of Employee's
employment (the "Termination Date") the maximum federal income tax rate on net
capital gains applicable to individuals who engage in transactions (the
"Capital Gain Rate") is less than the maximum federal income tax rate on
ordinary income applicable to individuals with respect to income earned on the
Termination Date (the "Ordinary Income Rate"), then the amount payable pursuant
to the other provisions of this Section 8.D shall be increased by:
(A) a sum equal to the amount payable
pursuant to the other provisions of this Section 8.D multiplied by the
difference, expressed as a percentage, between the Ordinary Income Rate and the
Capital Gain Rate, divided by
(B) the difference between one (1) and
the Ordinary Income Rate.
For example, if Employee is terminated when $1,405,105 is payable
under the other provisions of this Section 8.D and on the Termination Date the
Capital Gain Rate is 28% and the Ordinary Income Rate is 39.6%, then the amount
payable pursuant to this Section 8.C would be:
$1,405,105 + ($1,405,105 x 11.6%) = $1,674,960
--------------------
60.4%
9. Covenant Not to Compete.
A. Covenant. Upon any resignation by Employee or
termination of the employment of Employee with cause, Employee agrees that for
a period not to exceed one year from and after the date of such termination, he
will not serve in any capacity, whether as an officer, director, employee or
consultant, to any other casino company which is either (i) competing directly
against the LLC, the Company or any of their subsidiaries or affiliates at the
time of such termination; or (ii) in any "RFP" process under way on the
Termination Date or any other similar competitive process under way on the
Termination Date in which a limited number of gaming licenses are available for
issuance to one or more gaming companies selected out of a group of competing
companies, such as the competitive licensing process in which one of the LLC's
subsidiaries is presently engaged in Harrison County, Indiana. Such covenant
not to compete has been given by Employee to Employer for full and adequate
consideration, including, without limitation, the Ownership Interest, and such
covenant not to compete will expire on the earlier to occur of: (i) one year
after the Termination Date; or (ii) the date upon which all competitive
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<PAGE> 9
licensing processes under way on the Termination Date are completed and a
specific company or companies are selected for award of such license or
licenses.
B. Modification. If any court of competent jurisdiction
determines that the term or the business or geographic scope of the covenant
contained in Section 9.A above is impermissible due to the extent thereof, said
covenant shall be modified to reduce its term, business scope or geographic
scope, as the case may be, to the extent necessary to make such covenant valid,
and such covenant shall be enforced as modified.
C. Injunctive Relief. It would be difficult or
impossible to ascertain the measure of damages to Employer and/or the LLC
resulting from any breach of this covenant not to compete, injury to Employer
and/or the LLC from any such breach may be irreparable, and money damages
therefor may be an inadequate remedy. Accordingly, in the event of a breach or
threatened breach by Employee of the provisions of this Section 9, Employer
shall be entitled to seek and obtain, in addition to monetary damages,
injunctive relief against Employee, in a court of competent jurisdiction,
restraining Employee from breaching this Section 9.
10. Disclosure of Confidential Information.
A. Definition of Confidential Information. For purposes
of this Agreement, "Confidential Information" means any information that is not
generally known to the public that relates to the existing or reasonably
foreseeable business of Employer and/or the LLC which has been expressly or
implicitly protected by Employer and/or the LLC or which, from all of the
circumstances, Employee knows or has reason to know that Employer or the LLC
intend or expect to keep secret. Confidential Information includes, but is not
limited to, information contained in or relating to the customer lists, account
lists, price lists, product designs, marketing plans or proposals, customer
information, merchandising, selling, accounting, finances, know-how,
trademarks, trade names, trade practices, trade secrets and other proprietary
information of Employer.
B. Employee Shall Not Disclose Confidential Information.
Employee will not, during the term of Employee's employment and for two (2)
years following the Termination Date, use, show, display, release, discuss,
communicate, divulge or otherwise disclose Confidential Information to any
unauthorized person, firm, corporation, association or other entity for any
reason or purpose whatsoever, without the prior written consent or
authorization of Employer. Nothing contained herein shall be interpreted or
construed as restraining or preventing Employee from using Confidential
Information in the proper conduct of services to be rendered by Employee on
behalf of Employer and/or the LLC pursuant to this Agreement.
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<PAGE> 10
C. Scope. Employee's covenant in Section 10.B above to
not disclose Confidential Information shall not apply to information which, at
the time of such disclosure, may be obtained from sources outside of Employer,
or from its agents, lawyers or accountants, so long as those sources did not
receive the information in an improper manner or against the wishes of
Employer.
D. Title. All documents and other tangible or
intangible property (including business opportunities which Employer and/or the
LLC is pursuing) relating in any way to the business of Employer and/or the LLC
which are conceived or generated by Employee or come into Employee's possession
or knowledge during the employment period shall be and remain the exclusive
property of Employer and/or the LLC, and Employee shall return immediately to
Employer and/or the LLC, upon their request, all such documents and tangible
and intangible property, including, but not limited to, all records, manuals,
books, blank forms, documents, letters, memoranda, notes, notebooks, reports,
data, tables, magnetic tapes, computer disks, calculations or copies thereof,
which are the property of Employer and/or the LLC and which relate in any way
to the business, customers, products, practices or techniques of Employer
and/or the LLC, including but not limited to, all documents which in whole or
in part contain any Confidential Information of Employer and/or the LLC which
in any of these cases are in Employee's possession or are in Employee's
control.
E. Compelled Disclosure. If a third party seeks to
compel disclosure of Confidential Information by Employee by judicial or
administrative process, Employee shall promptly notify Employer of such
occurrence and furnish to Employer a copy of the demand, summons, subpoena or
other process served upon Employee to compel such disclosure, and will permit
Employer to assume, at its expense, but with Employee's cooperation, defense of
such disclosure demand. If Employer refuses to contest such a third party
disclosure demand under judicial or administrative process, or a final judicial
judgment is issued compelling disclosure of Confidential Information by the
Employee, Employee shall be entitled to disclose such information in compliance
with the terms of such administrative or judicial process or order.
F. Injunctive Relief. The disclosure, use or usurpation
of Confidential Information would cause significant economic detriment to the
business of Employer and/or the LLC which may be irreparable and for which
monetary damages may be an inadequate remedy. Accordingly, Employer and/or the
LLC shall be entitled to seek and obtain, in addition to monetary damages,
injunctive relief against Employee, in a court of competent jurisdiction,
restraining Employee from the disclosure, use or usurpation in any manner of
any Confidential Information.
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11. Possible Divestiture of Ownership Interest. Employee's
Ownership Interest in the LLC, being 750,734 Units, which Employee is entitled
to receive in accordance with the terms of this Agreement, shall be conveyed in
its entirety to and held by Employee within thirty (30) days after the date of
execution of this Agreement, subject to the approval of applicable Gaming
Authorities and compliance with Governmental Requirements. A portion of the
Ownership Interest of Employee shall, nevertheless, be subject to divestiture
based upon the following terms and conditions:
A. Approximately Seventy-Five percent (75%) of such
Ownership Interest, represented by 236,265 Old Units and 326,786 New Units,
shall not be subject to divestiture and shall be deemed fully vested for all
purposes upon execution of this Agreement.
B. Subject to the provisions of Section 8.B above, the
remaining twenty-five percent (25%) of such Ownership Interest of Employee,
represented by 187,683 New Units in the LLC shall be subject to divestiture if
Employee is terminated for any reason or voluntarily resigns prior to April 25,
1997, as follows: such remaining twenty-five percent (25%) shall vest on a
monthly basis commencing October 30, 1995 and ending March 31, 1997 at the rate
of one-eighteenth (1/18th) per month, or 10,427 New Units at the end of each
month from the date hereof through March 31, 1997 or until all New Units are
fully vested.
The Ownership Interest of Employee in the LLC which is not subject to
divestiture pursuant to the provisions set forth above is referred to herein as
the "Fully Vested Ownership Interest".
Such divestiture of the Ownership Interest shall be automatic upon the
occurrence of the event giving rise to such divestiture, and shall not require
the consent, acknowledgement or concurrence of Employee. Upon any such event
causing divestiture of all or a portion of the Ownership Interest, Employer
and/or the LLC shall send a written notice to Employee specifying the amount of
the Ownership Interest that has been divested and the reason for such
divestiture. Employee agrees to execute any and all documents reasonably
requested by counsel for Employer to evidence such divestiture. Such
divestiture shall be made without payment of any type whatsoever to Employee,
and shall be effective for all purposes from the date of the event giving rise
to such divestiture. In no event shall such divestiture be deemed a
forfeiture, but rather the possibility of such divestiture is part of the
bargained for consideration to Employer in entering into this Agreement; it
being clearly understood and agreed that Employee's performance of services in
a manner satisfactory to Employer for the entire term of this Agreement is the
consideration to be provided by Employee to Employer for the Ownership Interest
to be conveyed to Employee pursuant to this Agreement.
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<PAGE> 12
Notwithstanding the provisions of Section 11.B hereof, if Jack
B. Binion (including any entities through which Jack B. Binion holds his
ownership interest in the LLC), family members of Jack B. Binion and/or trusts
established for the benefit of his heirs transfers a controlling interest in
the LLC to a third party in a transaction other than a public offering (a
"Binion Disposition Event"), the entire Ownership Interest of Employee shall
immediately become a Fully Vested Ownership Interest and no longer subject to
divestiture.
12. Put/Call Option Upon Termination. In the event of the
termination of Employee's employment with Employer, for whatever reason, and
with or without cause, then the LLC shall have the right to purchase the Fully
Vested Ownership Interest of Employee at the fair market value of such
Ownership Interest as determined pursuant to the terms of this Agreement (the
"Call Option"). In a similar fashion, Employee shall have an option to require
the LLC to purchase back his entire Fully Vested Ownership Interest in the LLC
at the fair market value of such Ownership Interest as determined pursuant to
the terms of this Agreement (the "Put Option"). The LLC or Employee, as the
case may be, may exercise their respective options provided for in this Section
12, by tendering written notice to the other party of exercise of such option
within thirty (30) days after the date of the termination of this Agreement.
In the event that either option described herein should be exercised
by Employee or the LLC, then Employee and the LLC agree to promptly convene and
attempt in good faith to determine the fair market value of the Ownership
Interest to be purchased by the LLC from Employee. Such fair market value of
the Fully Vested Ownership Interest shall take into account that the New Units
constitute an interest only in future profits and asset appreciation and not
capital, as provided in Section 5.C hereof. In the event that the LLC and
Employee are unable to agree upon such fair market value, then the parties
hereto agree to submit such matter to an independent appraisal to be conducted
in Las Vegas, Nevada in accordance with the terms set forth below. Either
party may initiate such appraisal process by delivery of written notification
to the other party to such effect, designating the name of an appraiser that is
to represent it in such appraisal process. Thereafter, within ten (10) days of
receipt of such notice, the other party shall designate an appraiser to
represent it in such process. Within ten (10) days after designation of the
second appraiser, the two appraisers shall convene and agree upon a third
appraiser. In the event that said two appraisers are unable to agree upon a
third appraiser, then the third appraiser shall be selected by lottery, with
each appraiser to submit the name of another reputable appraiser, and with the
appraiser whose name is drawn in such lottery being designated for all purposes
as the third appraiser.
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<PAGE> 13
Within ten (10) days after selection of the third appraiser, the three
appraisers shall convene and attempt to agree upon the fair market value of the
Ownership Interest to be purchased the LLC. If unable to agree, then each
appraiser shall within thirty (30) days thereafter prepare his own independent
appraisal report and such reports shall be submitted to the LLC and Employee.
Provided that the middle appraisal is within ten percent (10%) of either the
high or low appraisal, then the middle appraisal (the highest and lowest
appraisals being disregarded) shall be deemed to be the fair market value and
thus the valuation to be used for purposes of the LLC's acquisition of
Employee's Fully Vested Ownership Interest.
In the event that the middle appraisal is not within ten percent (10%)
of either the high or low appraisal, then the determination of the fair market
value of Employee's Ownership Interest shall be submitted to arbitration in
accordance with the provisions of Section 17 hereinbelow, and in such
arbitration, each of the appraisers shall be entitled to submit their appraisal
report and testify on behalf of the LLC or Employee. The arbitration panel,
after hearing all evidence desired to be submitted by the LLC and Employee,
shall determine said fair market value, and such decision by said arbitration
panel shall be binding upon the LLC and Employee.
The purchase price to be paid by the LLC as determined by agreement or
appraisal as described herein shall be paid in three (3) equal principal
installments, with the first payment being due within ten (10) days after
determination of or agreement as to value, the second payment shall be due and
payable on the first anniversary of the Termination Date and the last payment
shall be due and payable on the second anniversary of the Termination Date,
provided, however, that if the value is less than $750,000 then the entire
purchase price shall be paid to Employee in one lump sum within ten (10) days
after determination of agreement as to value. Notwithstanding the foregoing,
in the event any of the LLC's lenders prohibit payment of the purchase price to
be made over as short as a three (3) year period, then Employee agrees that the
purchase price shall be paid in equal principal installments over the time
period permitted by such lender but in no event over a period in excess of five
(5) years. Such obligation shall bear interest at the prime rate of interest,
as quoted from time to time by the largest commercial bank (in terms of assets)
in the State of Nevada, and accrued but unpaid interest shall be due and
payable together with each annual principal installment.
The LLC and Employee agree that any persons chosen to represent them
as appraisers shall be qualified and competent MAI appraisers or a certified
public accountant with one of the "Big Six" accounting firms, experienced in
valuing closely held partnerships or corporations. In the event that the LLC
is a publicly traded company at the time of termination, then the
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<PAGE> 14
provisions of this Section 12 shall be inapplicable, and accordingly, the Put
and Call Option described herein shall terminate for all purposes.
In the event that the LLC exercises its Call Option, then the LLC
agrees to pay for all of the reasonable expenses incurred in connection with
such appraisal process, including the cost associated with the appraiser
selected by Employee, provided that the amount charged by such appraiser is a
fair and reasonable fee. In the event that Employee exercises his Put Option,
then Employer shall bear the cost of its appraiser, Employee shall bear the
cost of his appraiser and the LLC and Employee shall each bear one-half (1/2)
of the cost of the third appraiser.
13. Distributions; Public Offering. Employee shall become a
member of the LLC subject to all rights, conditions and other provisions of the
Operating Agreement which governs the relationship among all of the members of
the LLC. Accordingly, Employee shall be entitled to receive distributions from
the LLC with respect to Employee's Ownership Interest in the same manner and at
the same time as other members of the LLC under the terms of the Operating
Agreement or the terms of any credit agreement or other financing to which the
LLC or any of its subsidiaries or affiliates is a party. One of the credit
agreements currently in effect restricts the members of the LLC from receiving
distributions in an amount in excess of that intended to be sufficient to
discharge federal and state income taxes that may be levied against the income
allocated to each of such equity owners pursuant to the provisions of
applicable law.
In addition, if the LLC, its business or any portion thereof is at
some point in the future included in a public offering, which public offering
involves all or substantially all of the gaming interests or ventures owned or
controlled by Jack B. Binion, then in such event, the valuation to be placed
upon the business of the LLC shall be that which is determined in good faith by
the investment banking firm acting as the lead underwriter in such public
offering. Such valuation shall be based upon such firm's fair market appraisal
of the value of the business of the LLC in comparison to the other assets to be
included in such public offering. In such event, Employee shall receive a
percentage of stock in the resulting public company equal to the percentage
that the value of the Ownership Interest (as determined taking into account
that a portion of such Interest constitutes an interest only in future profits
and asset appreciation, and not capital, all as provided in Section 5.C hereof)
bears to the value of the LLC (subject to dilution as a result of such
offering) times the amount determined by dividing the value of the LLC, as
determined by such investment banking firm, by the value of all assets
(including the LLC) included in and cash raised by the public company in the
public offering. By way of example, if Employee's Ownership Interest was
valued at one-half of one percent (.5%) of the LLC's
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<PAGE> 15
value and the total value of the LLC was $400,000,000 and the value of the
other assets included in the public offering, including cash raised in the
public offering, was $200,000,000, then the ownership or stock interest of
Employee in the public company after the public offering would be equal to
one-third of one percent (.333%).
In the event that the LLC is involved in a public offering at any time
during the term of this Agreement, then that portion of the stock of the public
company that Employee is entitled to receive, but which is still not fully
vested and thus subject to divestiture pursuant to the terms of this Agreement,
shall be escrowed in the custody of the public company and shall not be
released to Employee until such time as such stock becomes free from potential
divestiture. Accordingly, during the time that such stock is escrowed with the
public company, Employee shall not margin, pledge, sell, transfer or otherwise
attempt to encumber or dispose of such stock, except to the public company. At
the time that such stock is no longer subject to divestiture, then it shall be
immediately released by the public company to Employee.
14. Representations and Warranties. Employer, as the following
relate to Employer, and the LLC, as the following relate to the LLC, hereby
represent and warrant to Employee as follows:
(a) The LLC is a limited liability company, duly
organized and validly existing under the laws of the State of Delaware.
Employer is a Nevada corporation, duly organized and validly existing under the
laws of the State of Nevada;
(b) This Agreement, when executed by Jack B.
Binion, as CEO and Chairman of the Company, will constitute a legal, valid, and
binding agreement on the part of Employer and the LLC, having been duly
authorized by all requisite corporate and company resolutions or
authorizations; and
(c) This Agreement, when executed by Employer and
the LLC, will not conflict with, violate the terms of or create a default under
any other agreement, contract or other obligation Employer and/or the LLC is a
party to or by which Employer or the LLC is bound.
Employee hereby represents and warrants to Employer and the
LLC as follows:
(i) this Agreement, when executed by
Employee, will not conflict with, violate the terms of or create a default
under Employee's present employment arrangements and/or agreement, whether oral
or written;
(ii) Employee has never been denied a
gaming application by any Gaming Authority and Employee currently knows of no
reason why Employee would not be qualified to receive a gaming
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<PAGE> 16
license from any jurisdiction in which the LLC and/or any of its affiliates or
subsidiaries conducts gaming operations; and
(iii) Employee is unaware of any mental,
physical or emotional condition, including, without limitation, substance or
alcohol abuse problems, which currently affects Employee, and which might
result in Employee's being unable to carry out all of his duties, obligations
and responsibilities set forth herein; and
(iv) Employee has read the Operating
Agreement and agrees to be bound thereby with respect to the Ownership
Interest. Employee specifically confirms that the representations and
warranties set forth in Section 14 of the Operating Agreement are accurate as
to Employee.
Employer, the LLC and Employee understand and agree that each is
entering into this Agreement in strict reliance upon the representations and
warranties set forth herein, and that a breach of any of said representations
and warranties by any of the parties hereto would constitute a default
hereunder.
15. Entire Agreement. This Agreement constitutes the entire
agreement of the parties hereto with respect to the subject matter set forth
herein, and supersedes any and all previous oral or written agreements,
understandings or discussions between the parties hereto with respect to the
subject matter set forth herein, including without limitation the Amended and
Restated Employment Agreement between the parties hereto also dated as of
October 1, 1995.
16. All Amendments in Writing. This Agreement may not be amended
orally, but only pursuant to a written instrument executed by Employer, the LLC
and Employee.
17. Arbitration. In the event of any dispute or controversy
between Employer and/or the LLC and Employee with respect to any of the matters
set forth herein, then such dispute or controversy shall be submitted to
binding arbitration, to be conducted in Las Vegas, Nevada pursuant to the then
prevailing rules and regulations of the American Arbitration Association. In
such arbitration, the prevailing party shall be entitled, in addition to any
award made in such proceeding, to recover all of its costs and expenses
incurred in connection therewith, including, without limitation, attorneys'
fees.
18. Governing Laws. This agreement shall be governed by and
construed in accordance with the laws of the State of Nevada.
19. Notices. Any notice required or permitted to be given in
connection with this Agreement shall be given by either: (a) depositing the
same in the United States Mail, postage prepaid,
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registered or certified, return receipt requested; or (b) by depositing it with
a recognized overnight courier service for delivery the following day to the
other party; or (c) by facsimile transmission, provided the other party
acknowledges receipt of such transmission.
All such notices shall be deemed received as of the date of
acknowledgment of receipt by the other party. All such notices shall be
addressed to the parties at the following addresses, or to such other address
as may be provided from time to time by one party to the other:
If to the LLC: Horseshoe Gaming, L.L.C.
330 S. Fourth Street
Las Vegas, Nevada 89101
Attn: Jack B. Binion
If to Employer: Horseshoe Gaming, Inc.
330 S. Fourth Street
Las Vegas, Nevada 89101
Attn: Jack B. Binion
If to Employee: Mr. John J. Schreiber
6895 E. Washington Avenue
Las Vegas, Nevada 89110
20. Assignment. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective heirs, successors,
administrators and assigns. Notwithstanding the foregoing, Employee
understands and agrees that the nature of this Agreement is a personal services
agreement, and that Employer is entering into this Agreement based upon the
specific services to be rendered personally by Employee hereunder; and
accordingly, Employee shall not assign, transfer or delegate in any manner any
of his duties, responsibilities or obligations hereunder.
21. Waiver. No waiver of any term, condition or covenant of this
Agreement by a Party shall be deemed to be a waiver of any subsequent breaches
of the same or other terms, covenants or conditions hereof by such party.
22. Construction. Whenever possible, each provision of this
Agreement shall be interpreted in such a manner as to be effective or valid
under applicable law, but if any provision of this Agreement shall be
prohibited by or invalid under applicable law, such provision shall be
ineffective only to the best of such prohibition or invalidity without
invalidating the remainder of such provision or the remaining provisions of
this Agreement.
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IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the day and year first above written.
"EMPLOYER" HORSESHOE GAMING, INC.
a Nevada corporation,
By: /s/ JACK B. BINION
-------------------------------
Jack B. Binion
Chief Executive Officer
and Chairman
"EMPLOYEE"
/s/ JOHN J. SCHREIBER
-----------------------------------
JOHN J. SCHREIBER
AGREED AND ACCEPTED as of the 1st
day of October, 1995
HORSESHOE GAMING, L.L.C.,
a Delaware Limited Liability Company
By: HORSESHOE GAMING, INC.
a Nevada corporation
Manager
By /s/ JACK B. BINION
-----------------------------
Jack B. Binion
Chief Executive Officer
and Chairman
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EXHIBIT A
DEFINITIONS
All capitalized terms referenced or used in this Agreement and
not specifically defined therein shall have the meanings set forth below in
this Exhibit A, which is attached to and made a part of this Agreement for all
purposes.
Excess Cash. The term "Excess Cash" shall have the same meaning as
the term "Excess Cash" has in the Limited Liability Company Agreement of the
LLC.
Gaming Authorities. The term "Gaming Authorities" or "Gaming
Authority" shall mean 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 or any State.
Governmental Authorities. The term "Governmental Authorities" means
the Government of the United States, and all states, counties and political
subdivisions in which any of the Company's casino facilities are located, and
all courts or political subdivisions, agencies, commissions, boards or
instrumentalities or officers thereof, whether federal, state or local, having
or exercising jurisdiction over Employer or any of the Company's gaming
facilities, including, without limitation, all Gaming Authorities.
Governmental Requirements. The term "Governmental Requirements" means
all laws and agreements with any Governmental Authority that are applicable to
the acquisition, development, construction and/or operation of any of the
Company's gaming facilities including, without limitation, all required
permits, approvals and any rules, guidelines or restrictions created or imposed
by Governmental Authorities (including, without limitation, any Gaming
Authority).
Net Profits. The term "Net Profits" shall have the same meaning as
the term "Profits" has in the Limited Liability Company Agreement of the LLC.
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<PAGE> 1
EXHIBIT 10.40
HORSESHOE GAMING, L.L.C.
1997 UNIT OPTION PLAN
Section 1. Description of Plan. This is the 1997 Unit Option Plan (the
"Plan") of Horseshoe Gaming, L.L.C., a Delaware limited liability company (the
"Company"). Under the Plan, officers and key employees of and consultants to the
Company and/or of any directly or indirectly majority or wholly owned entities
of the Company (individually, a "Subsidiary" and collectively, the
"Subsidiaries") and/or of any member or manager of the Company and/or of any
entity that directly or indirectly owns a majority of the Company's equity
interests (individually, a "Related Entity" and collectively, the "Related
Entities") may be granted options ("Options") to receive equity interests in the
Company constituted as Units in the Company's Limited Liability Company
Agreement (herein, the "Units").
Section 2. Purpose of Plan. The purpose of the Plan and of granting
Options to specified persons is to further the growth, development and financial
success of the Company and its Subsidiaries and Related Entities by providing
additional incentives to certain officers and key employees and consultants. By
assisting such persons in acquiring Units, the Company can ensure that such
persons will themselves benefit directly from the Company's and its
Subsidiaries' and Related Entities' growth, development and financial success.
Section 3. Eligibility. The persons who shall be eligible to receive
grants of Options under the Plan shall be the officers and key employees of and
consultants to the Company, its Subsidiaries and Related Entities. A person who
holds an Option is herein referred to as a "Participant," and more than one
Option may be granted to any Participant.
Section 4. Administration.
(a) The Plan shall be administered by the Company's manager (the
"Manager") or, at the Manager's option, by a compensation committee
established by the Manager (the Manager and such committee,
collectively, the "Committee").
(b) The Committee is authorized and empowered to administer the
Plan and, subject to the provisions of the Plan, (i) to select the
participants, to select the Participants, to determine the number of
Units which may be purchased under any given Option and the purchase
price therefor; (ii) to determine the dates upon which Options shall be
granted and the terms and conditions thereof in a manner consistent with
the Plan, which terms and conditions need not be identical as to the
various Options granted; (iii) to interpret the Plan; (iv) to prescribe,
amend and rescind rules relating to the Plan; (v) to authorize any
person to execute on behalf of the Company any instrument required to
effectuate the grant of an Option previously granted by the Committee;
(vi) to determine the rights and obligations of Participants under the
Plan; (vii) to accelerate the time during which an Option may be
exercised in accordance with the provisions of Section 14 hereof, and to
otherwise accelerate the time during which an Option may be exercised,
in each
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<PAGE> 2
case notwithstanding the provisions in the Option Agreement (as defined
in Section 11) stating the time during which it may be exercised; and
(viii) to make all other determinations deemed necessary or advisable
for the administration of the Plan. The good faith interpretation and
construction by the Committee of any provision of the Plan or of any
Option granted under it shall be final, conclusive and binding. No
Manager, director, officer or employee of any Manager or member of the
Committee shall be liable for any action or determination made with
respect to the Plan or any Option granted hereunder.
Section 5. Units Subject to Plan. The aggregate number of Units for
which Options may be granted pursuant to the Plan shall be 631,225 Units. The
number of Units which may be purchased by a Participant upon exercise of each
Option shall be determined by the Committee and set forth in each Option
Agreement. Upon the expiration or termination, in whole or in part, for any
reason of an outstanding Option or any portion thereof which shall not have
vested or shall not have been exercised in full or in the event that any Units
acquired pursuant to the Plan are reacquired by the Company, (a) any Units which
have not been purchased or (b) the Units reacquired, as the case may be, shall
again become available for the granting of additional Options under the Plan.
Section 6. Restrictions on Grants; Vesting of Options. Notwithstanding
any other provisions set forth herein or in any Option Agreement, no Options may
be granted under the Plan subsequent to ten (10) years from the date hereof. The
Committee shall determine the vesting schedule applicable to each Option or
group of Options, which schedule shall be filed with the records of the
Committee and set forth in each Option Agreement to which the same applies. The
vesting schedule need not be identical for all Options granted hereunder.
Section 7. Exercise of Options. To the extent it has vested, an Option
may be exercised by the Participant by given written notice to the Company
specifying the number of Units to be purchased and accompanied by payment of the
full purchase price therefor in cash, by check or in such other form of lawful
consideration as the Committee may approve from time to time. An Option may only
be exercised by the Participant or in the event of death of the Participant, by
the person or persons (including the deceased Participant's estate) to whom the
deceased Participant's rights under such Option shall have passed by will or the
laws of descent and distribution. Notwithstanding the immediately preceding
sentence, in the event of disability (within the meaning of Section 105 (d) (4)
of the Internal Revenue Code of 1986, as amended) of a Participant, a designee
of the Participant (or the legal representative of the Participant if the
Participant has no designee) may exercise the Option on behalf of such
Participant (provided such Option would have been exercisable by such
Participant) until the right to exercise such Option expires, as set forth in
such Participant's particular Option Agreement.
Section 8. Issuance of Units. The Company's obligation to issue its
Units upon exercise of an Option is expressly conditioned upon the compliance by
the Company with any registration or other qualification obligations with
respect to such Units under any state and/or federal law or rulings and
regulations of any government regulatory body, including without limitation and
all applicable gaming regulatory authorities of the states in which the
Company's
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Subsidiaries operate or intend to operate, and/or the filing by Participant of
any background applications required by such gaming authorities; and/or the
making of such investment representations or other representations and
undertakings by the Participant (or the Participant's designee, legal
representative, heir of legatee, as the case may be) in order to comply with the
requirements of any exemption from any such registration or other qualification
obligations with respect to such Units which the Company in its sole discretion
shall deem necessary or advisable. Such required representations and
undertakings may include representations and agreements that such Participant
(or the Participant's designee, legal representative, heir or legatee): (a) is
purchasing such Units for investment and not with any present intention of
selling or otherwise disposing of such Units; and (b) agrees to have a legend
placed upon the face and reverse of any certificates evidencing such Units (or,
if applicable, an appropriate data entry made in the ownership records of the
Company) setting forth (i) any representations and undertakings which such
Participant has given to the Company or a reference thereto, and (ii) that,
prior to effecting any sale or other disposition of any such Units, the
Participant must furnish to the Company an opinion of counsel, satisfactory to
the Company and its counsel, to the effect that such sale or disposition will
not violate the applicable requirements of state and federal laws and regulatory
agencies; provided, however, that any such legend or data entry shall be removed
when no longer applicable. The inability of the Company to obtain from any
regulatory body having jurisdiction registration, qualification or other
necessary authorization, or the unavailability of any exemption from
registration or qualification, deemed by the Company's counsel to be necessary
for the lawful issuance and sale of any Units hereunder shall suspend the
Company's obligation to permit the exercise of any affected Option or to issue
any Units thereupon and shall relieve the Company of any liability in respect of
the nonissuance or sale of such Units as to which such requisite authority or
exemption shall not have been obtained or be available. In no event shall the
Company be obligated to register or qualify the sale of any Units as to which an
exemption shall not be available. In the event that exercisability of an Option
shall be suspended as provided in this Section, the term of such Option shall be
extended until the fifteenth (15th) day after the date on which the Company
shall have given notice that such Option may be exercised. Any Units issued by
the Company upon exercise of an Option shall be subject to a right of
repurchase, as described in Section 20 hereof and described in each particular
Option Agreement.
Section 9. Nontransferability. An Option may not be sold, pledged,
assigned, hypothecated, transferred or disposed of in any manner other than by
will or by the laws of descent or distribution or inter vivos to a trust for the
benefit of the Participant or the Participant and the Participant's spouse. Any
permitted transferee shall be required prior to any transfer of an Option or
Units acquired pursuant to the exercise of an Option to execute a written
undertaking to be bound by the provisions of the applicable Option Agreement.
Section 10. Reorganization or Reclassification. Subject to Section 13
(b) hereof, in the event that any capital reorganization, reclassification,
recapitalization, merger, consolidation, split or like capital adjustment of the
outstanding Units is effected in such a way that holders of Units shall be
entitled to receive a different number of Units or other equity interest, stock
or securities with respect to or in exchange therefor, an appropriate adjustment
shall be made by the Committee whereby each Participant shall thereafter have
the right upon the terms and conditions specified in the Plan and applicable
Option Agreement to receive, such different number of Units,
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<PAGE> 4
or as the case may be, in lieu of Units such equity interests, stock or
securities as may be issued or payable with respect to or in exchange for Units
representing the same number of Units which each Participant may purchase
pursuant to the terms of the Plan and applicable Option Agreement upon the
exercise of the rights represented thereby had such reorganization or
reclassification not taken place. In any such case appropriate provision shall
be made with respect to the rights and interest of each Participant to the end
that the provisions of the applicable Option Agreement shall thereafter be
applicable, as nearly as may be possible, in relation to any equity interests,
stock or securities thereafter deliverable upon the exercise of an Option, and
appropriate adjustments shall be made to determine and provide for the price per
equity interest, share of stock or other security deliverable hereunder. In
making such adjustments, or in determining that no such adjustments are
necessary, the Committee may rely upon the advice of counsel and accountants to
the Company, and the good faith determination of the Committee shall be final,
conclusive and binding. No fractional Units shall be issued or issuable on
account of any such adjustment.
Section 11. Option Agreement. Each Option granted under the Plan shall
be evidenced by a written option agreement (an "Option Agreement") executed by
the Company and the participant which (a) shall contain each of the provisions
and agreements herein specifically required to be contained therein; (b) shall
contain provisions which give the Company a right, until such time as there is a
Public Offering, to repurchase at Fair Market Value (as defined in Section 20
hereof) any Units issued pursuant to the exercise of Options granted under the
Plan and (c) may contain such other terms and conditions as the Committee deems
desirable and which are not inconsistent with the Plan. "Public Offering" shall
mean an underwritten public offering of the voting securities of the Company or
any of its Subsidiaries or Related Entities under the Securities Act of 1933, as
amended, which results in gross proceeds to the Company or its Subsidiary or
Related Entity, as the case may be, in excess of [$15,000,000].
Section 12. Rights As a Member. A Participant shall have no rights as a
member with respect to any Units covered by an Option until the date an entry
evidencing such ownership is made in the transfer books of the Company. Except
as otherwise provided in Section 10 hereof, no adjustment shall be made for
dividends (ordinary or extraordinary, whether in cash, securities or other
property) or distributions or other rights for which the record date is prior to
the date an Option is exercised (the "Exercise Date").
Section 13. Termination of Options.
(a) Each Option granted under the Plan shall set forth a
termination date thereof, which shall be not later than ten (10) years
from the date such Option is granted subject to earlier termination as
set forth in Sections 6, 13 (b), or 14 hereof, or as otherwise set forth
in each particular Option Agreement. The termination of employment of,
or of a consulting relationship with, a Participant for any reason shall
not accelerate or otherwise affect the number of Units which may be
purchased upon exercise of an Option; provided, however, that the Option
may only be exercised with respect to that number of Units which could
have been purchased under the Option had the Option been exercised by
the Participant on the date of such termination and the Option shall
terminate with respect to that number of Units which have not vested as
of the date of termination.
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<PAGE> 5
(b) Subject to Section 14 hereof, unless the Committee shall, in
its sole discretion, determine otherwise, (i) upon the dissolution,
liquidation or sale of all or substantially all of the business,
properties and assets of the Company, (ii) upon any reorganization,
merger, consolidation or exchange of securities in which the Company
does not survive, (iii) upon any reorganization, merger, consolidation
or exchange of securities in which the Company does not survive, and any
of the Company's members have the opportunity to receive cash,
securities or equity of another corporation and/or other property in
exchange for their Units of the Company or (iv) upon any acquisition by
any person or group (as defined in Section 13 (d) of the Securities Act
of 1934, as amended) of beneficial ownership of more than 50% of the
then outstanding Units of the Company (each of the events described in
clauses (i), (ii), (iii), or (iv) is referred to herein individually as
an "Extraordinary Event" and collectively as the "Extraordinary
Events"), the Plan and each outstanding Option shall terminate. In such
event each Participant who is not offered a substitute option as
contemplated by the following sentence shall have the right, until the
effective date of such Extraordinary Event (the "Effective Date"), to
exercise any unexpired Option issued to the Participant, to the extent
that said Option is vested as of the Effective Date and exercisable as
of the Effective Date, and otherwise is vested and exercisable pursuant
to the provisions of said Option and of Section 6 of the Plan. The
surviving entity or corporation in any Extraordinary Event may, but
shall not be obligated to, tender to any Participant an option or
options to purchase equity interests of the surviving entity or
corporation on the same basis as any Participant may purchase Units
hereunder and under the applicable Option Agreement (including
satisfaction of similar vesting provisions), which substitute option
shall contain such terms and provisions as shall substantially preserve
the rights and benefits of any Option then outstanding under the Plan
with any reasonable changes to take into account the circumstances of
the surviving entity.
Section 14. Acceleration of Options. Notwithstanding the provisions of
Section 6 or Section 13 hereof, or any provision to the contrary contained in a
particular Option Agreement, the Committee, in its sole discretion, at any time,
or from time to time, may elect to accelerate the vesting of all or any portion
of any Option then outstanding. The decision by the Committee to accelerate an
Option or to decline to accelerate an Option shall be final, conclusive and
binding. In the event of the acceleration of the exercisability of Options as
the result of a decision by the Committee pursuant to this Section 14, each
outstanding Option so accelerated shall be exercisable for a period from and
after the date of such acceleration and upon such other terms and conditions as
the Committee may determine in its sole discretion provided that such terms and
conditions (other than terms and conditions relating solely to the acceleration
of exercisability and the related termination of an Option) may not adversely
affect the rights of any Participant without the consent of the Participant so
adversely affected. Any outstanding Option which has not been exercised by the
holder at the end of such period shall automatically revert to its original
vesting terms.
Section 15. Withholding of Taxes. The Company, or a Subsidiary or
Related Entity, as the case may be, may deduct and withhold from the wages,
salary, bonus and other income paid
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<PAGE> 6
by the Company (or such Subsidiary or Related Entity) to the Participant the
requisite tax upon the amount of taxable income, if any, recognized by the
Participant in connection with the exercise in whole or in part of any Option,
or the sale of Units issued to the Participant upon the exercise of an Option,
as may be required from time to time under any federal or state tax laws and
regulations. This withholding of tax shall be made from the Company's (or such
Subsidiary's or Related Entity's) concurrent or next payment of wages, salary,
bonus or other income to the Participant or by payment to the Company (or such
Subsidiary or Related Entity) by the Participant of the required withholding
tax, as the Committee may determine; provided, however, that, in the sole
discretion of the Committee, the Participant may pay such tax by reducing the
number of Units issued upon exercise of an Option (for which purpose such Units
shall be valued at Fair Market Value (as defined in Section 20 hereof) as
determined in good faith by the Committee, which determination shall be final,
conclusive and binding).
Section 16. Effectiveness and Termination of the Plan. The Plan shall be
effective on the date on which it is adopted by the Manager. The Plan shall
terminate at the earliest of the time when all Units which may be issued upon
exercise of Options granted hereunder have been so issued or at such other time
as set forth in Section 13 hereof; provided, however, that the Manager may in
their sole discretion terminate the Plan at any other time. Subject to Section
13 hereof, no such termination shall in any way affect any Option then
outstanding.
Section 17. Amendment of Plan. The Committee may make such amendments to
the Plan and, with the consent of each Participant affected, in the terms and
conditions of the outstanding Options as it shall deem advisable. No amendment
shall in any way adversely affect any Option then outstanding without the
consent of the Participant so adversely affected.
Section 18. Transfers and Leaves of Absence. For purposes of the Plan,
(a) a transfer of a Participant's employment or consulting relationship, without
an intervening period, between the Company and a Subsidiary or Related Entity
shall not be deemed a termination of employment or a termination of a consulting
relationship and (b) a Participant who is granted in writing a leave of absence
shall be deemed to have remained in the employ of, or in a consulting
relationship with, the Company (or a Subsidiary or Related Entity, whichever is
applicable) during such leave of absence.
Section 19. Not an Employment or Consulting Agreement. Nothing contained
in the Plan or in any Option Agreement shall confer, intend to confer or imply
any rights of employment or any rights to a consulting relationship or rights to
continued employment by, or rights to a continued consulting relationship with,
the Company or any Subsidiary or Related Entity in favor of any Participant or
limit the ability of the Company or any Subsidiary or Related Entity to
terminate, with or without cause, in its sole and absolute discretion, the
employment of, or consulting relationship with, any Participant, subject to the
terms of any written employment or consulting agreement to which a Participant
is a party.
Section 20. Right of Repurchase. Any Units which may be purchased
pursuant to the exercise of Options granted under the Plan shall be subject to a
right of repurchase in favor of the Company and its assigns from the date of
purchase until such time as there is a Public Offering.
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<PAGE> 7
The Company may require, as a condition to the grant and/or exercise of any
Options, that the Participant confirm in writing that such Units are subject to
such right of repurchase; provided, however, that the failure of the Participant
to confirm in writing the right of repurchase shall not affect the rights of the
Company and its assigns under the Plan, and any Units issued upon exercise of
Options to which the right of repurchase is applicable shall (notwithstanding
any failure by the Participant to confirm in writing such right of repurchase)
be subject to the terms and conditions of such right of repurchase with the same
force and effect as if such right of repurchase had in fact been confirmed in
writing by the Participant. In the event that the Company or its assigns wishes
to exercise the right of repurchase, the Company or its assigns shall pay to the
Participant in cash the then Fair Market Value of each Unit times the number of
Units to be repurchased. "Fair Market Value" shall mean the enterprise value of
the Company, plus all consideration payable upon exercise of all outstanding
options and warrants granted by the Company (other than options and warrants
whose exercise would not be dilutive), less all debt of the Company (including,
without imitation, capital lease obligations), each as determined in good faith
by the Committee, divided by the number of Units outstanding plus the number of
Units with respect to which options and warrants have been granted by the
Company (other than options and warrants whose exercise would not be dilutive).
In the event that the Participant does not agree with the Company's
determination of Fair Market Value, then the Company and the Participant will
submit such matter to an independent appraisal to be conducted in Las Vegas,
Nevada in accordance with the terms set in the Option Agreement with the
Participant.
Section 21. Governing Law. The Plan and any Option granted pursuant to
the Plan shall be construed under and governed by the laws of the State of
Delaware without regard to conflict of law provisions thereof.
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<PAGE> 1
EXHIBIT 10.41
HORSESHOE GAMING, L.L.C.
UNIT OPTION AGREEMENT
THIS UNIT OPTION AGREEMENT (this "Agreement") is entered into as of
February 1, 1997 by and between Horseshoe Gaming, L.L.C. (the "Company") and
Larry Lepinski ("Optionee") pursuant to the Company's 1997 Unit Option Plan (the
"Plan"). All capitalized terms not otherwise defined herein shall have the
meaning set forth in the Plan.
RECITALS
A. The Company considers it desirable to give Optionee an incentive to
advance the Company's interest through the opportunity to acquire an equity
interest and thus participate in the Company's growth, development and financial
success.
B. The Company has determined to grant Optionee the right to
purchase Units pursuant to the terms and conditions of this Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the covenants hereinafter set forth,
the parties agree as follows:
1. Option; Number of Units. The Company hereby grants to Optionee the
right (the "Option") to purchase up to 252,490 Units (the "Units") at a price of
$3.47 per Unit (the "Purchase Price"). The Option and the right to purchase all
or any portion of the Units are subject to the terms and conditions stated in
this Agreement and in the Plan, including, without limitation, the provisions of
Sections 4, 10, 13 (b), and 14 of the Plan and Sections 3 and 4 hereof. Upon
exercise of the Option, Optionee shall become a member of the Company, with the
rights and benefits, and subject to the terms and conditions, set forth in the
Company's Limited Liability Company Agreement and the Company's Limited
Liability Company Agreement shall (if necessary) be amended to so provide. The
Optionee agrees to comply with, and be subject to, the provisions of the
Company's Limited Liability Company Agreement and to do all acts required
thereunder.
2. Vesting. The Option shall vest in three (3) equal annual installments
of 33 1/3% of the Units covered by the Option on each of the first through third
anniversaries of the date of Optionee's employment with the Company pursuant to
the Employment Agreement between the Company and Optionee dated October 1, 1995,
as amended by that certain First Amendment to Employment Agreement dated July 1,
1996. Notwithstanding the foregoing, in the event Jack B. Binion (including any
entities through which Jack B. Binion holds his ownership interest in the
<PAGE> 2
Company), family members of Jack B. Binion and/or trusts established for the
benefit of his heirs transfer controlling interest in the Company to a third
party in a transaction other than a public offering, the Option shall
immediately become fully vested.
3. Term of Option. Except for the rights conferred upon the Company
pursuant to Section 7 below, the Option, and Optionee's right to exercise the
Option, shall terminate when the first of the following occurs:
(a) termination pursuant to Section 13 (b) or Section 14 of the
Plan;
(b) the expiration of ten (10) years from the date hereof; or
(c) ninety (90) days after the date of termination of Optionee's (i)
employment or (ii) consulting relationship, as applicable, with the
Company and all of the Subsidiaries and Related Entities, unless
such termination results from Optionee's death or disability (within
the meaning of Section 105 (d) (4) of the Internal Revenue Code of
1986, as amended) or Optionee dies within ninety (90) days after the
date of termination of Optionee's employment or consulting
relationship with the Company and all of the Subsidiaries and
Related Entities, in which case this Agreement and the Option shall
terminate 180 days after the date of termination of Optionee's
employment or consulting relationship with the Company and all of
the Subsidiaries and Related Entities.
4. Termination of Employment. The termination for any reason of
Optionee's employment or consulting relationship with the Company and all of the
Subsidiaries and Related Entities shall not accelerate the vesting of the Option
or affect the number of Units with respect to which the Option may be exercised;
provided, however, that the Option may only be exercised with respect to that
number of Units which could have been purchased under the Option had the Option
been exercised by Optionee on the date of such termination and shall in all
events be subject to Section 3 hereof.
5. Death of Optionee; No Assignment. The rights of Optionee under this
Agreement may not be assigned or transferred except by will, by the laws of
descent or distribution or inter vivos to a trust for the benefit of Optionee or
Optionee and Optionee's spouse and may be exercised during the lifetime of
Optionee only by such Optionee; provided, however, that in the event of
disability (within the meaning of Section 105 (d) (4) of the Internal Revenue
Code of 1986, as amended) of Optionee, a designee of Optionee (or the Optionee's
legal representative if Optionee has not designated anyone) may exercise the
Option on behalf of Optionee (provided the Option would have been exercisable by
Optionee) until the right to exercise the Option expires pursuant to Section 3
hereof. Any attempt to sell, pledge, assign, hypothecate, transfer or otherwise
dispose of the Option in contravention of this Agreement or the Plan shall be
void and shall have no effect. If Optionee should die while Optionee is engaged
in an employment or consulting relationship with the Company and/or any
Subsidiary or Related Entity, and provided Optionee's rights hereunder shall
have vested, in whole or in part, pursuant to Section 2 hereof, Optionee's,
designee, legal representative, or legatee, the successor trustee of Optionee's
inter
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<PAGE> 3
vivos trust or the person who acquired the right to exercise the Option by
reason of the death of Optionee (individually, a "Successor") shall succeed to
Optionee's rights under this Agreement. After the death of Optionee, only a
Successor may exercise the Option.
6. Exercise of Option. On or after the vesting of all or any portion of
the Option in accordance with Section 2 hereof and until termination of the
Option in accordance with Section3 hereof, the Option may be exercised by
Optionee (or such other person specified in Section 5 hereof) to the extend
exercisable as determined under Section 2 hereof, upon delivery of the following
to the Company at its principal executive offices:
(a) a written notice of exercise which identifies this
Agreement and states the number of Units to be purchased;
(b) a check, cash or an combination thereof in the amount of the
aggregate Purchase Price (or payment of the aggregate Purchase Price
in such other form of lawful consideration as the Committee may
approve from time to time under the provisions of Section 7 of the
Plan);
(c) a check or cash in the amount reasonably requested by the
Company to satisfy the Company's withholding obligations under
federal, state or other applicable tax laws with respect to the
taxable income, if any, recognized by Optionee in connection with
the exercise, in whole or in part, of the Option (unless the Company
and Optionee shall have made other arrangements for deductions or
withholding from Optionee's wages, bonus or other income paid to
Optionee by the Company or any Subsidiary or Related Entity,
provided such arrangements satisfy the requirements of applicable
tax laws);
(d) a written representation and undertaking, if requested by the
Company pursuant to Section 8 (b) hereof, in such form and substance
as the Company may require, setting forth the investment intent of
Optionee, or a Successor, as the case may be, and such other
agreements, representations and undertakings as described in the
Plan; and
(e) such further acts as may be necessary to admit Optionee as a
member of the Company, including becoming a party to the Company's
Limited Liability Company Agreement, as then in effect.
7. Representations and Warranties of Optionee.
(a) Optionee represents and warrants that the Option is being
acquired by Optionee for Optionee's personal account, for investment
purposes only, and not with a view to the distribution, resale or
other disposition thereof.
(b) Optionee acknowledges that the Company may issue Units upon the
exercise of the Option without registering or qualifying such
securities under
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<PAGE> 4
federal or state securities laws on the basis of certain exemptions
from such registration or qualification requirements. Accordingly,
Optionee agrees that Optionee's exercise of the Option may be
expressly conditioned upon Optionee's delivery to the Company of
such representations and undertakings as the Company may reasonable
require in order to secure the availability of such exemptions,
including a representation that Optionee is acquiring the Units for
investment and not with a present intention of selling or otherwise
disposing of such Units. Optionee acknowledges that, because Units
received upon exercise of an Option may be unregistered, Optionee
may be required to hold the Units indefinitely unless they are
subsequently registered for resale under the Act or an exemption
from such registration is available.
(c) Optionee acknowledges that the Company's obligation to issue the
Units upon exercise of the Option is expressly conditioned upon the
compliance by the Company with any registration or other
qualification obligations with respect to such Units under any state
and/or federal law or rulings and regulations of any government
regulatory body, including without limitation, any and all
applicable gaming regulatory authorities of the states in which the
Company's Subsidiaries operate or intend to operate, and/or the
filing by Optionee of any background applications required by such
gaming authorities.
(d) Optionee acknowledges receipt of this Agreement granting the
Option, and the Plan, and understands that all rights and
liabilities connected with the Option are set forth herein and in
the Plan, including without limitation, the Company's right to
repurchase from Optionee all Units acquired upon exercise of the
Option as provided in Section 13 hereof and in Section 20 of the
Plan.
(e) Optionee acknowledges receipt of a copy of the Company's Limited
Liability Company Agreement, as in effect on the dates hereof and
understands that any Unit acquired by exercise of the Option will be
subject to the provisions of the Company's Limited Liability Company
Agreement applicable to all of the Company's members, as in effect
from time to time.
8. No Rights As a Member. Optionee shall have no rights as a member in
connection with the Units covered by the Option until the date (the "Exercise
Date") an entry evidencing such ownership is made in the appropriate records of
the Company. Except as may be provided under Section 10 of the Plan, the Company
will make no adjustment for dividends (ordinary or extraordinary, whether in
cash, securities, or other property) or distributions or other rights for which
the record date is prior to the Exercise Date.
9. This Agreement Subject to Plan. This Agreement is made under the
provisions of the Plan and shall be interpreted in a manner consistent with it.
To the extent that any provision in this Agreement is inconsistent with the
Plan, the provisions of the Plan shall control. A copy of the Plan is available
to Optionee at the Company's principal executive offices upon request and
without charge. The good faith interpretation of the Committee of any provision
of the Plan, the
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<PAGE> 5
Option or this Agreement, and any determination with respect thereto or hereto
by the Committee, shall be final, conclusive and binding on all parties.
10. Restrictive Legends. Optionee hereby acknowledges that federal
securities laws and the securities laws of the state in which Optionee resides
may require the placement of certain restrictive legends upon the Units issued
upon exercise of the Option, and Optionee hereby consents to the placing of any
such legends upon certificates evidencing the Units as the Company, or its
counsel, may reasonably deem necessary; provided, however, that any such legend
or legends shall be removed when no longer applicable.
11. Notices. All notices, requests and other communications hereunder
shall be in writing and, if given by telegram, telecopy or telex, shall be
deemed to have been validly served, given or delivered when sent, if given by
personal delivery, shall be deemed to have been validly served, given or
delivered upon actual delivery and, if mailed, shall be deemed to have been
validly served, given or delivered three business days after deposit in the
United States mails, as registered or certified mail, with proper postage
prepaid and addressed to the party or parties to be notified, at the following
addresses (or such other address(es) as a party may designate for itself by like
notice):
If to the Company:
Horseshoe Gaming, L.L.C.
330 South Fourth Street
Las Vegas, NV 39101
If to Optionee:
Joseph Lawrence Lepinski
595 Fairway Drive
Hernando, MS 38632
12. Not an Employment Agreement. Nothing contained in this Agreement
shall confer, intend to confer or imply any rights to an employment relationship
or rights to a continued employment relationship with the Company and/or any
Subsidiary or Related Entity in favor of Optionee or limit the ability of the
Company and/or any Subsidiary or Related Entity to terminate, with or without
cause, in its sole and absolute discretion, its employment relationship with
Optionee, subject to the terms of any written employment agreement to which
Optionee is a party.
13. Right of Repurchase.
(a) Any Units which may be purchased pursuant to the exercise of
Options under this Agreement shall be subject to a right of
repurchase in favor or the Company and its assigns from the date of
purchase until such time as there is a Public Offering. "Public
Offering" shall mean an underwritten public offering of
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<PAGE> 6
the voting securities of the Company or any of its Subsidiaries or
Related Entities under the Securities Act of 1933, as amended, which
results in gross proceeds to the Company or its Subsidiary or
Related Entity, as the case may be, in excess of $25,000,000. In the
event that the Company or its assigns wishes to exercise the right
of repurchase, the Company or its assigns shall pay to Optionee in
cash the then Fair Market Value of each Unit times the number of
Units to be repurchased (the "Repurchase Price").
(b) "Fair Market Value" shall mean the enterprise value of the
Company, plus all consideration payable upon exercise of all
outstanding options and warrants whose exercise would not be
dilutive), less all debt of the Company (including, without
limitation, capital lease obligations), each as determined in good
faith by the Committee, divided by the number of Units outstanding
plus the number of Units with respect to which options and warrants
have been granted by the Company (other than options and warrants
whose exercise would not be dilutive).
(c) In the event that the Participant does not agree with the
Company's determination of Fair Market Value, then the Company and
the Participant will submit such matter to an independent appraisal
to be conducted in Las Vegas, Nevada in accordance with the terms
set forth below. Participant shall, within ten (10) days of
Participant's receipt of written notice of the Company's
determination of Fair Market Value, initiate such appraisal process
by delivering written notice to the Company to such effect,
designating the name of an appraiser that is to represent
Participant in such appraisal process. Thereafter, within ten (10)
days of receipt of such notice, the Company shall designate an
appraiser to represent it in such process. Within ten (10) days
after designation of the second appraiser, the two appraisers shall
convene and agree upon a third appraiser. In the event that said two
appraisers are unable to agree upon a third appraiser, then the
third appraiser shall be selected by lottery, with each appraiser to
submit the name of another reputable appraiser, and with the
appraiser whose name is drawn in such lottery being designated for
all purposes as the third appraiser.
Within ten (10) days after selection of the third appraiser,
the three appraisers shall convene and attempt to agree upon the
Fair Market Value. If unable to agree, then each appraiser shall
within thirty (30) days thereafter prepare his own independent
appraisal report and such reports shall be submitted to the Company
and the Participant. Provided that the middle appraisal is within
ten percent (10%) of either the high or low appraisal, then the
middle appraisal (the highest and lowest appraisals being
disregarded) shall be deemed to be the Fair Market Value and thus
the valuation to be used for purposes of the L.L.C.'s acquisition of
Employee's Ownership Interest. In the event that the middle
appraisal is not within ten percent (10%) of either the high or low
appraisal, then the determination of the Fair Market Value shall be
submitted to binding arbitration, to be conducted in Las Vegas,
Nevada pursuant to the then prevailing rules and regulations of the
American Arbitration Association. In such arbitration,
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<PAGE> 7
each of the appraisers shall be entitled to submit their appraisal
report and testify on behalf of the Company or the Participant. The
arbitration panel, after hearing all evidence desired to be
submitted by the Company and the Participant, shall determine said
fair market value, and such decision by said arbitration panel shall
be binding upon the Company and the Participant. The cost of the
arbitration shall be borne equally by the Company and the
Participant.
(d) The Repurchase Price to be paid by the Company as determined by
agreement or appraisal as described herein shall be paid in three
(3) equal principal installments, with the first payment being due
within ten (10) days after determination of or agreement as to Fair
Market Value, the second payment shall be due and payable one (1)
year thereafter and the last payment shall be due and payable two
(2) years thereafter; provided, however, that if the value is less
than $750,000 then the entire Purchase Price shall be paid to the
Participant in one lump sum within ten (10) days after determination
of agreement as to Fair Market Value. Notwithstanding the foregoing,
in the event any of the Company's loan agreements prohibit payment
of the Repurchase Price to be made over the period set forth above,
then the Participant agrees that the Repurchase Price shall be paid
in equal principal installments over the time period permitted by
such loan agreements but in no event over a period in excess of five
(5) years. Such obligation shall bear interest at the prime rate of
interest, as quoted from time to time by the largest commercial bank
(in terms of assets) in the State of Nevada, and accrued but unpaid
interest shall be due and payable together with each annual
principal installment.
The Company and Participant agree that any persons chosen to
represent them as appraisers shall be qualified and competent MAI
appraisers of a certified public accountant with one of the "Big
Six" accounting firms, experienced in valuing closely held
partnerships or corporations.
The Company shall bear the cost of its appraiser, the Participant
shall bear the cost of its appraiser and the Company and the
Participant shall each bear one-half (1/2) of the cost of the third
appraiser.
14. Governing Law. This Agreement shall be construed under and
governed by the laws of the State of Delaware without regard to the conflict
of law provisions thereof.
15. Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original and both of which together shall be
deemed one Agreement.
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IN WITNESS WHEREOF, the Company and Optionee have executed this Agreement
as of the date first above written.
HORSESHOE GAMING, L.L.C.
By:
/s/ Paul R. Alanis
------------------------------------------
OPTIONEE
/s/ Larry Lepinski
------------------------------------------
LARRY LEPINSKI
8
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EXHIBIT 10.42
A M E R I C A N I N S T I T U T E O F A R C H I T E C T S
- --------------------------------------------------------------------------------
AIA Document A111
STANDARD FORM OF AGREEMENT
BETWEEN OWNER AND CONTRACTOR
where the basis of payment is the
COST OF THE WORK PLUS A FEE
with or without a Guaranteed Maximum Price
1987 EDITION
THIS DOCUMENTS HAS IMPORTANT LEGAL CONSEQUENCES; CONSULTATION WITH
AN ATTORNEY IS ENCOURAGED WITH RESPECT TO ITS COMPLETION
OR MODIFICATION.
The 1987 Edition of AIA Document A201, General Conditions of the Contract for
Construction is adopted in this document by reference. Do not use with other
general conditions unless this document is modified.
This document has been approved and endorsed by The Associated General
Contractors of America.
- --------------------------------------------------------------------------------
AGREEMENT
made as of the day of in the year of
Nineteen Hundred and
<TABLE>
<S> <C>
BETWEEN the Owner: Horseshoe Gaming, Inc.,
(NAME AND ADDRESS) Horseshoe International, Inc., et al.
330 S. 4th Street
Las Vegas, Nevada 89101
and the Contractor: Manhattan Construction Company and Whitaker
(NAME AND ADDRESS) Construction Company, Inc. d.b.a. Manhattan/
Whitaker, A Joint Venture
P.O. Box 8176
Shreveport, Louisiana 71148
the Project is: Construction of a Hotel for the Horseshoe Casino
(NAME AND ADDRESS) Bossier City, Louisiana
the Architect is: Friedmutter and Associates
(NAME AND ADDRESS) 4285 S. polaris, Suite 100
Las Vegas, Nevada 89103
</TABLE>
The Owner and Contractor agree as set forth below.
- --------------------------------------------------------------------------------
Copyright 1920, 1925, 1951, 1958, 1961, 1963, 1967, 1974, 1978 @1987 by
The American Institute of Architects, 1735 New York Avenue, N.W.
Washington, D.C. 20006. Reproduction of the material herein or
substantial quotation of its provisions without written permission of
the AIA violates the copyright laws of the United States and will be
subject to legal prosecution.
- --------------------------------------------------------------------------------
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ARTICLE 1
THE CONTRACT DOCUMENTS
1.1 The Contract Documents consist of this Agreement, conditions of the
Contract (General, Supplementary and other Conditions), Drawings,
Specifications, Addenda issued prior to execution of this Agreement, other
documents listed in this Agreement and Modifications issued after execution of
this Agreement; these form the Contract, and ar as fully a part of the Contract
as if attached to this Agreement or repeated herein. The Contract represents the
entire and integrated agreement between the parties hereto and supersedes prior
negotiations, representations or agreements, either written or oral. An
enumeration of the Contract Documents, other than Modifications, appears in
Article 16. If anything in the other Contract Documents is inconsistent with
this Agreement, this Agreement shall govern.
ARTICLE 2
THE WORK OF THIS CONTRACT
2.1 The Contractor shall execute the entire Work described in the Contract
Documents, except to the extent specifically indicated in the Contract Documents
to be the responsibility of others, or as follows:
ARTICLE 3
RELATIONSHIP OF THE PARTIES
3.1 The Contractor accepts the relationship of trust and confidence
established by this Agreement and covenants with the Owner to cooperate with the
Architect and utilize the Contractor's best skill, efforts and judgments in
furthering the interests of the Owner; to furnish efficient business
administration and supervision; to make best efforts to furnish at all times an
adequate supply of workers and materials; and to perform the Work in the best
way and most expeditious and economical manner consistent with the interests of
the Owner. The Owner agrees to exercise best efforts to enable the Contractor to
perform the Work in the best way and most expeditious manner by furnishing and
approving in a timely way information required by the Contractor and making
payments to the Contractor in accordance with requirements of the Contract
Documents.
ARTICLE 4
DATE OF COMMENCEMENT AND SUBSTANTIAL COMPLETION
4.1 The date of commencement is the date from which the Contract Time of
Subparagraph 4.2 is measured; it shall be the date of this Agreement, as first
written above, unless a different date is stated below or provision is made for
the date to be fixed in a notice to proceed issued by the Owner.
(INSERT THE DATE OF COMMENCEMENT, IF IT DIFFERS FROM THE DATE OF THIS AGREEMENT
OR, IF APPLICABLE, STATE THAT THE DATE WILL BE FIXED IN A NOTICE TO PROCEED.)
Unless the date of commencement is established by a notice to proceed issued by
the Owner, the Contractor shall notify the Owner in writing not less than five
days before commencing the Work to permit the timely filing of mortgages,
mechanic's liens and other security interests.
4.2 The Contractor shall achieve Substantial Completion of the entire Work
not later than
(INSERT THE CALENDAR DATE OR NUMBER OF CALENDAR DAYS AFTER THE DATE OF
COMMENCEMENT. ALSO INSERT ANY REQUIREMENT FOR EARLIER SUBSTANTIAL COMPLETION OF
CERTAIN PORTIONS OF THE WORK, IF NOT STATED ELSEWHERE IN THE CONTRACT
DOCUMENTS.)
, subject to adjustments of this Contract Time as provided in the Contract
Documents.
(INSERT PROVISIONS, IF ANY, FOR LIQUIDATED DAMAGES RELATING TO FAILURE TO
COMPLETE ON TIME.)
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ARTICLE 5
CONTRACT SUM
5.1 The Owner shall pay the Contractor in current funds for the Contractor's
performance of the Contract the Contract Sum consisting of the Cost of the Work
as defined in Article 7 and the Contractor's Fee determined as follows:
(STATE A LUMP SUM, PERCENTAGE OF COST OF THE WORK OR OTHER PROVISION FOR
DETERMINING THE CONTRACTOR'S FEE, AND EXPLAIN HOW THE CONTRACTOR'S FEE IS TO
BE ADJUSTED FOR CHANGES IN THE WORK.)
A. Base Contract Fee: 3.75%
B. Change In Work Fee: 3.75%
C. Change In Work General Conditions: 5.00%, SUBJECT TO EVALUATION
AT JANUARY 1, 1997. IF AT THE DISCRETION OF THE OWNER, THE
GENERAL CONDITIONS NEED TO BE ADJUSTED, THE CONTRACTOR WILL HAVE
30 DAYS TO PROVIDE SUBSTANTION OR DOCUMENTATIONS PRIOR TO ANY
ADJUSTMENT.
5.2 GUARANTEED MAXIMUM PRICE (IF APPLICABLE)
5.2.1 The sum of the Cost of the Work and the Contractor's Fee is guaranteed
by the Contractor not to exceed
Dollars ($________________________), subject to additions and deductions by
Change Order as provided in the Contract Documents. Such maximum sum is referred
to in the Contract Documents as the Guaranteed Maximum Price. Costs which would
cause the Guaranteed Maximum Price to be exceeded shall be paid by the
Contractor without reimbursement by the Owner.
(INSERT SPECIFIC PROVISIONS IF THE CONTRACTOR IS TO PARTICIPATE IN ANY SAVINGS.)
Savings Split: Owner 75%
Contractor 25%
5.2.2 The Guaranteed Maximum Price is based upon the following alternates, if
any, which are described in the Contract Documents and are hereby accepted by
the Owner:
(STATE THE NUMBERS OR OTHER IDENTIFICATION OF ACCEPTED ALTERNATES, BUT ONLY IF A
GUARANTEED MAXIMUM PRICE IS INSERTED IN SUBPARAGRAPH 5.2.1. IF DECISIONS ON
OTHER ALTERNATES ARE TO BE MADE BY THE OWNER SUBSEQUENT TO THE EXECUTION OF THIS
AGREEMENT, ATTACH A SCHEDULE OF SUCH OTHER ALTERNATES SHOWING THE AMOUNT FOR
EACH AND THE DATE UNTIL WHICH THAT AMOUNT IS VALID.)
N/A
5.2.3 The amounts agreed to for unit prices, if any, are as follows: N/A
(STATE UNIT PRICES ONLY IF A GUARANTEED MAXIMUM PRICE IS INSERTED IN
SUBPARAGRAPH 5.2.1.)
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ARTICLE 6
CHANGES IN THE WORK
6.1 CONTRACTS WITH A GUARANTEED MAXIMUM PRICE
6.1.1 Adjustments to the Guaranteed Maximum Price on account of changes in the
Work may be determined by any of the methods listed in Subparagraph 7.3.3 of the
General Conditions.
6.1.2 In calculating adjustments to subcontracts (except those awarded with
the Owner's prior consent on the basis of cost plus a fee), the terms "cost" and
"fee" as used in Clause 7.3.3.3 of the General Conditions and the terms "costs"
and "a reasonable allowance for overhead and profit" as used in Subparagraph
7.3.6 of the General Conditions shall have the meanings assigned to them in the
General Conditions and shall not be modified by Articles 5, 7 and 8 of this
Agreement. Adjustments to subcontracts awarded with the Owner's prior consent on
the basis of cost plus a fee shall be calculated in accordance with the terms of
those subcontracts.
6.1.3 In calculating adjustments to this Contract, the terms "cost" and
"costs" as used in the above-referenced provisions of the General Conditions
shall mean the Cost of the Work as defined in Article 7 of this Agreement and
the terms "fee" and "a reasonable allowance for overhead and profit" shall mean
the Contractor's Fee as defined in Paragraph 5.1 of this Agreement.
6.2 CONTRACTS WITHOUT A GUARANTEED MAXIMUM PRICE
6.2.1 Increased costs for the items set forth in Article 7 which result from
changes in the Work shall become part of the Cost of the Work, and the
Contractor's Fee shall be adjusted as provided in Paragraph 5.1.
6.3 ALL CONTRACTS
6.3.1 If no specific provision is made in Paragraph 5.1 for adjustment of the
Contractor's Fee in the case of changes in the Work, or if the extent of such
changes is such, in the aggregate, that application of the adjustment provisions
of Paragraph 5.1 will cause substantial inequity to the Owner or Contractor, the
Contractor's Fee shall be equitably adjusted on the basis of the Fee established
for the original Work.
ARTICLE 7
COSTS TO BE REIMBURSED
7.1 The term Cost of the Work shall mean costs necessarily incurred by the
Contractor in the proper performance of the Work. Such costs shall be at rates
not higher than the standard paid at the place of the Project except with prior
consent of the Owner. The Cost of the Work shall include only the items set
forth in this Article 7.
7.1.1 LABOR COSTS
7.1.1.1 Wages of construction workers directly employed by the Contractor to
perform the construction of the Work at the site or, with the Owner's agreement,
at off-site workshops.
7.1.1.2 Wages or salaries of the Contractor's supervisory and administrative
personnel when stationed at the site with the Owner's agreement.
(IF IT IS INTENDED THAT THE WAGES OR SALARIES OF CERTAIN PERSONNEL STATIONED AT
THE CONTRACTOR'S PRINCIPAL OR OTHER OFFICES SHALL BE INCLUDED IN THE COST OF THE
WORK, IDENTIFY IN ARTICLE 14 THE PERSONNEL TO BE INCLUDED AND WHETHER FOR ALL OR
ONLY PART OF THEIR TIME.)
7.1.1.3 Wages and salaries of the Contractor's supervisory or administrative
personnel engaged, at factories, workshops or on the road, in expediting the
production or transportation of materials or equipment required for the Work,
but only for that portion of their time required for the Work.
7.1.1.4 Costs paid or incurred by the Contractor for taxes, insurance,
contributions, assessments and benefits required by law or collective bargaining
agreements and, for personnel not covered by such agreements, customary benefits
such as sick leave, medical and health benefits, holidays, vacations and
pensions, provided such costs are based on wages and salaries included in the
Cost of the Work under Clauses 7.1.1.1 through 7.1.1.3.
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7.1.2 SUBCONTRACT COSTS
Payments made by the Contractor to Subcontractors in accordance with the
requirements of the subcontracts.
7.1.3 COSTS OF MATERIALS AND EQUIPMENT INCORPORATED IN THE COMPLETED
CONSTRUCTION
7.1.3.1 Costs, including transportation, of materials and equipment incorporated
or to be incorporated in the completed construction.
7.1.3.2 Costs of materials described in the preceding Clause 7.1.3.1 in excess
of those actually installed but required to provide reasonable allowance for
waste and for spoilage. Unused excess materials, if any, shall be handed over to
the Owner at the completion of the Work or, at the Owner's option, shall be sold
by the Contractor, amounts realized, if any, from such sales shall be credited
to the Owner as a deduction from the Cost of the Work.
7.1.4 COSTS OF OTHER MATERIALS AND EQUIPMENT, TEMPORARY FACILITIES AND RELATED
ITEMS.
7.1.4.1 Costs, including transportation, installation, maintenance, dismantling
and removal of materials, supplies, temporary facilities, machinery, equipment,
and hand tools not customarily owned by the construction workers, which are
provided by the Contractor at the site and fully consumed in the performance of
the Work; and cost less salvage value on such items if not fully consumed,
whether sold to others or retained by the Contractor. Cost for items previously
used by the Contractor shall mean fair market value.
7.1.4.2 Rental charges for temporary facilities, machinery, equipment, and hand
tools not customarily owned by the construction workers, which are provided by
the Contractor at the site, whether rented from the Contractor or others, and
costs of transportation, installation, minor repairs and replacements,
dismantling and removal thereof. Rates and quantities of equipment rented shall
be subject to the Owner's prior approval.
7.1.4.3 Costs of removal of debris from the site.
7.1.4.4 Costs of telegrams and long-distance telephone calls, postage and parcel
delivery charges, telephone service at the site and reasonable petty cash
expenses of the site office.
7.1.4.5 That portion of the reasonable travel and subsistence expenses of the
Contractor's personnel incurred while traveling in discharge of duties connected
with the Work.
7.1.5 MISCELLANEOUS COSTS
7.1.5.1 That portion directly attributable to this Contract of premiums for
insurance and bonds.
7.1.5.2 Sales, use or similar taxes imposed by a governmental authority which
are related to the Work and for which the Contractor is liable.
7.1.5.3 Fees and assessments for the building permit and for other permits,
licenses and inspections for which the Contractor is required by the Contract
Documents to pay.
7.1.5.4 Fees of testing laboratories for tests required by the Contract
Documents, except those related to defective or nonconforming Work for which
reimbursement is excluded by Subparagraph 13.5.3 of the General Conditions or
other provisions of the Contract Documents and which do not fall within the
scope of Subparagraphs 7.2.2 through 7.2.4 below.
7.1.5.5 Royalties and license fees paid for the use of a particular design,
process or product required by the Contract Documents; the cost of defending
suits or claims for infringement of patent rights arising from such requirement
by the Contract Documents; payments made in accordance with legal judgments
against the Contractor resulting from such suits or claims and payments of
settlements made with the Owner's consent; provided, however, that such costs of
legal defenses, judgment and settlements shall not be included in the
calculation of the Contractor's Fee of a Guaranteed Maximum Price, if any, and
provided that such royalties, fees and costs are not excluded by the last
sentence of Subparagraph 3.17.1 of the General Conditions or other provisions of
the Contract Documents.
7.1.5.6 Deposits lost for causes other than the Contractor's fault or
negligence.
7.1.6 OTHER COSTS
7.1.6.1 Other costs incurred in the performance of the Work if and to the extent
approved in advance in writing by the Owner.
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7.2 EMERGENCIES; REPAIRS TO DAMAGED, DEFECTIVE OR NONCONFORMING WORK
The Cost of the Work shall also include costs described in Paragraph 7.1 which
are incurred by the Contractor.
7.2.1 In taking action to prevent threatened damage, injury or loss in case of
an emergency affecting the safety of persons and property, as provided in
Paragraph 10.3 of the General Conditions.
7.2.2 In repairing or correcting Work damaged or improperly executed by
construction workers in the employ of the Contractor, provided such damage or
improper execution did not result from the fault or negligence of the Contractor
or the Contractor's foremen, engineers or superintendents, or other supervisory,
administrative or managerial personnel of the Contractor.
7.2.3 In repairing damaged Work other than that described in Subparagraph
7.2.2, provided such damage did not result from the fault or negligence of the
Contractor or the Contractor's personnel, and only to the extent that the cost
of such repairs is not recoverable by the Contractor from others and the
Contractor is not compensated therefor by insurance or otherwise.
7.2.4 In correcting defective or nonconforming Work performed or supplied by a
Subcontractor or material supplier and not corrected by them, provided such
defective or nonconforming Work did not result from the fault or neglect of the
Contractor or the Contractor's personnel adequately to supervise and direct the
Work of the Subcontractor or material supplier, and only to the extent that the
cost of correcting the defective or nonconforming Work is not recoverable by the
Contractor from the Subcontractor or material supplier.
ARTICLE 8
COSTS NOT TO BE REIMBURSED
8.1 The Cost of the Work shall not include:
8.1.1 Salaries and other compensation of the Contractor's personnel stationed
at the Contractor's principal office or offices other than the site office,
except as specifically provided in Clauses 7.1.1.2 and 7.1.1.3 or as may be
provided in Article 14.
8.1.2 Expenses of the Contractor's principal office and offices other than the
site office.
8.1.3 Overhead and general expenses, except as may be expressly included in
Article 7.
8.1.4 The Contractor's capital expenses, including interest on the
Contractor's capital employed for the Work.
8.1.5 Rental costs of machinery and equipment, except as specifically provided
in Clause 7.1.4.2.
8.1.6 Except as provided in Subparagraphs 7.2.2 through 7.2.4 and Paragraph
13.5 of this Agreement, costs due to the fault or negligence of the Contractor,
Subcontractors, anyone directly or indirectly employed by any of them, or for
whose acts any of them may be liable, including but not limited to costs for the
correction of damaged, defective or nonconforming Work, disposal and replacement
of materials and equipment incorrectly ordered or supplied, and making good
damage to property not forming part of the Work.
8.1.7 Any cost not specifically and expressly described in Article 7.
8.1.8 Costs which would cause the Guaranteed Maximum Price, if any, to be
exceeded.
ARTICLE 9
DISCOUNTS, REBATES AND REFUNDS
9.1 Cash discounts obtained on payments made by the Contractor shall accrue
to the Owner if (1) before making the payment, the Contractor included them in
an Application for Payment and received payment therefor from the Owner, or (2)
the Owner has deposited funds with the Contractor with which to make payments,
otherwise, cash discounts shall accrue to the Contractor. Trade discounts,
rebates, refunds and amounts received from sales of surplus materials and
equipment shall accrue to the Owner, and the Contractor shall make provisions so
that they can be secured.
9.2 Amounts which accrue to the Owner in accordance with the provisions of
Paragraph 9.1 shall be credited to the Owner as a deduction from the Cost of the
Work.
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ARTICLE 10
SUBCONTRACTS AND OTHER AGREEMENTS
*10.1 Those portions of the Work that the Contractor does not customarily
perform with the Contractor's own personnel shall be performed under
subcontracts or by other appropriate agreements with the Contractor. The
Contractor shall obtain bids from Subcontractors and from suppliers of materials
or equipment fabricated especially for the Work and shall deliver such bids to
the Architect. The Owner will then determine, with the advice of the Contractor
and subject to the reasonable objection of the Architect, which bids will be
accepted. The Owner may designate specific persons or entities from whom the
Contractor shall obtain bids; however, if a guaranteed Maximum Price has been
established, the Owner may not prohibit the Contractor from obtaining bids from
others. The Contractor shall not be required to contract with anyone to whom the
Contractor has reasonable objection.
*10.2 If a Guaranteed Maximum Price has been established and a specific bidder
among those whose bids are delivered by the Contractor to the Architect (1) is
recommended to the Owner by the Contractor; (2) is qualified to perform that
portion of the Work; and (3) has submitted a bid which conforms to the
requirements of the Contractor Documents without reservations or exceptions, but
the Owner requires that another bid be accepted; then the Contractor may require
that a Change Order be issued to adjust the Guaranteed Maximum Price by the
difference between the bid of the person or entity recommended to the Owner by
the Contractor and the amount of the subcontract or other agreement actually
signed with the person or entity designated by the Owner.
10.3 Subcontracts or other agreements shall conform to the payment provisions
of Paragraphs 12.7 and 12.8, and shall not be awarded on the basis of cost plus
a fee without the prior consent of the Owner.
*See Article 14.3 for revisions to Articles 10.1 and 10.2.
ARTICLE 11
ACCOUNTING RECORDS
11.1 The Contractor shall keep full and detailed accounts and exercise such
controls as may be necessary for proper financial management under this
Contract; the accounting and control systems shall be satisfactory to the Owner.
The Owner and the Owner's accountants shall be afforded access to the
Contractor's records, books, correspondence, instructions, drawings, receipts,
subcontracts, purchase orders, vouchers, memoranda and other data relating to
this Contract, and the Contractor shall preserve these for a period of three
years after final payment, or for such longer period as may be required by law.
ARTICLE 12
PROGRESS PAYMENTS
12.1 Based upon Applications for Payment submitted to the Architect by the
Contractor and Certificates for Payment issued by the Architect, the Owner shall
make progress payments on account of the Contract Sum to the Contractor as
provided below and elsewhere in the Contract Documents.
12.2 The period covered by each Application for Payment shall be one calendar
month ending on the last day of the month, or as follows:
12.3 Provided an Application for Payment is received by the Owner later than
the day of a month, the Owner shall make payment to the Contractor not later
than the day of the month. If an Application for Payment is received by
the Architect after the application date fixed above, payment shall be made by
the Owner not later than days after the Architect receives the Application
for Payment.
12.4 With each Application for Payment the Contractor shall submit payrolls,
petty cash accounts, receipted invoices or invoices with check vouchers
attached, and any other evidence required by the Owner or Architect to
demonstrate that cash disbursements already made by the Contractor on account of
the Cost of the Work equal or exceed (1) progress payments already received by
the Contractor; less (2) that portion of those payments attributable to the
Contractor's Fee; plus (3) payrolls for the period covered by the present
Application for Payment; plus (4) retainage provided in Subparagraph 12.5.4, if
any, applicable to prior progress payments.
12.5 CONTRACTS WITH A GUARANTEED MAXIMUM PRICE
12.5.1 Each Application for Payment shall be based upon the most recent
schedule of values submitted by the Contractor in accordance with the Contract
Documents. The schedule of values shall allocate the entire Guaranteed Maximum
Price among the various portions of the Work, except that the Contractor's Fee
shall be shown as a single separate item. The schedule of values shall be
prepared in such form and supported by such data to substantiate its accuracy as
the Architect may require. This schedule, unless objected to by the Architect,
shall be used as a basis for reviewing the Contractor's Applications for
Payment.
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12.5.2 Applications for Payment shall show the percentage completion of each
portion of the Work as of the end of the period covered by the Application for
Payment. The percentage completion shall be the lesser of (1) the percentage of
that portion of the Work which has actually been completed or (2) the percentage
obtained by dividing (a) the expense which has actually been incurred by the
Contractor on account of that portion of the Work for which the Contractor has
made or intends to make actual payment prior to the next Application for Payment
by (b) the share of the Guaranteed Maximum Price allocated to that portion of
the Work in the schedule of values.
12.5.3 Subject to other provisions of the Contract Documents, the amount of
each progress payment shall be computed as follows:
12.5.3.1 Take that portion of the Guaranteed Maximum Price properly allocable to
completed Work as determined by multiplying the percentage completion of each
portion of the Work by the share of the Guaranteed Maximum Price allocated to
that portion of the Work in the schedule of values. Pending final determination
of cost to the Owner of changes in the Work, amounts not in dispute may be
included as provided in Subparagraph 7.3.7 of the General Conditions, even
though the Guaranteed Maximum Price has not yet been adjusted by Change Order.
12.5.3.2 Add that portion of the Guaranteed Maximum Price properly allocable to
materials and equipment delivered and suitably stored at the site for subsequent
incorporation in the Work, or if approved in advance by the Owner, suitably
stored off the site at a location agreed upon in writing.
12.5.3.3 Add the Contractor's Fee, less retainage of percent ( %). The
Contractor's Fee shall be computed upon the Cost of the Work described in the
two preceding Clauses at the rate stated in Paragraph 5.1 or, if the
Contractor's Fee is stated as a fixed sum in that Paragraph, shall be an amount
which bears the same ratio to that fixed sum Fee as the Cost of the Work in the
two preceding Clauses bears to a reasonable estimate of the probable Cost of the
Work upon its completion.
12.5.3.4 Subtract the aggregate of previous payments made by the Owner.
12.5.3.5 Subtract the shortfall, if any, indicated by the Contractor in the
documentation required by Paragraph 12.4 to substantiate prior Applications for
Payment, or resulting from errors subsequently discovered by the Owner's
accountants in such documentation.
12.5.3.6 Subtract amounts, if any, for which the Architect has withheld or
nullified a Certificate for Payment as provided in Paragraph 9.5 of the General
Conditions.
12.5.4 Additional retainage, if any, shall be as follows:
(If it is intended to retain additional amounts from progress payments to the
Contractor beyond (1) the retainage from the Contractor's Fee provided in Clause
12.5.3.3. (2) the retainage from Subcontractors provided in paragraph 12.___
below; and (3) the retainage, if any, provided by other provisions of the
Contract, insert provision for such additional retainage here. Such provision,
if made, should also describe any arrangement for limiting or reducing the
amount retained after the Work reaches a certain state of completion.)
12.6 CONTRACTS WITHOUT A GUARANTEED MAXIMUM PRICE
12.6.1 Applications for Payment shall show the Cost of the Work actually
incurred by the Contractor through the end of the period covered by the
Application for Payment and for which the Contractor has made or intends to make
actual payment prior to the next Application for Payment.
12.6.2 Subject to other provisions of the Contract Documents, the amount of
each progress payment shall be computed as follows:
12.6.2.1 Take the Cost of the Work as described in Subparagraph 12.6.1.
12.6.2.2 Add the Contractor's Fee, less retainage of percent ( %).* The
Contractor's Fee shall be computed upon the Cost of the Work described in the
preceding Clause 12.6.2.1 at the rate stated in Paragraph 5.1 or, if the
Contractor's Fee is stated as a fixed sum in that Paragraph, an amount which
bears the same ratio to that fixed-sum Fee as the Cost of the Work in the
preceding Clause bears to a reasonable estimate of the probable Cost of the Work
upon its completion.
12.6.2.3 Subtract the aggregate of previous payments made by the Owner.
12.6.2.4 Subtract the shortfall, if any, indicated by the Contractor in the
documentation required by Paragraph 12.4 or to substantiate prior Applications
for Payment or resulting from errors subsequently discovered by the Owner's
accountants in such documentation.
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12.6.2.5 Subtract amounts, if any, for which the Architect has withheld or
withdrawn a Certificate for Payment as provided in the Contract Documents.
12.6.3 Additional retainage, if any, shall be as follows:
12.7 Except with the Owner's prior approval, payments to Subcontractors
included in the Contractor's Applications for Payment shall not exceed an amount
for each Subcontractor calculated as follows:
12.7.1 Take that portion of the Subcontract Sum properly allocable to completed
Work as determined by multiplying the percentage completion of each portion of
the Subcontractor's Work by the share of the total Subcontract Sum allocated to
that portion in the Subcontractor's schedule of values, less retainage of
percent ( %). Pending final determination of amounts to be paid to the
Subcontractor for changes in the work, amounts not in dispute may be included as
provided in Subparagraph 7.3.7 of the General Conditions even though the
Subcontract Sum has not yet been adjusted by Change Order.
12.7.2 Add that portion of the Subcontract Sum properly allocable to materials
and equipment delivered and suitably stored at the site for subsequent
incorporation in the Work or, if approved in advance by the Owner, suitably
stored off the site at a location agreed upon in writing, less retainage of
percent ( %).
12.7.3 Subtract the aggregate of previous payments made by the Contractor to
the Subcontractor.
12.7.4 Subtract amounts, if any, for which the Architect has withheld or
nullified a Certificate for Payment by the Owner to the Contractor for reasons
which are the fault of the Subcontractor.
12.7.5 Add, upon Substantial Completion of the entire Work of the Contractor, a
sum sufficient to increase the total payments to the Subcontractor to
percent ( %) of the Subcontract Sum, less amounts, if any, for incomplete Work
and unsettled claims; and, if final completion of the entire Work is thereafter
materially delayed through no fault of the Subcontractor, add any additional
amounts payable on account of Work of the Subcontractor in accordance with
Subparagraph 9.10.3 of the General Conditions.
(If it is intended, prior to Substantial Completion of the entire Work of the
Contractor, to reduce or limit the retainage from Subcontractors resulting from
the percentages inserted in Subparagraphs 12.7.1 and 12.7.2 above, and this is
not explained elsewhere in the Contract Documents, insert here provisions for
such reduction or limitation.)
The Subcontract Sum is the total amount stipulated in the subcontract to be paid
by the Contractor to the Subcontractor for the Subcontractor's performance of
the subcontract.
12.8 Except with the Owner's prior approval, the Contractor shall not make
advance payments to suppliers for materials or equipment which have not been
delivered and stored at the site.
12.9 In taking action on the Contractor's Applications for Payment, the
Architect shall be entitled to rely on the accuracy and completeness of the
information furnished by the Contractor and shall not be deemed to represent
that the Architect has made a detailed examination, audit or arithmetic
verification of the documentation submitted in accordance with Paragraph 12.4 or
other supporting data; that the Architect has made exhaustive or continuous
on-site inspections or that the Architect has made examinations to ascertain how
or for what purposes the Contractor has used amounts previously paid on account
of the Contract. Such examinations, audits and verifications, if required by the
Owner, will be performed by the owner's accountants acting in the sole interest
of the Owner.
ARTICLE 13
FINAL PAYMENT
13.1 Final payment shall be made by the Owner to the Contractor when (1) the
Contract has been fully performed by the Contractor except for the Contractor's
responsibility to correct defective or nonconforming Work, as provided in
Subparagraph 12.2.2 of the General Conditions, and to satisfy other
requirements, if any, which necessarily survive final payments; (2) a final
Application for Payment and a final accounting for the Cost of the Work have
been submitted by the Contractor and reviewed by the Owner's accountants; and
(3)
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a final Certificate for Payment has then been issued by the Architect; such
final payment shall be made by the Owner not more than 30 days after the
issuance of the Architect's final Certificate for Payment, or as follows:
13.2 The amount of the final payments shall be calculated as follows:
13.2.1 Take the sum of the Cost of the Work substantiated by the Contractor's
final accounting and the Contractor's Fee; but not more than the Guaranteed
Maximum Price, if any.
13.2.2 Subtract amounts if any, for which the Architect withholds, in whole or
in part, a final Certificate for Payment as provided in Subparagraph 9.5.1 of
the General Conditions or other provisions of the Contract Documents.
13.2.3 Subtract the aggregate of previous payments made by the Owner.
If the aggregate of previous payments made by the Owner exceeds the amount due
the Contractor, the Contractor shall reimburse the difference to the Owner.
13.3 The Owner's accountants will review and report in writing on the
Contractor's final accounting within 30 days after delivery of the final
accounting to the Architect by the Contractor. Based upon such Cost of the Work
as the Owner's accountants report to be substantiated by the Contractor's final
accounting, and provided the other conditions of Paragraph 13.1 have been met,
the Architect will, within seven days after receipt of the written report of the
Owner's accountant's, either issue to the Owner a final Certificate for Payment
with a copy to the Contractor, or notify the Contractor and Owner in writing of
the Architect's reasons for withholding a certificate as provided in
Subparagraph 9.5.1 of the General Conditions. The time periods stated in this
Paragraph 13.3 supersede those stated in Subparagraph 94.1 of the General
Conditions.
13.4 If the Owner's accountants report the Cost of the Work as substantiated
by the Contractor's final accounting to be less than claimed by the Contractor,
the Contractor shall be entitled to demand arbitration of the disputed amount
without a further decision of the Architect. Such demand for arbitration shall
be made by the Contractor within 30 days after the Contractor's receipt of a
copy of the Architect's final Certificate for Payment; failure to demand
arbitration within this 30-day period shall result in the substantiated amount
reported by the Owner's accountant's becoming binding on the Contractor. Pending
a final resolution by arbitration, the Owner shall pay the Contractor the amount
certified in the Architect's final Certificate for Payment.
13.5 If, subsequent to final payment and at the Owner's request, the
Contractor incurs costs described in Article 7 and not excluded by Article 8 to
correct defective or nonconforming Work, the Owner shall reimburse the
Contractor such costs and the Contractor's Fee applicable thereto on the same
basis as if such costs had been incurred prior to final payment, but not in
excess of the Guaranteed Maximum Price, if any. If the Contractor has
participated in savings as provided in Paragraph 5.2, the amount of such savings
shall be recalculated and appropriate credit given to the Owner in determining
the net amount to be paid by the Owner to the Contractor.
ARTICLE 14
MISCELLANEOUS PROVISIONS
14.1 Where reference is made in this Agreement to a provision of the General
Conditions or another Contract Document, the reference refers to that provision
as amended or supplemented by other provisions of the Contract Documents.
14.2 Payments due and unpaid under the Contract shall bear interest from the
date payment is due at the rate stated below, or in the absence thereof, at the
legal rate prevailing from time to time at the place where the Project is
located.
(INSERT RATE OF INTEREST AGREED UPON, IF ANY.)
(USURY LAWS AND REQUIREMENTS UNDER THE FEDERAL TRUTH IN LENDING ACT, SIMILAR
STATE AND LOCAL CONSUMER CREDIT LAWS AND OTHER REGULATIONS AT THE OWNER'S AND
CONTRACTOR'S PRINCIPAL PLACES OF BUSINESS, THE LOCATION OF THE PROJECT AND
ELSEWHERE MAY AFFECT THE VALIDITY OF THIS PROVISION. LEGAL ADVICE SHOULD BE
OBTAINED WITH RESPECT TO DELETIONS OR MODIFICATIONS, AND ALSO REGARDING
REQUIREMENTS SUCH AS WRITTEN DISCLOSURES OR WAIVERS.)
14.3 Other provisions
A. This contract without a stated guaranteed maximum price is to be
modified to a contract with a guaranteed maximum price upon
completion of document design and pricing of same.
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B. Time is of the essence and Manhattan/Whitaker, A Joint Venture,
will obtain competitive bids on the work except where
circumstances dictate that certain items of work be expedited.
In these instances, the Owner will be kept advised of the
subcontractor chosen and the scope of work being performed. The
competitive bids will be evaluated by Manhattan/Whitaker, A
Joint Venture, and an award made based upon a thorough scope of
work analysis to obtain the most competitive price with the most
qualified subcontractor. The Owner will then receive a copy of
this subcontract agreement.
ARTICLE 15
TERMINATION OR SUSPENSION
15.1 The Contract may be terminated by the Contractor as provided in Article
14 of the General Conditions; however, the amount to be paid to the Contractor
under Subparagraph 14.1.2 of the General Conditions shall not exceed the amount
the Contractor would be entitled to receive under Paragraph 15.3 below.
15.2 If a Guaranteed Maximum Price is established in Article 5, the Contract
may be terminated by the Owner for cause as provided in Article 14 of the
General Conditions; however, the amount, if any, to be paid to the Contractor
under Subparagraph 14.2.4 of the General Conditions shall not cause the
Guaranteed Maximum Price to be exceeded, nor shall it exceed the amount the
Contractor would be entitled to receive under Paragraph 15.3 below.
15.3 If no Guaranteed Maximum Price is established in Article 5, the Contract
may be terminated by the Owner for cause as provided in Article 14 of the
General Conditions; however, the Owner shall then pay the Contractor an amount
calculated as follows:
15.3.1 Take the Cost of the Work incurred by the Contractor to the date of
termination.
15.3.2 Add the Contractor's Fee computed upon the Cost of the Work to the date
of termination at the rate stated in Paragraph 5.1 or, if the Contractor's Fee
is stated as a fixed sum in that Paragraph, an amount which bears the same ratio
to that fixed-sum Fee as the Cost of the Work at the time of termination bears
to a reasonable estimate of the probable Cost of the Work upon its completion.
15.3.3 Subtract the aggregate of previous payments made by the Owner.
The Owner shall also pay the Contractor fair compensation, either by purchase or
rental at the election of the Owner, for any equipment owned by the Contractor
which the Owner elects to retain and which is not otherwise included in the Cost
of the Work under Subparagraph 15.3.1. To the extent that the Owner elects to
take legal assignment of subcontracts and purchase orders (including rental
agreements), the Contractor shall, as a condition of receiving the payments
referred to in this Article 15, execute and deliver all such papers and take all
such steps, including the legal assignment of such subcontracts and other
contractual rights of the Contractor, as the Owner may require for the purpose
of fully vesting in the Owner the rights and benefits of the Contractor under
such subcontracts or purchase orders.
15.4 The Work may be suspended by the Owner as provided in Article 14 of the
General Conditions; in such case, the Guaranteed Maximum Price, if any, shall be
increased as provided in Subparagraph 14.3.2 of the General Conditions except
that the term "cost of performance of the Contract" in that Subparagraph shall
be understood to mean the Cost of the Work and the term "profit" shall be
understood to mean the Contractor's Fee as described in Paragraph 5.1 and 6.3 of
this Agreement.
ARTICLE 16
ENUMERATION OF CONTRACT DOCUMENTS
16.1 The Contract Documents, except for Modifications issued after execution
of this Agreement, are enumerated as follows:
16.1.1 The Agreement is this executed Standard Form of Agreement Between Owner
and Contractor, AIA Document A111, 1987 Edition.
16.1.2 The General Conditions are the General Conditions of the Contract for
Construction, A1A Document A201, 1987 Edition.
16.1.3 The Supplementary and other Conditions of the Contract are those
contained in the Project Manual dated
, and are as follows:
DOCUMENT TITLE PAGES
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16.1.4 The Specifications are those contained in the Project Manual dated as in
Paragraph 16.1.3, and are as follows:
(EITHER LIST THE SPECIFICATIONS HERE OR REFER TO AN EXHIBIT ATTACHED TO THIS
AGREEMENT.)
SECTION TITLE PAGES
16.1.5. The Drawings are as follows, and are dated unless a
different date is shown below:
(EITHER LIST THE SPECIFICATIONS HERE OR REFER TO AN EXHIBIT ATTACHED TO THIS
AGREEMENT.)
SECTION TITLE DATE
16.1.6. The Addenda, if any, are as follows:
NUMBER DATE PAGES
Portions of Addenda relating to bidding requirements are not part of the
Contract Documents unless the bidding requirements are also enumerated in this
Article 16.
16.1.7. Other Documents, if any, forming part of the Contract Documents are as
follows:
(LIST HERE ANY ADDITIONAL DOCUMENTS WHICH ARE INTENDED TO FORM PART OF THE
CONTRACT DOCUMENTS. THE GENERAL CONDITIONS PROVIDE THAT BIDDING REQUIREMENTS
SUCH AS ADVERTISEMENT OR INVITATION TO BID, INSTRUCTIONS TO BIDDERS, SAMPLE
FORMS AND THE CONTRACTOR'S BID ARE NOT PART OF THE CONTRACT DOCUMENTS UNLESS
ENUMERATED IN THIS AGREEMENT. THEY SHOULD BE LISTED HERE ONLY IF INTENDED TO BE
PART OF THE CONTRACT DOCUMENTS.)
A. Horseshoe Casino & Hotel Request for Proposal dated 8/25/95.
B. Manhattan/Whitaker, A Joint Venture Proposal dated 9/11/95.
C. [ADD LETTER OF INTENT]
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This Agreement is entered into as of the date and year first written above and
is executed in at least three original copies of which one is to be delivered to
the Contractor, one to the Architect for use in the administration of the
Contract, and the remainder to the Owner.
OWNER CONTRACTOR
- -------------------------------------- ---------------------------------------
(Signature) (Signature)
- -------------------------------------- ---------------------------------------
(Printed name and title) (Printed name and title)
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<PAGE> 1
EXHIBIT 10.43
VESSEL CONSTRUCTION AGREEMENT.
HULL NAME: "KING OF THE RED"
-----------------
PRICE: $19,O39,904
-----------
DELIVERY DATE: 328 Days after Receipt of Down Payment
--------------------------------------
CONTRACT.
---------
This Agreement entered into as of the_____ day of ________, 1997
BETWEEN.
--------
LEEVAC Shipyards. Inc.
(hereinafter called "BUILDER")
AND
---
HORSESHOE ENTERTAINMENT.
(hereinafter called "OWNER").
WITNESSETH:
-----------
ARTICLE I - SCOPE.
------------------
A. For the price and sum of Nineteen Million, Thirty-Nine Thousand, Nine
Hundred Four Dollars U.S. currency ($19,039,904) BUILDER agrees, at its
own risk and expense, subject to and as qualified by, the other terms
and conditions of this Agreement. complete and deliver to OWNER, afloat
at delivery point determined by Article II-C below, on or before above
Delivery Date, time being of the essence, as hereinafter provided one
riverboat casino (hereinafter called the "Vessel") constructed,
outfitted and tested in accordance with the attached Specifications and
Contract Drawings labeled as follows:
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Specifications.
"KING OF THE RED"
Rodney E. Lay Associates, Inc.
Project 3169
January 15, 1997, Revision 1
Including Addendum 1 dated January 28, 1997
Booklet of Gingerbread Details
3169-F50 (Rev O)
January 2, 1997
Contract Drawings
Per Page 5 and 6 of Specifications
References.
A. Letter to Horseshoe with Bid form dated February 3, 1997
B. Letter to Horseshoe dated February 12, 1997 with price
Revisions and Deletions to Specifications and
Contract Drawings
C. "KING Of THE RED" construction organization updated
4 January 1997
The Specifications. Contract Drawings and References have been identified by the
signatures of the parties hereto and are hereby made a part of this Agreement.
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B. OWNER agrees to furnish a suitable location for the construction of the
Vessel, in accordance with Reference A, 6.4. BUILDER agrees to furnish
all labor, tools, equipment, materials, services, and fees necessary for
the construction and completion of said vessel, except as otherwise
indicated herein or in said Specification or Contract Drawings.
C. BUILDER shall be responsible for the adequacy and accuracy of the
Specifications and Contract Drawings with regard to compliance with any
requirements or classifications mandated by USCG or any other
governmental or regulatory body for the intended or actual use of the
Vessel, in effect as of date of this Contract.
D. BUILDER will provide and/or install ready for use all parts, equipment
and appurtenances shown in the Specifications and Contract Drawings
(including OWNER Furnished items, except those Items to be installed by
OWNER or its Subcontractors). BUILDER shall store, safe keep and handle
OWNER'S equipment and supplies both prior to and after placement on
board. BUILDER shall allow sufficient working area and time to allow the
timely and safe installation of equipment and loading of supplies prior
to Vessel's departure voyage to its final mooring area.
E. BUILDER will allow OWNER and/or its representatives at all reasonable
times to examine the Vessel during construction.
F. BUILDER will provide OWNER with a production schedule updated every
fifteen (15) days.
G. BUILDER will do all work hereunder in a good and workman-like manner in
accordance with the Specification and Contract Drawings. All material
and equipment shall be in accordance with the Specifications and
Contract Drawings.
ARTICLE II - DELIVERY.
A. BUILDER agrees, subject to the other provisions of this Agreement, to
complete and deliver said Vessel to aforesaid OWNER free and clear of
all liens, claims and encumbrances, except such as OWNER or its
subcontractors, their employees and/or agents and/or vendors
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shall cause to be placed on the Vessel, and OWNER agrees to accept
delivery upon completion of the Vessel at the agreed delivery point set
forth in Article II-C below.
B. BUILDER agrees to deliver (in accordance with Reference A) the Vessel to
OWNER (subject to the qualifications hereinafter stated), after
satisfactory completion as per Specifications at OWNER's shipyard
(herein referred to as Builder's Managed Shipyard) in accordance with
the Specifications and Contract Drawings on or before the Delivery Date
specified or such later date as may be required by reason of agreed
changes in the Vessel or by reason of Force Majeure delays as that term
is defined in Article V.
C. The Vessel after river trials, USCG approvals, delivery by OWNER of all
protrusions above the 4th deck, and reinstallation of all protrusions
above 4th deck, shall be inspected by OWNER safely afloat at Bossier
City. BUILDER shall execute a "Certificate of Completion and Acceptance"
in a form reasonably acceptable to OWNER at the time of delivery for
such Vessel. A form of the unsigned "Certificate of Completion and
Acceptance" is attached as Exhibit ___ to this Agreement.
D. In the event the contract work is not finished at the time BUILDER
tenders the "Certificate of Completion and Acceptance", OWNER shall have
the option, if it, in its sole discretion, deems the Vessel fit for
service, to take Acceptance of the Vessel and treat all "unfinished
work" as a Guarantee Defect as set forth in Article IX. In that event,
Builder's Certificate of Completion and Acceptance shall specify all
unfinished work. The parties shall agree as to the amount to be withheld
from the Acceptance Payment and the Vessel shall be delivered to OWNER
upon OWNER paying the undisputed amount to BUILDER and by withholding
the amount for "unfinished work" until such time that BUILDER completes
the "unfinished work" and OWNER accepts the "unfinished work" as
complete. BUILDER shall invoice OWNER for completion of "unfinished
work" and, provided the work meets the standards of Article II C. OWNER
shall, within ten (10) days of receipt of Invoice, pay BUILDER. If OWNER
does not exercise such option, BUILDER shell completely finish all
contract work.
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E. BUILDER shall furnish OWNER on delivery of the Vessel a Bill of Sale and
Builder's Certificate together with whatever other documents may be
required by law or by any other regulatory agency of the United States
having jurisdiction in the premises in order for OWNER to document the
Vessel; and will assist OWNER, or its agent, in acquiring all required
information to enable OWNER to obtain all certificates necessary to
operate the Vessel as intended. Any expense in connection with
documentation or Certification of the Vessel shall be paid by BUILDER.
ARTICLE III - DOWN PAYMENT.
Down Payment of 15% ($ ) shall be made upon Contract Signing.
ARTICLE IV - SUBSEQUENT PAYMENTS.
A. OWNER agrees to pay to BUILDER at address indicated on applicable
BUILDER's invoice the following "Interim Installment Payments" for such
Vessel:
12.5% 30 days after receipt of Down Payment 12.5% 60 days after
receipt of Down Payment 12.5% 90 days after receipt of Down
Payment 12.5% 120 days after receipt of Down Payment 72.5% 150
days after receipt of Down Payment 12.5% 180 days after receipt
of Down Payment
All Change Order work to be paid monthly based on mutually agreed
percent complete.
B. Upon completion of the Vessel by BUILDER and acceptance thereof by OWNER
in accordance with the Agreement, OWNER agrees to pay the BUILDER at
address indicated on applicable BUILDER's invoice the "Acceptance
Payment" consisting of:
1. The 10% balance due on Contract Price set out in Article 1-A
above
2. Any applicable State or Local Sales and/or Use Taxes.
3. Plus or less any changes in contract price resulting from agreed
changes in the specifications and Contract Drawings in
accordance with Article VII below not previously invoiced and/or
paid.
4. Less any liquidated damages for delay in accordance with Article
VI below.
C. BUILDER will give OWNER notice of intended date of issuance of each
"Interim Installment Payments" invoice not more than 10 nor less than 7
days before issuance. All
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"Interim Installment Payments" and the "Acceptance Payment" will be due
by wire transfer to First National Banker's Bank, Baton Rouge, LA
#065403370, to credit: FNB, Crowley #065200515, and final credit: LEEVAC
Shipyards, Inc. Acct. #0135942.
D. The "Interim Installment Payments" shall be payable within seven days
after presentation of BUILDER's invoice and the "Acceptance Payment"
shall be payable upon BUILDER'S lnvoice and the "Certificate of
Completion and Acceptance" of said Vessel signed by BUILDER and OWNER.
E. The BUILDER shall furnish an invoice for each "Interim Installment
Payment" which shall state (i) the month invoiced; (ii) that the
contract work completed complies with the Contract Drawings and
Specifications and this Agreement; and (iii) that there are no liens or
claims upon said Vessel for labor, materials or equipment for said
Vessel, except those created by the OWNER, its subcontractors, vendors,
or employees. The Interim Installment Invoice shall be executed and
certified by the President or Assistant Secretary/Treasurer of BUILDER.
If BUILDER has any outstanding lien on Vessel, OWNER shall not be
obligated to make payment until lien is resolved, unless such liens are
held by the OWNER or its vendors.
F. The Certificate of Completion end Acceptance shall state (i) that the
Vessel has been completed: (ii) that all trials and tests have been
satisfactorily completed; (iii) that the Vessel complies with the
Specifications and Contract Drawings and this Agreement, and is free
from defects in materials and workmanship; (iv) that there are no liens
or claims upon said Vessel for materials, equipment or labor for said
Vessel, except those created or incurred by the OWNER, its
subcontractors, vendors or employees.
G. The making of the Interim Installment Payments or Acceptance Payment
with respect to the Vessel shall not stop the OWNER from thereafter
asserting any right or remedy accruing to it because of the failure of
the BUILDER to construct and deliver the completed Vessel in accordance
with the terms thereof.
ARTICLE V - FORCE MAJEURE AND DELAYS.
A. All agreements of the BUILDER contained in this contract respecting the
Date of Delivery of the Vessel shall be subject to extension by reason
of "Force Majeure", which Term is
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hereby declared to be any delay caused by fire, explosion, lightning,
flood, windstorm, hurricane, tornado or extraordinary rains,
earthquakes, act of war, strikes, or civil riot which prevent work for
two (2) consecutive days and not caused, or contributed to, by BUILDER;
and including non-delivery and/or late delivery of all OWNER furnished
equipment subject to the further terms hereinafter set forth.
B. Delays in receiving supplies, materials and equipment shall not be
considered Force Majeure unless (a) caused by strikes or Lockouts of
workmen or (b) BUILDER establishes to the reasonable satisfaction of
OWNER that (1) BUILDER timely ordered such supplies, materials and
equipment and (2) BUILDER exercised due diligence to obtain delivery and
(3) no other source of supply was reasonably available (relative price
being a factor to be considered).
C. Delays caused by late receipt of OWNER furnished equipment shall not be
considered Force Majeure unless BUILDER has notified OWNER in writing of
date by which each such item of OWNER furnished equipment must be
delivered to BUILDER's Managed Yard in time to allow OWNER by utmost
diligence to cause timely delivery. BUILDER shall provide OWNER with a
schedule indicating latest on-sight arrival date for each OWNER
furnished component.
D. Failure of OWNER to remit Interim Payments, as per Article IV, D shall
be considered a delay and the delivery date of the vessel shall be
automatically extended by a period of time equal to total of said delay.
E. BUILDER shall have no responsibility for Force Majeure delays, other
than to inform the OWNER in writing of the occurrence of a Force Majeure
within three business days of its occurrence and to include with that
notice (i) a description of the event and (ii) its expected duration.
BUILDER shall inform OWNER of the end of a Force Majeure event within
three business days of its cessation and include an estimate of the
delay in Delivery Date, if any, caused by that event. Failing such
notices, BUILDER shall not have the benefit of the Force Majeure clause
for said event. The BUILDER shall maintain records of such delays and
allow OWNER to inspect same upon request at all reasonable times. The
Delivery Date for the Vessel shall automatically be extended by a period
of time equal to the total of said delays (Extended Delivery Date)
relating to the Vessel unless the OWNER, within
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ten (10) days after receiving the aforesaid notice of a Force Majeure
development, shall state its objections in writing to treating such
development as a Force Majeure event, in which event the rights of both
parties, with respect to treating such events as Force Majeure, shall be
preserved.
ARTICLE VI - LIQUIDATED DAMAGES PROVISIONS.
A. All work on the Vessel contemplated hereunder shall be completed and
delivery on the Vessel effected on or before the Delivery Date set forth
on the first page of this Agreement or such extensions of time as are
provided for herein. Both parties recognize that because during
construction OWNER will make contracts depending upon the use of the
Vessel and that delivery time is of the essence and that delivery delay
will result in substantial damages not susceptible of accurate
calculation. In the event the Vessel is not completed and delivered to
the OWNER on the Delivery Date or Extended Delivery Date by the
provisions of this Agreement, OWNER will deduct from Delivery Payment
for the Vessel the sum of One Thousand Dollars and no cents U.S.
Currency (US $5,000.00) per day for each day following the Delivery
Date, or the Extended Delivery Date until the Vessel is actually
completed and accepted by OWNER. This is in lieu of all other damages,
direct or consequential, which may result to OWNER from delay.
B. In the event the parties are unable to agree on the above reduction of
the Acceptance Payment, the Vessel shall nevertheless be accepted by
OWNER upon OWNER paying the undisputed amount to BUILDER and by placing
the disputed portion of the acceptance in a Certificate of Deposit with
a bank or in prime grade commercial paper of BUILDER'S choice,
withdrawable only upon signatures of both OWNER'S and BUILDER'S
attorneys, interest to be accumulated and payable in proportion to the
resolution of the dispute, and the certificate to be held by OWNER'S
attorneys.
ARTICLE VII - CHANGES IN SPECIFICATIONS AND CONTRACT DRAWINGS.
A. The right is reserved by OWNER to make any deductions for or additions
or substitutions to the said Specifications and Contract Drawings on
giving due notice in writing to BUILDER: the cost of any such changes to
be added to or deducted from the Contract
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price. If any such change will delay the completion of the work, BUILDER
will be allowed additional time sufficient to cover such delay. The
increased or reduced cost, or any additional time required, as
aforesaid, shall be submitted to OWNER by BUILDER within 3 business days
and shall be acted upon by OWNER in three (3) business days from receipt
in writing before such change is made.
B. Cost of any change considered an addition or a deletion shall be "labor"
and "materials" unless some other pricing has been previously agreed by
BUILDER and OWNER. Cost of any change considered a substitution shall be
difference between cost of addition and cost of deletion.
C. For purposes of Article VII-B above, see Reference A, Section 3.0.
D. Changes required by USCG or any other regulatory body shall be subject
to the same Change Order procedure, provided they are not based on laws,
rules or regulations, in force prior to date of execution of this
Agreement that were the responsibility of BUILDER.
ARTICLE VIII - RISKS AND INSURANCE.
A. All risks of damage to or destruction of the Vessel, all machinery,
materials and equipment provided by BUILDER and all liability, to or for
labor employed by the BUILDER and subcontracted effort arranged for by
the BUILDER on or about the Vessel during construction and prior to
delivery and acceptance, shall be the responsibility of the BUILDER.
Pre-keel and full form Builder's Risk Insurance acceptable to OWNER
(including loss or damage caused by strikes, locked-out workmen or
persons taking part in labor disturbances or riots, or civil commotions,
without deletions of protection and indemnity and collision clauses, and
including risks of earthquakes, with endorsements attached covering
losses or damage caused by vandalism and malicious mischief) will be
maintained by BUILDER at BUILDER's expense. Such insurance shall cover
the completed value of the Vessel and any agreed change orders. OWNER
shall reimburse BUILDER for providing Builder's Risk Insurance for the
term of the Contract per Article 11-0 by way of a Change Order to this
Contract in accordance with Article VII. The agreed starting value and
ending value of the Vessel shall be established by OWNER-BUILDER and
BUILDER's subcontractors shall maintain Workmen's Compensation,
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Longshoreman's and Harborworker's Compensation not less than minimum
required by statute, and Public Liability Insurance of $10,000,000.
BUILDER shall provide relevant copies of insurance policies prior to
signing of this Agreement. OWNER or OWNER's subcontractors as the case
may be, shall maintain workman's compensation, longshoreman's and harbor
worker's compensation insurance not less than the minimum required by
statute, and public liability insurance of $1,000,000. OWNER or OWNER's
subcontractors (if any) shall provide relevant copies of insurance
policies prior to commencing any work at BUILDER's Managed Shipyard or
on Vessel.
B. The said Builder's Risk Insurance and Public Liability Insurance shall
be taken out in the name of BUILDER, BUILDER's "subcontractors," OWNER
and "Construction Financing Entity", and all casualty losses under such
policies shall be payable to the BUILDER and OWNER and "Construction
Financing Entity", as their interests may appear. The policy shall
provide that there shall be no recourse against the OWNER for payment of
premiums or other charges and shall further provide that at least thirty
(30) days' prior written notice of any cancellation for the non-payment
of premiums or other charges shall be given to the OWNER by the
Insurance underwriters. The originals of all cover notes and policies
shall be delivered to the BUILDER, with duplicates thereof to OWNER.
Policies not in conformance herewith shall be conformed or surrendered
and canceled upon direction of the OWNER and new policies procured in
conformance herewith.
C. If, prior to Acceptance by OWNER, the Vessel, its machinery, equipment
or material shall be damaged, such damage shall be repaired by the
BUILDER or replacement shall be supplied by the BUILDER at its sole cost
and expense except for OWNER furnished material and equipment not
covered under Builder's Risk Insurance.
D. For actions prior to delivery and acceptance of the Vessel, the BUILDER
shall at its own cost and expense indemnify, protect and defend the
Vessel and the OWNER against any and all claims, suits, actions,
maritime liens, and other liens and costs and expenses incident thereto
(including reasonable attorney's fees and costs) arising from injury to,
or death of BUILDER's employees, workmen, BUILDER's subcontractors,
trespassers, licensees, invitees or all other persons; and, from
property damage whether in, or on, or about the Vessel and the work to
be performed hereunder due in whole or in part to the act, neglect,
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or default of BUILDER or BUILDER's subcontractors or their agents or
employees. It being expressly understood that the workmen other than
compensated employees or subcontractors of OWNER, engaged upon the work
on the Vessel, shall at all times be employees or subcontractors of the
BUILDER and not of the OWNER.
E. For actions prior to delivery and acceptance of the Vessel, the OWNER
shall at its own cost and expense indemnify, protect and defend the
Vessel and the BUILDER against any and all claims and costs and expenses
incident thereto (including reasonable attorney's fees and costs)
arising from injury to, or death of OWNER's employees, or OWNER's
subcontractors, or property damage whether in, or on, or about the
Vessel and the work to be performed hereunder, due in whole or in part
to the act, neglect, or default of the OWNER or OWNER's subcontractors
or their employees or agents.
F. In the event there is an actual total loss of constructive total loss of
the Vessel, this Contract shall be terminated upon receipt by OWNER and
BUILDER, and "Construction Financing Entity" as interest may appear, of
the proceeds of the insurance required pursuant to this Article VIII for
such actual loss or constructive total loss, or if such actual total
loss or constructive total loss shall occur through the operation of a
risk not covered by insurance for which the BUILDER assumes the risk as
herein set forth, upon receipt by OWNER of payment of the full amount as
interest may appear.
G. For purposes of this Article VIII-F, it is agreed that "as interest may
appear" shall be construed to mean that OWNER and "Construction Finance
Entity" are entitled to refund of amounts paid by OWNER as Down Payment
and Interim Installment Payments, and BUILDER for labor expanded and
material/equipment purchased but not yet reimbursed.
H. OWNER shall also hold harmless BUILDER as pertains any loss of OWNER
furnished equipment and material while in the care, custody and control
of BUILDER or Subcontractor of BUILDER.
ARTICLE IX - GUARANTEE
A. The Vessel will be built in accordance with the Specifications, Contract
Drawings and References in a good and workmanlike manner, free from
defects in material and workmanship and BUILDER agrees at BUILDER'S
expense including transporting labor
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and supplies, to repair or replace any defects discovered within 365
days of delivery and acceptance excepting machinery and equipment
manufactured by others and/or furnished by OWNER; however, BUILDER shall
assign and subrogate to OWNER all warranties by said manufacturers and
agrees to extend full cooperation to OWNER, as needed, to coordinate in
enforcing such warranties. This is in lieu of all other expressed or
implied warranties.
B. No warranty is made by BUILDER with respect to paint, regardless of
whether procured by BUILDER, except that same will be applied neatly in
accordance with the manufacturer's recommendations and in accordance
with Specifications.
C. In the event of any defect covered by BUILDER'S guarantee, BUILDER will
make repairs or replacements (at OWNERS's option) at the expense of
BUILDER at OWNER's Bossier City site.
1. OWNER shall give prompt notice and BUILDER shall have reasonable
time and opportunity (seven days) under the circumstances, to
inspect the Vessel before work is undertaken: and,
2. BUILDER shall have the right, reasonable time, and opportunity,
under the circumstances, to negotiate price with the shipyard or
repairman; and,
3. BUILDER's liability for repair or replacement costs shall not
exceed the expense which BUILDER would have been incurred as
determined using actual hours incurred and actual direct
material costs incurred by the OWNER with the BUILDER's then
current appropriate time and material rates applied. BUILDER, at
its sole option and expense, may have a representative present
during repairs.
D. BUILDER shall have no obligation under this guarantee unless such defect
becomes manifest within 365 days after Acceptance of the Vessel and
notice of claim is given within ten (10) days thereafter. The BUILDER
shall not be liable for any consequential or incidental damage
occasioned by any defect.
ARTICLE X - DEFAULT
A. BUILDER shall be considered in default under this Agreement in the event
(a) during a period of thirty (30) consecutive days (plus the number of
days from the beginning of such period when work has been prevented by
force majeure causes) no substantial progress has
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been made in the construction of the Vessel: or (b) that Vessel has not
been delivered within thirty-five (35) days after the later of the
Delivery Date or Extended Delivery Date.
B. OWNER shall be considered in default under this Agreement if (a) after a
period of 30 calendar days after receipt of an Interim Installment
Payment, the BUILDER has not been paid, or (b) after 5 calendar days
after Acceptance of Vessel, in accordance with Article VI-B, BUILDER has
not paid.
C. For any such default and any other default, OWNER and/or BUILDER shall
have all rights and remedies otherwise available to it, including
specifically (but not by way of limitation) any rights to specific
performance or mandatory injunction.
D. In the event that circumstances beyond the control of the OWNER occur
that would cause the OWNER to not have use of the Vessel, the OWNER
reserves the right to terminate this Agreement, understanding that all
monies owed to the BUILDER including overhead and profit up to that
point would become due and payable in full.
ARTICLE XI - ARBITRATION, JURISDICTION AND LAW
A. Any technical or design dispute or controversy arising under this
Agreement shall be submitted to binding arbitration before a single
arbitrator appointed jointly by the parties.
B. "Any other disputes or controversies shall be submitted to the United
States District Court for the Western District of Louisiana (Shreveport)
and BUILDER and OWNER each agree to submit to the jurisdiction of said
Court upon the filing of a complaint by either and service by certified
mail, return receipt to the other.
C. This Agreement shall be governed by and construed in accordance with the
laws of the State of Louisiana, USA.
ARTICLE XII - AGREEMENT CONTROLLING
A. This Agreement, which includes the Contract Drawings and Specifications
and References incorporated herein by reference, contains all the
agreements between the BUILDER and the OWNER, and there are no promises
or representations by either of them, other than those set forth herein.
This Agreement shall not be altered or modified except by an agreement
in writing signed by the parties hereto, and no officer, agent, or
employee of
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either the BUILDER or the OWNER shall have the power to waive any
provisions hereof, unless such waiver be in writing and signed by a duly
authorized representative of each of the parties hereto.
B. In the event of conflict between this Agreement and the Specifications
as adjusted by References and/or the Contract Drawings as adjusted by
References, this Agreement governs; and as between the Specifications
and the Contract Drawings, the Specifications govern.
ARTICLE XIII - INSPECTION, ACCESS, TESTS AND OFFICIAL CERTIFICATES
A. During construction, BUILDER shall provide OWNER, or its accredited
representative, access to inspect the Vessel, material, workmanship,
plans, tests and movements. OWNER shall provide a suitable office for
OWNER'S representative and OWNER shall provide access to suitable
facilities and conditions such as a telephone, fax, copy machine, heat
and air conditioning. BUILDER will perform all of the tests and trials
required of BUILDER in the contract documents. BUILDER will supply all
fuel, lubricants and stores for all such tests and trials and will give
OWNER at least three [3) business days notice of the date thereof. OWNER
shall provide the Captain and Crew.
B. All of the workmanship and material required under this Agreement, while
the same is in the process of fabrication, erection, construction,
installation and performance, shall be inspected promptly by the OWNER
and his agents and shall be accepted promptly in accordance with this
Agreement and the Contract Drawings and Specifications and all
References or rejected promptly in accordance therewith. Failure to
object will not stop OWNER from later complaining if OWNER establishes
that it used reasonable diligence, under the circumstances, to discover
defects promptly. Where the term "promptly" is used, a "reasonable"
standard shall be used.
C. OWNER shall have the right to appoint an "OWNER'S Representative" and
OWNER shall inform BUILDER in writing as to the extent of authority
OWNER has granted to said OWNER'S Representative. In the event of a
"working conflict" between OWNER'S Representative and BUILDER, BUILDER
shall promptly inform OWNER of the problem
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<PAGE> 15
and OWNER shall make a due diligence effort to promptly resolve the
"working conflict" in a manner amenable to both parties.
D. BUILDER shall provide access to the Vessel while under construction to
Inspectors from any Gaming Commission or any other public authority
reasonably requested by OWNER.
E. BUILDER shall not allow access to the Vessel of the shipyard to any
companies, representatives, employees (including Horseshoe employees),
or visitors that are not specifically related to the construction of the
Vessel of the project. All other persons are to receive written approval
from the Horseshoe Vice President, Development prior to access to the
Vessel.
ARTICLE XIV - ASSIGNMENT OF THE AGREEMENT.
A. This Agreement shall inure to the benefit of the BUILDER and OWNER and
their successors and assigns and shall be binding upon the BUILDER and
OWNER and their successors and assigns; provided, however, that BUILDER
shall not assign this Agreement or any interest hereunder without the
prior written consent of OWNER, such consent to be given in OWNER's sole
discretion, and any assignment without said prior written consent shall
be null and void. OWNER may at any time sell the Vessel and/or assign
this Agreement, but shall at all times remain liable under the
Agreement. BUILDER and OWNER agree that such a sale and/or assignment
shall not be grounds for termination of this Agreement.
ARTICLE XV - COMPLIANCE WITH REGULATIONS.
A. The BUILDER shall comply with all laws, rules, regulations and
requirements of the departments or agencies of the United States
affecting the construction of works, plants and Vessels, in or on
navigable waters and the shores thereof, and all other waters subject to
the control of the United States. OWNER shall procure at its own expense
such permits from the United States and from state and local authorities
as may be necessary in connection with beginning or carrying on the
completion of the contract work, and shall at all times comply with all
United States, State and local laws in any way affecting the contract
work.
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ARTICLE XVI - PATENTS.
OWNER agrees to protect and hold harmless BUILDER against claims of
third persons for damages sustained by reason of the infringement of the
patent rights with respect to materials, processes, machinery, and
equipment selected, supplied or specifically acquired by OWNER or
required by any Plans or Specifications furnished by OWNER. BUILDER
agrees to protect and hold harmless OWNER against claims of third
persons for damages sustained by reason of infringement of patent rights
with respect to materials, processes, machinery and equipment supplied
or specifically acquired by BUILDER, or required by any Plans or
Specifications furnished by BUILDER.
ARTICLE XVII - USE OF THE DRAWINGS AND SPECIFICATIONS.
The Specifications and Contract Drawings and BUILDER's working drawings of the
Vessel are and shall remain property of the OWNER.
ARTICLE XVIII - NOTICES AND COMMUNICATIONS.
Communication and notices shall be in writing addressed to the OWNER under this
Agreement shall be addressed to the OWNER at the following address:
Mr. Cliff Kortman
Horseshoe Gaming
900 Rockmead, Suite 102
Kingwood, TX 77339
Fax: 281-358-9379
With a copy to: Loren Ostrow, Esq.
Horseshoe Entertainment
150 S. Los Robles, Suite 880
Pasadena, CA 91101
Fax: 818-577-4725
Communications and notices shall be in writing addressed to the BUILDER under
this Agreement shall be addressed to the BUILDER at the following address:
LEEVAC SHIPYARDS, INC.
P.O. Box 1190, (Hwy 90 E.)
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Jennings, LA 70548
FAX: 318-824-2970
Notices shall be given by letter or by Fax. If by Fax, with a Fax Return
Confirmation of receipt of Fax.
ARTICLE XIX - TITLE
Title to the Vessel, to the extent completed, and title to all work and material
preformed upon or installed in the Vessel or placed on board the Vessel shall
vest in the OWNER. The risk of the loss or damage to such material and the
Vessel shall remain with the BUILDER and the OWNER shall not be deemed to have
waived its right to require the BUILDER to repair and replace, at the BUILDER's
expense, defective workmanship or damaged/defective material provided by
BUILDER, and to deliver the Vessel with the contract work completed, as herein
provided. The BUILDER shall have an equity in and lien on such material and
completed contract work in the shipyard and elsewhere to the extent that BUILDER
has not been paid for by the OWNER. Title to all scrap and title to any material
which is surplus to the requirements of this Agreement (except material
furnished by the OWNER of which under any adjustment of Agreement price under
the provisions of this Agreement remains the property of the OWNER) shall be
vested in the BUILDER. Without regard to the provisions of this Article XIX as
to title, the BUILDER shall be subject to the risk of loss of all material and
the Vessel until the completed Vessel is delivered to and accepted by the OWNER
as provided in this Agreement.
IN WITNESS WHEREOF the parties hereto have caused this Agreement to be
executed by their proper authorized representatives, thereunto duly authorized
at ___________________.
WITNESSES: LEEVAC Shipyards, Inc.
_______________________ SIGNATURE:_____________________________
_______________________ NAME:__________________________________
TITLE:_________________________________
DATE:__________________________________
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WITNESSES: Horseshoe Entertainment
A Louisiana Limited Partnership
By: Horseshoe G.P. Inc.,
a Nevada Corporation
General Partner
_______________________ SIGNATURE:_____________________________
_______________________ NAME:__________________________________
TITLE:_________________________________
DATE:__________________________________
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<PAGE> 1
EXHIBIT 10.44
CONTRACT FOR CONSTRUCTION BETWEEN OWNER
AND CONTRACTOR WHERE THE BASIS OF PAYMENT IS
THE COST OF THE WORK PLUS A FEE WITH
A GUARANTEED MAXIMUM PRICE (GMP)
THIS AGREEMENT HAS BEEN ADAPTED FROM AIA DOCUMENT All1,
1987 EDITION, WITH SIGNIFICANT ADDITIONS AND ALTERATIONS.
THIS DOCUMENT HAS IMPORTANT LEGAL CONSEQUENCES;
CONSULTATION WITH AN ATTORNEY IS ENCOURAGED WITH
RESPECT TO ITS COMPLETION OR MODIFICATION
- ------------------------------------------------------------------------------
AGREEMENT
made as of the sixth day of August in the year of Nineteen Hundred and Ninety
Six
<TABLE>
<S> <C>
BETWEEN the Owner: Robinson Property Group, a Limited Partnership and
Horseshoe Gaming, Inc.
(Name and Address) 128 East Freemont
Las Vegas, Nevada 89101
and the Contractor: Charles N. White Construction Company
(Name and address) Post Office Box 656
Clarksdale, Mississippi 38614
the Project is: Horseshoe Casino Complex Additions & Renovations
(Name and address) Robinsonville, Mississippi
</TABLE>
<TABLE>
<S> <C> <C>
the Architect is: Reaves & Sweeney, Inc. Friedmutter and Associates
(Name and address) 5118 Park Avenue 42855 S. Polaris
Suite 400 Suite 100
Memphis, Tennessee 38117 Las Vegas, Nevada 89103
</TABLE>
The Owner and Contractor agree as set forth below.
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1
THE CONTRACT DOCUMENTS.
1.1 The Contract Documents consist of this Agreement, Conditions of the
Contract (General, Supplementary and other Conditions), Drawings,
Specifications, Addenda issued prior to execution of this Agreement, other
documents listed in this Agreement and Modifications issued after execution of
this Agreement; these form the Contract, and are as fully a part of the Contract
as if attached to this Agreement or repeated herein. The Contract represents the
entire and integrated agreement between the parties hereto and supersedes prior
negotiations, representations or agreements, either written or oral. An
enumeration of the Contract Documents, other than Modifications, appears in
Article 16. If anything in the other Contract Documents is inconsistent with
this Agreement, this Agreement shall govern.
2
THE WORK OF THIS CONTRACT.
2.1 The Contractor shall execute the following Items of Work as in the
Contract Documents, except to the extent specifically indicated in the Contract
Documents to be the responsibility of others:
Construction of Binion Horseshoe Casino Addition and Renovations, Hotel Tower,
Entertainment Complex, Parking Deck, Administration Building Addition, Site
Work, and Utility' Work. Preconstruction services to be provided by the
Contractor are included in the Contractor's Fee.
The specific scope for each Item of Work shall be further defined by plans and
specifications prepared by Architects/Engineers employed by Owner.
3
RELATIONSHIP OF THE PARTIES.
3.1 The Contractor and the Owner accept the relationship of mutual trust and
confidence established by this Agreement and covenant with each other to
cooperate with the Architect and Engineers to utilize their best skill, efforts
and judgment in discharging their respective responsibilities and furthering the
interests of the Project. The Contractor covenants to furnish efficient business
administration and supervision; to make best efforts to furnish at all times an
adequate supply of workers and materials; and to perform the Work in the best
way and most expeditious and economical manner consistent with the interests of
the Owner. The Owner covenants to exercise best efforts to enable the Contractor
to perform the Work in the best way and most expeditious manner by furnishing
and approving in a timely way information required by the Contractor and by
making payments to the Contractor in accordance with requirements of the
Contract Documents.
2
<PAGE> 3
4
DATE OF COMMENCEMENT AND SUBSTANTIAL COMPLETION.
4.1 Work has already commenced on the subject Project and the commencement
of Work has been authorized by the Owner. All Work shall be subject to this
Agreement.
4.2 As of the date of execution of this Agreement, final design information
has' not been furnished to the Contractor for the great majority of the Work.
The Contractor and the Owner shall mutually agree upon schedule of completion
when all Items of Work have been finally priced and the Contractor is able to
proceed with unrestricted performance of all Items of Work.
4.3 Any agreed completion dates assume that the Owner has secured or will
secure adequate financing for the entire Scope of Work with arrangements to
ensure that payments are made to Contractor in accordance with this Agreement.
Any delays caused by the failure of the Owner to deliver the required design
information or to secure adequate financing will entitle the Contractor to
commensurate time extensions to applicable milestone and final completion dates,
and to adjustments in the Contract Sum for any additional costs occasioned by
such delays.
4.4 In view of the incomplete nature of the design information and the
cooperative effort to be undertaken by the Owner and the Contractor to complete
the Project in an efficient manner with all reasonable dispatch, Owner and
Contractor agree that no liquidated damages are specified and no actual damages
for delay will be assessed.
5
CONTRACT SUM.
5.1 The Owner shall pay the Contractor in current funds for the Contractor's
performance of the Contract the Contract Sum consisting of the Cost of the Work
as defined in Article 7 and a Contractor's Fee of three and one half percent
(3.5%) as determined in Paragraph 5.6.
5.2 The sum of the Cost of the Work and the Contractor's Fee is guaranteed
by the Contractor not to exceed Twelve million three hundred twenty five
thousand five hundred forty six dollars [$12,325,546.00) subject to - additions
and deductions as provided in the Contract Documents. Such maximum sum is
referred to in the Contract Documents as the Guaranteed Maximum Price or "GMP".
As of the date of execution of this Agreement, the Owner has furnished plans to
the Contractor for GMP pricing of only the Site Work and Utility' Relocation
Work. The remaining Items of Work identified in Paragraph 2.1 have not been
fully designed or Finally priced. Consequently, the GMP stated in this paragraph
is an
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initial provisional amount comprised mainly of Owner Allowances for unpriced
Work which shall subsequently be converted to a final GMP by change orders
pursuant to Paragraph 5.5.
5.3 The Guaranteed Maximum Price applies to the overall cost of the Project
as a whole and not to specific Items of Work, line items or schedule of values.
The Contractor may apply underruns in any Item of Work to overruns in any other
Item and may exceed the estimated cost for any line item without penalty so long
as the total Cost of the Work, plus Fee, on the entire Project does not exceed
the finally adjusted GMP for all the Work.
5.4 In the event the total Cost of the Work plus the Contractor's Fee is
less than the Guaranteed Maximum Price, as finally adjusted pursuant to the
Contract Documents, then seventy percent (70%) of the difference or savings
shall accrue to the Owner and the remaining thirty percent (30%) of the savings
shall be paid to the Contractor. The Contractor's share of such savings shall be
paid to the Contractor at the time of substantial completion of the Work.
Similar savings provisions will apply to any additions to the Scope of Work and
will be paid upon substantial completion of such Work scope additions.
5.5 The Owner acknowledges that in developing the initial, provisional
Guaranteed Maximum Price, the Contractor has used preliminary budget estimates
for Items of Work. These estimates are set forth in Exhibit "A" as Owner
Allowances. The Owner agrees there is insufficient design information to enable
the Contractor to make a reliable final estimate of costs for these allowances.
Consequently, the Contractor makes no representation, warranty, or guarantee as
to the accuracy or adequacy of the amounts for these Owner Allowances. Once
sufficient design information becomes available for any Item of Work, the
Contractor will propose a final price which, if accepted by the Owner, will be
converted by Change Order from an Owner Allowance to a priced component of the
GMP, with an appropriate increase or decrease in GMP for any differences between
the agreed upon final price for the Item of Work and the amount of the Owner's
Allowance for that Item of Work. Any work performed or cost incurred with
respect to any Item of Work before final pricing and conversion to a CMP shall
be on a cost-plus fee basis without GMP limitations.
5.6 The Contractor shall receive a basic Fee equal to three and on-half
percent (3.5%), which includes home office overhead and profit, on the Cost of
the Work incurred, paid, or to be paid by the Contractor pursuant to a proper
Application for Payment.
5.7 Although the Contract Sum is based upon the Cost of the Work plus 3.5%
Fee subject to a Guaranteed Maximum Price, as may be adjusted, the Owner agrees
to make progress payments to the Contractor on a percentage of completion
according to a Schedule of Values as provided in Article 12.
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<PAGE> 5
6
CHANGES IN THE WORK.
6.1 The initial, provisional Guaranteed Maximum Price is based upon
incomplete Drawings and Specifications. Changes in the Work shall refer to any
Work performed by the Contractor which is not expressly shown or reasonably
inferable from the plans and specifications on which the Contractor relied to
submit final pricing to the Owner. Adjustments to the GMP on account of changes
in the Work or other remedy granting provisions of the Contract Documents shall
be determined as provided in the General Conditions.
6.2 In calculating adjustments to Subcontracts (except those awarded with
the Owner's prior consent on the basis of cost plus a fee), the terms "cost" and
"fee" as used in Clause 7.3.3.3 of the General Conditions and the terms "costs"
and "a reasonable allowance for overhead and profit" as used in Subparagraph
7.3.6 of the General Conditions shall have the meanings assigned to them in the
General Conditions and shall not be modified by Articles 5, 7 and 8 of this
Agreement. Adjustments to Subcontracts awarded with the Owner's prior consent on
the basis of cost plus a fee shall be calculated in accordance with the terms of
those Subcontracts.
6.3 In calculating adjustments to this Contract, the terms "cost" and
"costs" as used in the above-referenced provisions of the General Conditions
shall mean the Cost of the Work as defined in Article 7 of this Agreement and
the terms "fee" and "a reasonable allowance for overhead and profit" shall mean
the Contractor's Fee as defined in Paragraph 5.6 of this Agreement.
7
COSTS TO BE REIMBURSED.
7.1 The Owner shall pay the Contractor on the basis of Cost of the Work plus
a Fee subject to a GMP. The term Cost of the Work shall mean costs reasonably
incurred by the Contractor or properly billed to the Contractor in the
performance of Work or in furtherance of the Project, unless expressly excluded
by Article 8 of this Agreement.
7.1.1 LABOR COSTS
7.1.1.1 Wages of construction workers directly employed by the Contractor to
perform the construction of the Work at the site or, with the Owner's agreement,
at off-site workshops.
7.1.1.2 Wages, salaries, and expenses of the Contractor's supervisory and
administrative personnel when stationed at the site.
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<PAGE> 6
7.1.1.3 Wages, salaries, and expenses of the Contractor's supervisory or
administrative personnel engaged at factories, workshops or on the road, in
expediting the production or transportation of materials or equipment required
for the Work, but only for that portion of their time required for the Work.
7.1.1.4 Wages and salaries of draftsmen and related costs incurred by the
Contractor to provide additional drawings, shop drawings, and layouts as may be
needed for construction.
7.1.1.5 Costs of project management and administrative personnel in the
Contractor's home office for the allocable portion of time devoted to the
Project.
7.1.1.6 Costs paid or incurred by the Contractor for taxes, insurance,
contributions, assessments and benefits required by law or collective bargaining
agreements and, for personnel not covered by such agreements, customary benefits
such as sick leave, medical and health benefits, holidays, vacations and
pensions, provided such costs based on wages and salaries included in the Cost
of the Work under Clauses 7.1.1.1 through 7.1.1.5.
7.1.1.7 Clerk-time in home office necessary to put monthly payment application
together each month will be charged to the project and is included in the
General Conditions. This will involve approximately three days each month for
one person.
7.1.2 SUBCONTRACT COSTS
Amounts properly billed by Subcontractors for Work approved by the Contractor
and the Owner and otherwise in accordance with the requirements of the
Subcontracts.
7.1.3 COSTS OF MATERIALS AND EQUIPMENT INCORPORATED IN THE COMPLETED
CONSTRUCTION
7.1.3.1 Costs, including transportation, of materials and equipment incorporated
or to be incorporated in the completed construction.
7.1.3.2 Costs of materials described in the preceding Clause 7.1.3.1 in excess
of those actually installed but required to provide reasonable allowance for
waste and for spoilage.
7.1.4 COSTS OF OTHER MATERIALS AND EQUIPMENT, TEMPORARY FACILITIES AND RELATED
ITEMS
7.1.4.1 Costs, including transportation, installation, maintenance, dismantling
and removal of materials, supplies, temporary facilities, machinery, and
equipment. Such costs also include hand tools not customarily owned by the
construction workers, which are provided by the Contractor at the site.
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<PAGE> 7
7.1.4.2 Rental charges for temporary facilities, machinery, equipment, and hand
tools not customarily owned by the construction workers, which are provided by
the Contractor at the site, whether rented from the Contractor or others, and
costs of transportation, installation, minor repairs and replacements,
dismantling and removal thereof.
7.1.4.3 Costs of removal of debris from the site.
7.1.4.4 Costs of telegrams and long-distance telephone calls, postage and parcel
delivery charges, telephone service at the site and reasonable petty cash
expenses of the site office.
7.1.4.5 That portion of the reasonable travel and subsistence expenses of the
Contractor's personnel incurred while traveling in discharge of duties connected
with the Work. Contractor must receive prior written approval of subsistence,
pay prior to such subsistence being treated as a cost of the work.
7.1.5 MISCELLANEOUS COSTS
7.1.5.1 That portion directly attributable to this Contract of premiums for
insurance and bonds.
7.1.5.2 Sales, use or similar taxes imposed by a governmental authority which
are related to the Work and for which the Contractor is liable.
7.1.5.3 Fees and assessments for the building permit and for other permits,
licenses and inspections.
7.1.5.4 Fees of testing laboratories for tests required by the Contract
Documents, except those related to defective or nonconforming Work for which
reimbursement is excluded by Subparagraph 13.5.3 of the General Conditions or
other provisions of the Contract Documents and which do not fall within the
scope of Subparagraphs 7.2.2 through 7.2.6 below.
7.1.5.5 Royalties and license fees paid for the use of a particular design,
process or product required by the Contract Documents; the cost of defending
suits or claims for infringement of patent rights arising from such requirement
by the Contract Documents; payments made in accordance with legal judgments
against the Contractor resulting from such suits or claims and payments of
settlements made with the Owner's consent; provided, however, that such costs of
legal defenses, judgment and settlements shall not be included in the
calculation of the Contractor's Fee or of the Guaranteed Maximum Price.
7.1.5.6 Deposits lost for causes other than the Contractor's sole fault or
negligence.
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7.1.5.7 All costs, losses, and expenses incurred by Contractor, not otherwise
expressly excluded by Article 8, for which no insurance was required of the
Contractor, or for which insurance was not reasonably obtainable, or for which
policy limits or exclusions make insurance coverage inapplicable or otherwise
unavailable to Contractor.
7.1.6 OTHER COSTS
7.1.6.1 Any cost not specifically and expressly excluded by Article 8 which the
Contractor reasonably incurs in the performance of the Work or in the
furtherance of the Project.
7.2 EMERGENCIES: REPAIRS TO DAMAGED, DEFECTIVE OR NONCONFORMING WORK
The Cost of the Work shall also include costs described in Paragraph 7.1 which
are incurred by the Contractor:
7.2.1 In taking action to prevent threatened damage, injury or loss in case of
an emergency affecting the safety of persons and property, as provided in
Paragraph 10.3 of the General Conditions.
7.2.2 In repairing or correcting Work damaged or improperly executed by
construction workers in the employ of the Contractor, provided such damage or
improper execution did not result from the fault or negligence of the Contractor
or the Contractor's foremen, engineers or superintendents, or other supervisory,
administrative or managerial personnel of the Contractor.
7.2.3 In repairing damaged Work other than that described in Subparagraph
7.2.2, provided such damage did not result from the fault or negligence of the
Contractor or the Contractor's personnel, and only to the extent that the cost
of such repairs is not recoverable by the Contractor from others and the
Contractor is not compensated therefor by insurance or otherwise.
7.2.4 In correcting defective or nonconforming Work performed or supplied by a
Subcontractor or material supplier and not corrected by them, provided such
defective or nonconforming Work did not result from the fault or neglect of the
Contractor or the Contractor's personnel adequately to supervise and direct the
Work of the Subcontractor or material supplier, and only to the extent that the
cost of correcting the defective or nonconforming Work is not recoverable by the
Contractor from the Subcontractor or material supplier.
8
<PAGE> 9
8
COSTS NOT TO BE REIMBURSED.
8.1 The Cost of the Work shall not include:
8.1.1 Salaries and other compensation of the Contractor's personnel stationed
at the Contractor's principal office or offices other than the site office,
except as specifically provided in Paragraph 7.1.1 or as may be provided in
Article 14.
8.1.2 Expenses of the Contractor's principal office and offices, except when
Owner approves specific costs (i.e. pre-construction, estimating, scheduling,
etc.).
8.1.3 Overhead and general expenses, except as may be expressly included in
Article 7.
8.1.4 The Contractor's capital expenses, including interest on the
Contractor's capital employed for the Work.
8.1.5 Except otherwise as provided in this Agreement, costs due to the fault
or negligence of the Contractor, Subcontractors, anyone directly or indirectly
employed by any of them, or for whose acts any of them may be liable, including
but not limited to costs for the correction of damaged, defective or
nonconforming Work, disposal and replacement of materials and equipment
incorrectly ordered or supplied, and making good damage to property not forming
part of the Work.
8.1.6 Costs which would cause the finally adjusted Guaranteed Maximum Price to
be exceeded.
9
DISCOUNTS, REBATES AND REFUNDS.
9.1 Cash discounts obtained on payments made by the Contractor shall accrue
to the Owner if (1) before making the payment, the Contractor included them in
an Application for Payment and received payment therefor from the Owner, or (2)
the Owner has deposited funds with the Contractor with which to make payments;
otherwise, cash discounts shall accrue to the Contractor. Trade discounts,
rebates, refunds and amounts received from sales of surplus materials and
equipment shall accrue to the Owner, and the Contractor shall make provisions so
that they can be secured. The Contractor shall notify the Owner whenever the
Contractor actually becomes aware that any advance payment or deposit is
required in order to obtain any discounts, rebates or refunds and allow the
Owner the opportunity' to deposit such fund with the Contractor in order to
obtain such discounts, rebates or refunds.
9
<PAGE> 10
9.2 Amounts which accrue to the Owner in accordance with the provisions of
Paragraph 9.1 shall be credited to the Owner as a deduction from the Cost of the
Work.
10
SUBCONTRACTS AND OTHER AGREEMENTS.
10.1 Those portions of the Work that the Contractor does not customarily
perform with the Contractor's own personnel shall be performed under
subcontracts, purchase orders, or by other appropriate agreements with the
Contractor. The Contractor shall obtain bids, when the Contractor judges it
reasonable to do so, for such portions of the Work from Subcontractors and from
suppliers of materials or equipment fabricated especially for the Work and shall
deliver such bids to the Owner and Construction Manager. Within three (3)
business days of delivery of the bids, the Owner & Construction Manager will
determine, with the advice of the Contractor and subject to the reasonable
objection of the Architect, which bids will be accepted and the Owner &
Construction Manager will notify the Contractor. The Owner may designate
specific persons or entities from whom the Contractor shall obtain bids; but the
Owner shall not prohibit the Contractor from obtaining bids from others. The
Contractor shall not be required to contract with anyone to whom the Contractor
has reasonable objection.
10.2 If a Guaranteed Maximum Price has been established and a specific bidder
among those whose bids are delivered by the Contractor to the Owner (1) is
recommended to the Owner by the Contractor; (2) is qualified to perform that
portion of the Work; and (3) has submitted a bid which conforms to the
requirements of the Contract Documents without reservations or exceptions, but
the Owner requires that another bid be accepted; then the Contractor may require
that a Change Order be issued to adjust the Guaranteed Maximum Price by the
difference between the bid of the person or entity recommended to the Owner by
the Contractor and the amount of the subcontract or other agreement actually
signed with the person or entity designated by the Owner.
11
ACCOUNTING RECORDS.
11.1 The Contractor shall keep full and detailed accounts and exercise such
controls as may be necessary for proper financial management under this
Contract; the accounting and control systems in place at the time of execution
of this Agreement are satisfactory to the Owner and shall remain in effect for
the duration of this Project. The Owner and the Owner's accountants shall be
afforded access to the Contractor's records, books, correspondence,
instructions, drawings, receipts, subcontracts, purchase orders, vouchers,
memoranda and other data relating to this Contract, and the Contractor shall
preserve these for a period of three years after final payment, or for such
longer period as may be required by law.
10
<PAGE> 11
12
PROGRESS PAYMENTS.
12.1 Based upon Applications for Payment submitted to the Architect by the
Contractor and Certificates for Payment issued by the Architect, the Owner shall
make progress payments on account of the Guaranteed Maximum Price to the
Contractor as provided below and elsewhere in the Contract Documents.
12.2 The period covered by each Application for Payment shall be one calendar
month ending on the last day of the month.
12.3 Provided an Application for Payment is received by the Architect not
later than the first day of the month,
12.4 Each Application of Payment shall be based Upon the Schedule of Values
submitted by the Contractor in accordance with the Contract Documents. The
Schedule of Values shall allocate the entire Guaranteed Maximum Price among the
various portions of the Work and shall be prepared in such form and supported by
such data to substantiate its accuracy as the Owner may reasonably require. This
Schedule shall be used as a basis for reviewing the Contractor's Applications
for Payment.
12.5 Applications for Payment shall indicate the percentage of completion of
each portion of the Work as of the end of the period covered by the Application
for Payment.
12.6 Subject to the provisions of the Contract Documents, the amount of each
progress payment shall be computed as follows:
12.6.1 Take that portion of the Guaranteed Maximum Price properly allocable to
completed Work as determined by multiplying the percentage completion of each
portion of the Work by the share of the total Guaranteed Maximum Price allocated
to that portion of the Work in the Schedule of Values, less retainage of ten
percent (10%) of the earned amount of Subcontracts but no retainage on amounts
due the Contractor for self-performed work, fee, and general conditions. Pending
final determination of cost to the Owner of changes in the Work, amounts not in
dispute may be included as provided in Subparagraph 7.3.7 of the General
Conditions even though the Guaranteed Maximum Price has not yet been adjusted by
Change Order.
12.6.2 Add that portion of the Guaranteed Maximum Price properly allocable to
materials and equipment delivered and suitable stored at the site for subsequent
incorporation in the completed construction (or, if approved in advance by the
Owner and Construction Manager, suitably stored off the site at a location
agreed upon in writing), without retainage.
12.6.3 Subtract the aggregate of previous payments made by the Owner: and
11
<PAGE> 12
12.6.4 Subtract amounts, if any, for which the Architect has withheld or
nullified a Certificate of Payment as provided in Paragraph 9.5 of the General
Conditions.
12.7 The progress payment amount determined in accordance with Paragraph 12.6
shall be further modified under the following circumstances:
12.7.1 Add, upon Substantial Completion of the Work, a sum sufficient to
increase the total payments to one hundred percent (100%) of the Contract Sum,
less such amounts as the Architect shall determine for incomplete Work as
provided in Paragraph 13.2.
12.7.2 Add, if final completion of Work is thereafter materially delayed
through no fault of the Contractor, any additional amounts payable in accordance
with Subparagraph 9.10.3 of the General Conditions.
12.8 Reduction or limitation of retainage, if any, shall be as follows:
12.8.1 Fifty Percent Completion At fifty percent (50%) completion of the
Project, provided satisfactory progress is being made, the Owner may elect not
to hold any further retainage on earned amounts of Subcontracts for the
remaining fifty percent (50%) of the Work. However, even if the Owner elects not
to withhold further retainage on earned amounts of Subcontracts, the Contractor
has the discretion whether withhold further retainage on the remaining 50% of
respective Subcontractor's work.
12.8.2 Substantial Completion
At substantial completion of the Project, the Owner and the Contractor
will inspect the Project and develop a schedule of any incomplete or defective
items. They will mutually agree upon the value of said incomplete or defective
Work. Retainage shall then be determined at the lesser of: (1) actual retainage
being withheld or (2) one hundred fifty percent (150%) of the value of the Work
to he corrected or completed. As the Work is completed, the Owner will release
proportional amounts of retainage to the Contractor.
12.9 Although the Contractor shall invoice on a percentage of completion
basis according to an approved Schedule of Values and Major Subcontractor
Invoices for the current billing period, the Contractor shall also provide to
the Owner on a monthly basis cost summaries and compilations for the previous
billing period. The Owner shall review such cost summaries and compilations in a
timely manner and shall advise the Contractor within thirty (30) calendar days
after receipt of these cost summaries and compilations if there are any cost
categories which the Owner considers to be non-reimbursable under the Contract
or if there are any kinds of charges or any Work for which the Owner does not
intend to make payment. These issues will be resolved on a monthly basis between
the Contractor and Owner so as to prevent material prejudice to both parties
caused by continuing incurrence of costs which may be subject to dispute. Any
adjustments required for any previous payments of nor-reimbursable costs shall
he made on the following month's invoice.
12
<PAGE> 13
12.10 Except with the Owner's prior approval, the Contractor shall not make
advance payments to suppliers for materials or equipment which have not been
delivered and stored at the site.
12.11 In taking action on the Contractor's Application for Payment, the
Architect shall be entitled to rely on the accuracy and completeness of the
information furnished by the Contractor and shall not be deemed to represent
that the Architect has made exhaustive or continuous on-site inspections or that
the Architect has made examinations to ascertain how or for what purposes the
Contractor has used amounts previously paid on account of the Contract
12.12 Within seven (IS) days after receipt of the Contractor's Application for
Payment, the Owner shall issue a Certificate of Payment, with a copy to the
Contractor. If the Owner does not issue a Certificate for Payment within seven
(15) days after receipt of the Contractor's Application for Payment, the Owner
shall pay to the Contractor the amount invoiced on the Contractor's Application
for Payment.
12.12.1 If the Owner does not pay by the due date the full amount of the
Contractor's Application for Payment the Owner and the Contractor shall endeavor
in good faith to resolve their differences over the amount due for the
Application for Payment. If, after thirty (30) calendar days from the due date
of payment, the Owner and the Contractor are unable to reach agreement on the
amount properly due or the Owner has not paid an amount acceptable to the
Contractor for the Application for Payment, the Contractor may stop all Work
immediately and without further notice to the Owner. The Owner then has the
option of depositing all disputed amounts into an escrow fund, established on
terms mutually acceptable to the Contractor and the Owner (hereinafter referred
to as the "Escrow Fund"). Upon the Owner's timely deposit of disputed amounts
into the Escrow Fund, the Contractor shall continue or resume Work, subject to
the provisions of this Paragraph.
12.12.2 If the Owner's Certificate of Payment is for less than the full amount
originally invoiced by the Contractor, the Owner shall recite in the Certificate
of Payment the reasons for any amounts being disapproved, reduced, or otherwise
found not to be due. In such event, the Owner shall, within the time period set
forth in Subparagraph 12.3, pay to the Contractor the amount approved in the
Certificate of Payment and shall deposit into the Escrow Fund the amounts not
approved by the Owner. Either party may initiate arbitration under the Expedited
Procedures of the Construction Industry Arbitration Rules of the American
Arbitration Association, but the Contractor, unless otherwise specifically
provided in this Subparagraph 12.12, must continue Work.
12.12.3 Notwithstanding anything to the contrary herein, if the accumulated
amount in the Escrow Fund exceeds $ 100,000, the Contractor may, at Its
discretion, stop Work after initiation of arbitration under the Expedited
Procedures pending a decision of the arbitrator until such time as the Owner
pays to the Contractor an amount sufficient to bring the Escrow Fund to a
balance of $100,000 or less. The Owner may elect to make payments to the
Contractor of otherwise disputed amounts to maintain the Escrow Fund below the $
100,000
13
<PAGE> 14
ceiling and thus avoid a stoppage of Work. In such event, the Owner may reserve
its rights with respect to any such payment but only if such reservation is made
in writing and delivered to the Contractor at the time of payment. If the
arbitrator determines that further payments are owed to the Contractor, then the
Owner shall pay such additional amount within three (3) days after the date of
the arbitrator's decision.
12.12.4 In the event the Work is stopped in accordance with the foregoing, the
Contract Time shall be extended for each day the Work is stopped and the
Contract Sum shall be increased by the amount of the Contractor's reasonable
costs of shutdown, delay and start-up, which shall be accomplished as provided
in Article 7.
13
FINAL PAYMENT.
13.1 Final payment shall be made by the Owner to the Contractor when (1) the
Contract has been substantially completed by the Contractor except for the
Contractor's responsibility' to correct defective or nonconforming Work, as
provided in Subparagraph 12.2.2 of the General Conditions, and to satisfy other
requirements, if any, which necessarily survive final payment; and (2) a final
Certificate for Payment has then been issued by the Architect. Such final
payment shall be made by the Owner not more than 20 days after the issuance of
the final Certificate for Payment but in no event shall the Owner's final
payment be made more than 50 days after the Contractor's Application for Final
Payment.
13.2 Notwithstanding the foregoing, the Owner may retain an amount equal to
one hundred fifty' percent (150%) of the values established by joint agreement
of the Owner and the Contractor for punch list items. Amounts withheld for each
punch list item shall be paid upon completion of the item. The Contractor shall
invoice for payment of completed punch list items as per the schedule provided
in Subparagraph 12.8.2, and the Owner shall pay such invoices within ten (10)
days of receipt.
14
MISCELLANEOUS PROVISIONS.
14.1 Where reference is made in this Agreement to a provision of the General
Conditions or another Contract Document, the reference refers to that provision
as amended or supplemented by other provisions of the Contract Documents.
14.2 Payments due and unpaid under the Contract shall hear interest from the
date payment is due at the rate stated below, or in the absence thereof, at the
legal rate prevailing from time to time at the place where the Project is
located.
14
<PAGE> 15
14.3 Where reference is made in this Agreement to Architect, it shall mean
Owner and/or Construction Manager.
14.3.1 This Contract may not be assigned by either party hereto without the
express written consent of the other, except as follows:
14.3.2 In view of the fast-track nature of the Project and the Owner's desire
for the Contractor to price Items of Work before design documents have been
fully completed, the Contractor shall add a Contingency Amount of three and
on-half percent (3.5%) to the final pricing for each separate Item of Work when
converted from an Owner Allowance to a component of the GMP, pursuant to
Paragraph 5.5 of this Agreement. These Contingency Amounts are for the exclusive
use and benefit of the Contractor for performance of Work after GMP pricing has
been provided. Upon written notice, the Contractor may apply these Contingency
amounts to unexpected difficulties, estimating errors, unforeseen expenses, and
any other causes for cost overruns in the performance of Work included in the
Contractor's GMP pricing. Contingency Amounts may not be used for Changes in the
Work or other costs for which the Contractor is entitled to an adjustment in the
GMP pursuant to the Contract Documents.
14.3.3 Nothing in the Agreement or other Contract Documents is intended nor may
be construed to waive, abridge, or adversely affect the Contractor's right to
make the Contractor's actual receipt of payment from the Owner a condition
precedent to the Contractor's payment (whether progress, final, or any other
payment) to Subcontractors, suppliers, or other contractees. If the Contractor
or its contractees are required to submit affidavits of payment, waivers of
rights, releases of claims, or the like, such requirements will not be deemed
effective as to unpaid contract balances and retainage until payment for same is
actually received by the Contractor from the Owner.
15
TERMINATlON OR SUSPENSION.
15.1 If the Contract is terminated by the Contractor as provided in Article
14 of the General Conditions, the Owner shall pay the Contractor within thirty
(30) days of such termination all amounts set forth in Subparagraph 14.1.2 of
the General Conditions and all other additional costs generally recognizable in
Terminations for Convenience of federal government contracts, including such
costs as follow: reasonable costs of terminating and settling subcontracts and
purchase orders, including restocking charges as may be applicable; reasonable
costs of demobilizing for the site; costs of reassignment and relocation of
personnel; reasonable storage, transportation, and other costs incurred
reasonably necessary for the presentation, protection, or disposition of
equipment, materials, and inventory; costs reasonably necessary to prepare a
termination settlement proposal and supporting data; and an additional
termination fee which is fair and reasonable under the circumstances with due
regard to the Contractor's investment of resources, organization, and management
attention to
15
<PAGE> 16
the subject Project in anticipation of performing the Project to completion. The
amount of termination fee shall he at the discretion of the Owner.
15.2 The Contract may be terminated by the Owner for cause as provided in
Article 14 of the General Conditions; however, the Owner shall then pay the
Contractor an amount calculated as follows:
15.2.1 Take the Cost of the Work incurred by the Contractor to the date of
termination or for which the Contractor has become obligated as of the date
notice of termination is received and add costs reasonably necessary for
demobilization, for disposition of equipment, materials, and other property, for
site clean-up and remediation, and otherwise directly related to the
termination.
15.2.2 Add the Contractor's Fee computed upon the Cost of the Work to the date
of termination at the rate stated in Paragraph 5.5.
15.2.3 Subtract the aggregate of previous payments made by the Owner.
15.2.4 The Owner shall also pay the Contractor fair compensation, either by
purchase or rental at the election of the Owner, for any equipment owned by the
Contractor which the Owner elects to retain and which is not otherwise included
in the Cost of the Work. To the extent that the Owner elects to take legal
assignment of subcontracts and purchase orders (including rental agreements),
the Contractor shall, as a condition of receiving the payments referred to in
this Article 15, execute and deliver all such papers and take all such steps,
including the legal assignment of such subcontracts and other contractual rights
of the Contractor, as the Owner may require for the purpose of fully vesting in
the Owner the rights and benefits of the Contractor under such subcontracts or
purchase orders.
15.3 The Work may he suspended by the Owner as provided in Article 14 of the
General Conditions; in such case, the GMP, if any, shall be increased as
provided in Subparagraph 14.3.2 of the General Conditions except that the term
"cost of performance of the Contract" in that Subparagraph shall be understood
to mean the Cost of the Work and the term "profit" shall be understood to mean
the Contractor's Fee as described in Paragraph 5.6 of this Agreement.
16
ENUMERATlON OF CONTRACT DOCUMENTS.
16.1 The Contract Documents, except for Modifications issued after execution
of this Agreement, are enumerated as follows:
16.1.1 The Agreement (sometimes referred to as "Contract") is this executed
Agreement between the Owner and Contractor.
16
<PAGE> 17
16.1.2 The General Conditions are the General Conditions of the Contract for
Construction, AlA Document A201, 1987 Edition.
16.1.3 The Supplementary and other Conditions of the Contract are those
contained in the attachment hereto entitled Supplementary Conditions attached
hereto as Exhibit "8".
Document Title Pages
16.1.4 The Specifications are as follows:
(Either list the Specifications here or refer to an Exhibit attached to this
Agreement)
Section Title Pages
[Not available as of the date of this Agreement].
16.1.5 The Drawings are as follows, and are dated unless a different date is
shown below: (Either list the Drawings here or refer to an exhibit attached to
this Agreement.)
Number Title Date
The drawings available to the Contractor for GMP pricing of the Site
Work and the Utility' Relocation work are listed in Exhibit "C". No other
drawings have been made available to the Contractor for final pricing.
17
<PAGE> 18
16.1.6 The Addenda, if any, are as follows:
Number Date Pages
[Not available as of the date of this Agreement].
16.1.7 Other Documents, if any, forming part of the Contract Documents are as
follows: (List hen any additional documents which are intended to form part of
the Contract Documents. The General Conditions provide that bidding requirements
such as advertisement or invitation to bid, Instructions to Bidders. sample
forms and the Contractors bid are not pan of the Contract Documents unless
enumerated in this Agreement. They should be list"d hen only if intended to he
part of the Contract Documents.)
This Agreement is entered into as of the day and year first written above and is
executed in at least three original copies of which one is to be delivered to
the Contractor, one to the Architect for use in the administration of the
Contract, and the remainder to the Owner.
OWNER CONTRACTOR
ROBINSON PROPERTY GROUP, CHARLES N. WHITE CONSTRUCTION COMPANY
A LIMITED PARTNERSHIP and
HORSESHOE GAMING, INC.
- ------------------------------ ---------------------------------------
(Signature) (Signature)
General Partner Charles N. White, Chief Executive Officer
(Printed Name and Title) (Printed Name and Title)
18
<PAGE> 19
BREAKDOWN OF INITIAL, PROVISIONAL GMP
<TABLE>
<CAPTION>
Item of Work Price Owner
- ------------ Component Allowance
of GMP ---------
---------
<S> <C> <C>
Binion Horseshoe Casino Addition $ 1
and Renovations
Hotel Tower $ 1
Entertainment Complex (included in Hotel) $ --
Parking Deck $ 4,888,773*
Administration Building Addition $ 1
Fire Protection for Existing $ 90,910
Site Work $ 3,855,205
Utility Relocation Work $ 800,965
Contractor's General Conditions $ 2,689,690
----------- -------------
$12,325,543 $ 3
Subtotal of Priced Components of GMP $ 12,325,543
Subtotal of Owner Allowances $ 3
============
Initial Provisional Guaranteed Maximum
Price (Paragraph 5.2 of Agreement) $ 12,325,546
</TABLE>
* INCOMPLETE PRICING
Exhibit "A"
19
<PAGE> 20
BlNlON HORSESHOE CASINO COMPLEX ADDITIONS AND RENOVATIONS
EXHIBIT "B"
SUPPLEMENTARY CONDITIONS
TO
CONTRACT BETWEEN
ROBINSON PROPERTY GROUP, a Limited Partnership, and
Horseshoe Gaming, Inc. and
CHARLES N. WHITE CONSTRUCTION COMPANY
DATED August 6th, 1996
CHANGES TO GENERAL CONDITIONS
1.01 GENERAL
A. The following supplements modify, change, delete from or add to the
"General Conditions of the Contract for Construction," AIA Document
A201, Fourteenth Edition, 1987. Where an Article, Paragraph,
Subparagraph or Clause contained in the General Conditions is modified
or deleted by these Supplementary Conditions, the unaltered provisions
of that Article, Paragraph, Subparagraph or Clause shall remain in
effect.
1.02 ARTICLE 3 - CONTRACTOR
A. Paragraph 3.18 INDEMNIFICATION
1. Subparagraph 3.18.1: Delete all references in Subparagraph
3.18.1 to the Contractor's indemnification of the Architect, the
Architect's consultants, or anyone employed by the Architect.
The Contractor's indemnity extends only to the Owner.
1.03 ARTICLE 4 - ADMINISTRATION OF THE CONTRACT
A. Paragraph 4.2 ARCHITECT'S ADMINISTRATION OF THE CONTRACT
1. Subparagraph 4.2.4: Subparagraph 4.2.4 is amended by deleting
the first sentence thereof and substituting in place thereof the
following sentence:
Exhibit "B"
<PAGE> 21
Owner and Contractor are authorized to communicate directly
regarding administration of the Contract Documents and shall
endeavor to advise Architect of the resolution of all material
issues regarding the Contract Documents.
1.04 ARTICLE 9 - PAYMENTS AND COMPLETION
A. Paragraph 9.7 FAILURE OF PAYMENT
1. Subparagraph 9.7.1: Subparagraph 9.7.1 is amended by deleting
the first sentence and substituting the following:
If the Owner does not pay the Contractor in accordance with
Articles 12 and 13 of the Agreement, the Contractor may stop the
Work in accordance with procedures set forth in Paragraph 12.12
of the Agreement until payment of the amount owing has been
received.
B. Paragraph 9.10 FINAL COMPLETION AND FINAL PAYMENT
1. Subparagraph 9.10.2: In Subparagraph 9.10.2, modify the language
in item "(1)" in the third through seventh lines as follows:
(1) an affidavit that payrolls, bills for materials and
equipment, and other indebtedness connected with the Work for
which the Owner or Owner's property might be responsible or
encumbered (less amounts withheld by Owner) have been paid or
will be paid as follows: (i) with respect to previous
Applications for Payment for which the Contractor has been paid
in full, such indebtedness has been paid or otherwise satisfied
and (ii) with respect to the Application for Final Payment or
other Applications for Payment for which the Contractor has not
received full payment, such indebtedness will be paid only, as a
condition precedent, after the Contractor's actual receipt of
full payment from the Owner.
C. Add a new Paragraph 9.11 CONDITIONED PAYMENTS
1. Add a new Subparagraph 9.11.1 as follows:
9.11.1 Nothing in the Agreement or other Contract Documents is
intended nor may be construed to waive, abridge, or adversely
affect the Contractor's right to make the Contractor's actual
receipt of payment from the Owner a condition precedent to the
Contractor's payment (whether progress, final, or any other
payment) to Subcontractors, suppliers, or other contractees. If
the Contractor or its contractees are required to submit
affidavits of payment, waivers of rights, releases of claims, or
the like, such requirements will not he deemed effective as to
unpaid contract balances and retainage until payment for the
same is actually received by the Contractor from the Owner.
Exhibit "B"
<PAGE> 22
1.05 ARTICLE 13 - MISCELLANEOUS PROVISIONS
A. Paragraph 13.3 WRITTEN NOTICE
1. Subparagraph 13.3.1: Delete Subparagraph 13.3.1 in its entirety
and substitute the following:
13.3.1 All notices, demands and other communications required or
permitted hereunder shall be made in writing and be deemed
communicated on the date when delivered in person or when
delivered, if mailed by certified mail, return receipt
requested, postage prepaid, or by courier delivery addressed as
follows:
Owner: Robinson Property Group, a Limited Partnership
and Horseshoe Gaming, Inc.
128 East Freemont
Las Vegas, Nevada 89101
Attn: ____________
Contractor: Charles N. White Construction Company
Post Office Box 656
Clarksdale, Mississippi 38614
Attn: Charles N. White, Chairman
Architect: Reaves & Sweeney, Inc.
5118 Park Avenue
Suite 400
Memphis, Tennessee 38117
Attn: ______________
or to such other address as either Owner, Contractor or the
Architect may designate by notice to the other.
B. Paragraph 13.7 COMMENCEMENT OF STATUTORY LIMITATION PERIOD
1. Subparagraph 13.7.1: Delete Subparagraph 13.7.1 in its
entirety.
1.06 ARTICLE 14 - TERMINATION OR SUSPENSION OF THE CONTRACT
A. Add a new Subparagraph 14.2.5 as follows:
14.2.5 Notwithstanding anything to the contrary herein, the
Owner shall give the Contractor written notice of grounds for
termination for cause and afford the Contractor a reasonable
opportunity to cure before exercising any rights or remedies
under Paragraph 14.
Exhibit "B"
<PAGE> 23
OWNER: CONTRACTOR:
ROBINSON PROPERTY GROUP, CHARLES N. WHITE CONSTRUCTION COMPANY a Limited
Partnership and
Horseshoe Gaming, Inc.
- ---------------------------- -----------------------------
BY: BY: Charles N. White
Director of Dev. Its: Chairman
Exhibit "B"
<PAGE> 24
BINION HORSESHOE CASINO COMPLEX ADDITIONS AND RENOVATIONS
EXHIBIT "C"
SUPPLEMENTARY CONDITIONS
TO
CONTRACT BETWEEN
ROBINSON PROPERTY GROUP, a Limited Partnership, and
Horseshoe Gaming, Inc. and
CHARLES N. WHITE CONSTRUCTION COMPANY
DATED August 6th, 1996.
LIST OF DRAWINGS USED BY THE CONTRACTOR FOR GMP PRICING OF THE SITE WORK AND THE
UTILITY RELOCATION WORK:
Bid Package 1 - Utility relocation
<TABLE>
<S> <C> <C>
C100 dated 25 April 1996
C101 dated 25 April 1996 6/05/96 Rev.2
C200 dated 25 April 1996
C201 dated 10 July 1996 8/06/96 Rev.5
C504 dated 25 April 1996
C505 dated 25 April 1996
C506 dated 05 June 1996
C507 dated 05 June 1996
ES101 dated 19 ApriI 1996
ES102 dated 19 Apri1 1996
</TABLE>
Bid Package 2 - Sitework
<TABLE>
<S> <C> <C>
C100 dated 25 April 1996
C101 dated 25 April 1996 6/05/96 Rev. 2
C102 dated 25 April 1996 8/06/96 Rev. 2
C103 dated 25 April 1996
C200 dated 25 April 1996
C201 dated 25 April 1996 8/06/96 Rev. 5
</TABLE>
Exhibit "C"
<PAGE> 25
<TABLE>
<S> <C> <C>
C300 dated 25 April 1996
C301 dated 25 April 1996 8/06/96 Rev. 1
C302 dated 05 June 1996 Rev. 1
C303 dated 05 June 1996 8/06/96 Rev 2
C304 dated 04 June 1996 Rev. 1
C500 dated 23 July 1996 Rev. 2
C501 dated 30 June 1996 Rev. 2
C502 dated 10 July 1996 Rev 3
C503 dated 30 June 1996 Rev 3
C504 dated 25 April 1996
C505 dated 25 April 1996
C506 dated 05 June 1996 Rev. 1
C507 dated 05 June 1996 Rev. 1
C508 dated 25 April 1996
C509 dated 10 May 1996 8/06/96 Rev. 2
C510 dated 10 May 1996 8/06/96 Rev. 2
C511 dated 25 April 1996
C512 dated 05 June 1996 Rev. 1
C513 dated 10 May 1996 Rev.1
ES101 dated 25 April 1996
ES102 dated 25 April 1996
</TABLE>
Specifications covering site Development for Horseshoe Casino and Hotel:
Addendum No. 1 5/14/96
Addendum No. 2 5/21/96
Owner: Contractor:
Robinson Property Group, a Limited Charles N. White Construction Company
Partnership and Horseshoe
Gaming, Inc.
- --------------------------------- --------------------------------------
BY: BY: Charles N. White
Director of Dev. Its: Chief Executive Officer
Exhibit "C"
<PAGE> 26
<TABLE>
<S> <C>
- -------------------------------------------------------------------------------------------------------------
CHANGE ORDER
- -------------------------------------------------------------------------------------------------------------
PROJECT: Horseshoe Casino Complex Additions & Renovations DISTRIBUTION TO:
Robinsonville, Mississippi OWNER
CONTRACTOR
PROJECT MANAGER
</TABLE>
<TABLE>
<S> <C> <C> <C>
OWNER: Robinson Property Group, a Limited Partnership and
Horseshoe Gaming, Inc.
128 East Freemont
Las Vegas, Nevada 89101
(800) 237 6537 Fax (702) 366-7342
CONTRACTOR: Charles White Construction Company Change Order Number: 1
115 Issaquena Date of this Change Order: 01/09/97
Clarksdale, MS 38614 Date of Contract: 08/06/96
(601) 627-4705 Fax (601) 627-3546
</TABLE>
<TABLE>
<S> <C>
The Contract between the Owner and Contractor is changed as follows:
- -------------------------------------------------------------------------------------------------------------
The following approved Request For Changes (RFC's) were already included in the existing contract:
- -------------------------------------------------------------------------------------------------------------
RFC's - #1, #2, #3, #4, #5, #6, #7, #8, #9, #10, #11, #13, #14, #16, #18 & #21 = $12,325,546.00.
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
The following previously approved RFC's are to be added to the contract by this Change Order:
- -------------------------------------------------------------------------------------------------------------
RFC#22 Credit Rip Rap = ($48,945.00) RFC#23 Parking Lot Lights = $24,447.00
- -------------------------------------------------------------------------------------------------------------
RFC#12 Temp. Generator = $2,690.00 RFC#19 Garage Piles = $777,410.00
- -------------------------------------------------------------------------------------------------------------
RFC#20 Hotel Piles = $516,451.00 RFC#24 Credit Pile Wall = ($58,574.00)
- -------------------------------------------------------------------------------------------------------------
RFC#27 Grease Trap = $1,066.00 TOTAL THIS CHANGE ORDER $1,214,545.00
- -------------------------------------------------------------------------------------------------------------
This Change Order is not valid until signed by the Owner and Contractor or their assigns.
- -------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C>
1. The original contract amount (Guaranteed Maximum Price) was: 1. $12,325,546.00
-----------------------------------
2. Net change by previously authorized Change Orders: 2. $0.00
-----------------------------------
3. The Guaranteed Maximum Price prior to this Change Order: 3. $12,325,546.00
-----------------------------------
4. The Guaranteed Maximum Price will be increased by this Change Order
in the amount of: 4. $1,214,545.00
-----------------------------------
5. The new Guaranteed Maximum Price including this Change Order will
be: 5. $13,540,091.00
-----------------------------------
6. The Contract Time will be increased by: 6. Zero
-----------------------------------
7. The date of Substantial Completion as of the date of this Change
Order is: 7. Be Determined
-----------------------------------
</TABLE>
<TABLE>
<S> <C> <C>
------------------------------------------------------------------------
PROJECT MANAGER OWNER CONTRACTOR
------------------------------------------------------------------------
The MATHIS Group, Inc. Horseshoe Gaming, Inc. Charles White Const. Co. Inc.
13313 S.W. Frwy. #286 1021 Casino Center Drive 115 Issaquena
Sugarland, TX 77478 Robinsonville, MS 38664 Clarksdale, MS 38614
ARCHITECT
Friedmutter & Associates By:________________________________ By:________________________________
4385 South Polaris, #100 Date:______________________________ Date:______________________________
Las Vegas, NV 89103
</TABLE>
<PAGE> 27
<TABLE>
<S> <C>
- -------------------------------------------------------------------------------------------------------------
CHANGE ORDER
- -------------------------------------------------------------------------------------------------------------
PROJECT: Horseshoe Casino Complex Additions & Renovations DISTRIBUTION TO:
Robinsonville, Mississippi OWNER
CONTRACTOR
PROJECT MANAGER
</TABLE>
<TABLE>
<S> <C> <C> <C>
OWNER: Robinson Property Group, a Limited Partnership and
Horseshoe Gaming, Inc.
128 East Freemont
Las Vegas, Nevada 89101
(800) 237 6537 Fax (702) 366-7342
CONTRACTOR: Charles White Construction Company Change Order Number: 2
115 Issaquena Date of this Change Order: 01/09/97
Clarksdale, MS 38614 Date of Contract: 08/06/96
(601) 627-4705 Fax (601) 627-3546
</TABLE>
<TABLE>
<S> <C>
The Contract between the Owner and Contractor is changed as follows:
- -------------------------------------------------------------------------------------------------------------
The following previously approved RFC's are to be added to the contract by this Change Order:
- -------------------------------------------------------------------------------------------------------------
RFC#28 Casino Steel Barge = $1,665,356.00 RFC#33 Casino Mooring = $533,596.00
- -------------------------------------------------------------------------------------------------------------
RFC#29 Utility Additions = $1,320.00 RFC#26 Hotel Piles = $469,048.00
- -------------------------------------------------------------------------------------------------------------
RFC#30 Credit Utility Items = ($37,207.00) RFC#34 Road Maintenance = $28,185.00
- -------------------------------------------------------------------------------------------------------------
RFC#15 Credit Duct Bank = ($78,468.00) RFC#35 Credit Sleeves = ($28,033.00)
- -------------------------------------------------------------------------------------------------------------
RFC#25 Garage Piles = $1,217,725.00 RFC#36 Credit Sewer = ($3,188.00)
- -------------------------------------------------------------------------------------------------------------
RFC#31 Credit Off Loading = ($2,653.00) RFC#38 Garage Metals = $120,049.00
- -------------------------------------------------------------------------------------------------------------
RFC#32 Credit Sewer Main = ($10,055.00) TOTAL THIS CHANGE ORDER $3,375,675.00
- -------------------------------------------------------------------------------------------------------------
This Change Order is not valid until signed by the Owner and Contractor or their assigns.
- -------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C>
1. The original contract amount (Guaranteed Maximum Price) was: 1. $12,325,546.00
-----------------------------------
2. Net change by previously authorized Change Orders: 2. $1,214,545.00
-----------------------------------
3. The Guaranteed Maximum Price prior to this Change Order: 3. $13,540,091.00
-----------------------------------
4. The Guaranteed Maximum Price will be increased by this Change Order
in the amount of: 4. $3,375,675.00
-----------------------------------
5. The new Guaranteed Maximum Price including this Change Order will
be: 5. $16,915,766.00
-----------------------------------
6. The Contract Time will be increased by: 6. Zero
-----------------------------------
7. The date of Substantial Completion as of the date of this Change
Order is: 7. Be Determined
-----------------------------------
</TABLE>
<TABLE>
<S> <C> <C>
------------------------------------------------------------------------
PROJECT MANAGER OWNER CONTRACTOR
------------------------------------------------------------------------
The MATHIS Group, Inc. Horseshoe Gaming, Inc. Charles White Const. Co. Inc.
13313 S.W. Frwy. #286 1021 Casino Center Drive 115 Issaquena
Sugarland, TX 77478 Robinsonville, MS 38664 Clarksdale, MS 38614
ARCHITECT
Friedmutter & Associates By:________________________________ By:________________________________
4385 South Polaris, #100 Date:______________________________ Date:______________________________
Las Vegas, NV 89103
</TABLE>
<PAGE> 28
<TABLE>
<S> <C>
- -------------------------------------------------------------------------------------------------------------
CHANGE ORDER
- -------------------------------------------------------------------------------------------------------------
PROJECT: Horseshoe Casino Complex Additions & Renovations DISTRIBUTION TO:
Robinsonville, Mississippi OWNER
CONTRACTOR
PROJECT MANAGER
</TABLE>
<TABLE>
<S> <C> <C> <C>
OWNER: Robinson Property Group, a Limited Partnership and
Horseshoe Gaming, Inc.
128 East Freemont
Las Vegas, Nevada 89101
(800) 237 6537 Fax (702) 366-7342
CONTRACTOR: Charles White Construction Company Change Order Number: 3
115 Issaquena Date of this Change Order: 01/09/97
Clarksdale, MS 38614 Date of Contract: 08/06/96
(601) 627-4705 Fax (601) 627-3546
</TABLE>
<TABLE>
<S> <C>
The Contract between the Owner and Contractor is changed as follows:
- -------------------------------------------------------------------------------------------------------------
The following previously approved RFC's are to be added to the contract by this Change Order:
- -------------------------------------------------------------------------------------------------------------
RFC#39 Hotel Misc. Metals = $606,749.00 RFC#45 Gar. Pile Increase = $69,867.00
- -------------------------------------------------------------------------------------------------------------
RFC#40 Perf. Aug. Cst. Piles = $70,088.00 RFC#46 Hot. Pile Increase = $54,383.00
- -------------------------------------------------------------------------------------------------------------
RFC#37 Hotel Structure = $4,607,151.00 RFC#47 Perf. Pile Fly Ash = ($1,420.00)
- -------------------------------------------------------------------------------------------------------------
RFC#44 Erosion Control = $407,319.00 RFC#48 Gar. Found Chgs = $79,025.00
- -------------------------------------------------------------------------------------------------------------
RFC#41 Striping West Lot = $570.17 RFC#49 Pk. Gar. Top Slab = $753,355.00
- -------------------------------------------------------------------------------------------------------------
RFC#42 Beam@Basin Wall = $742.00 RFC#17 Temp. Lights = $4,563.00
- -------------------------------------------------------------------------------------------------------------
RFC#43 Repair Adm. Sidewalk = $494.00 TOTAL THIS CHANGE ORDER $6,652,886.17
- -------------------------------------------------------------------------------------------------------------
This Change Order is not valid until signed by the Owner and Contractor or their assigns.
- -------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C>
1. The original contract amount (Guaranteed Maximum Price) was: 1. $12,325,546.00
-----------------------------------
2. Net change by previously authorized Change Orders: 2. $4,590,220.00
-----------------------------------
3. The Guaranteed Maximum Price prior to this Change Order: 3. $16,915,766.00
-----------------------------------
4. The Guaranteed Maximum Price will be increased by this Change Order
in the amount of: 4. $6,652,886.17
-----------------------------------
5. The new Guaranteed Maximum Price including this Change Order will
be: 5. $23,568,652.17
-----------------------------------
6. The Contract Time will be increased by: 6. Zero Days
-----------------------------------
7. The date of Substantial Completion as of the date of this Change
Order is: 7. 8/31/97
-----------------------------------
</TABLE>
<TABLE>
<S> <C> <C>
------------------------------------------------------------------------
PROJECT MANAGER OWNER CONTRACTOR
------------------------------------------------------------------------
The MATHIS Group, Inc. Horseshoe Gaming, Inc. Charles White Const. Co. Inc.
13313 S.W. Frwy. #286 1021 Casino Center Drive 115 Issaquena
Sugarland, TX 77478 Robinsonville, MS 38664 Clarksdale, MS 38614
ARCHITECT
Friedmutter & Associates By:________________________________ By:________________________________
4385 South Polaris, #100 Date:______________________________ Date:______________________________
Las Vegas, NV 89103
</TABLE>
<PAGE> 29
<TABLE>
<S> <C>
- -------------------------------------------------------------------------------------------------------------
CHANGE ORDER
- -------------------------------------------------------------------------------------------------------------
PROJECT: Horseshoe Casino Complex Additions & Renovations DISTRIBUTION TO:
Robinsonville, Mississippi OWNER
CONTRACTOR
PROJECT MANAGER
</TABLE>
<TABLE>
<S> <C> <C> <C>
OWNER: Robinson Property Group, a Limited Partnership and
Horseshoe Gaming, Inc.
128 East Freemont
Las Vegas, Nevada 89101
(800) 237 6537 Fax (702) 366-7342
CONTRACTOR: Charles White Construction Company Change Order Number: 4
115 Issaquena Date of this Change Order: 01/09/97
Clarksdale, MS 38614 Date of Contract: 08/06/96
(601) 627-4705 Fax (601) 627-3546
</TABLE>
<TABLE>
<S> <C>
The Contract between the Owner and Contractor is changed as follows:
- -------------------------------------------------------------------------------------------------------------
RFC#50 Casino Struct. Steel = $265,301.00 RFC#60 Hotel Steel Angles = ($138,615.00)
- -------------------------------------------------------------------------------------------------------------
RFC#53 Elect. Start-Up Power = ($84,783.00) RFC#61 Hotel Struct. VE = $341,963.00
- -------------------------------------------------------------------------------------------------------------
RFC#54 Increase Print. Allow = $22,446.00 RFC#62 GC's for Mech. = $883,730.00
- -------------------------------------------------------------------------------------------------------------
RFC#55 Tax Casino Barge = ($62,857.00) RFC#63 GC's for Elect. = $568,919.00
- -------------------------------------------------------------------------------------------------------------
RFC#56 Hotel Elevators = $918,079.00 RFC#64 Gar. Elev. Upgrades = $9,032.00
- -------------------------------------------------------------------------------------------------------------
RFC#57 Topping Slab Bond = ($11,151.00) RFC#65 Basin Wall Gangway = $21,882.00
- -------------------------------------------------------------------------------------------------------------
RFC#58 CPM Scheduler = ($27,882.00) RFC#67 Casino Brg. Wtr. Dr. = $51,303.00
- -------------------------------------------------------------------------------------------------------------
RFC#59 Misc. Directive Cost = $27,882.00 TOTAL THIS CHANGE ORDER $2,785,249.00
- -------------------------------------------------------------------------------------------------------------
This Change Order is not valid until signed by the Owner and Contractor or their assigns.
- -------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C>
1. The original contract amount (Guaranteed Maximum Price) was: 1. $12,325,546.00
-----------------------------------
2. Net change by previously authorized Change Orders: 2. $11,243,106.17
-----------------------------------
3. The Guaranteed Maximum Price prior to this Change Order: 3. $23,568,652.17
-----------------------------------
4. The Guaranteed Maximum Price will be increased by this Change Order
in the amount of: 4. $2,785,249.00
-----------------------------------
5. The new Guaranteed Maximum Price including this Change Order will
be: 5. $26,353,901.17
-----------------------------------
6. The Contract Time will be increased by: 6. Zero Days
-----------------------------------
7. The date of Substantial Completion as of the date of this Change
Order is: 7. 8/31/97
-----------------------------------
</TABLE>
<TABLE>
<S> <C> <C>
------------------------------------------------------------------------
PROJECT MANAGER OWNER CONTRACTOR
------------------------------------------------------------------------
The MATHIS Group, Inc. Horseshoe Gaming, Inc. Charles White Const. Co. Inc.
13313 S.W. Frwy. #286 1021 Casino Center Drive 115 Issaquena
Sugarland, TX 77478 Robinsonville, MS 38664 Clarksdale, MS 38614
ARCHITECT
Friedmutter & Associates By:________________________________ By:________________________________
4385 South Polaris, #100 Date:______________________________ Date:______________________________
Las Vegas, NV 89103
</TABLE>
<PAGE> 30
<TABLE>
<S> <C>
- -------------------------------------------------------------------------------------------------------------
CHANGE ORDER
- -------------------------------------------------------------------------------------------------------------
PROJECT: Horseshoe Casino Complex Additions & Renovations DISTRIBUTION TO:
Robinsonville, Mississippi OWNER
CONTRACTOR
PROJECT MANAGER
</TABLE>
<TABLE>
<S> <C> <C> <C>
OWNER: Robinson Property Group, a Limited Partnership and
Horseshoe Gaming, Inc.
128 East Freemont
Las Vegas, Nevada 89101
(800) 237 6537 Fax (702) 366-7342
CONTRACTOR: Charles White Construction Company Change Order Number: 5
115 Issaquena Date of this Change Order: 04/21/97
Clarksdale, MS 38614 Date of Contract: 08/06/96
(601) 627-4705 Fax (601) 627-3546
</TABLE>
<TABLE>
<S> <C>
The Contract between the Owner and Contractor is changed as follows:
- -------------------------------------------------------------------------------------------------------------
The following previously approved RFC's are to be added to the contract by this
Change Order:
- -------------------------------------------------------------------------------------------------------------
RFC#68 Credit Garage FDC = ($4,575.00) RFC#73 Water Well = $14,316.00
- -------------------------------------------------------------------------------------------------------------
RFC#69 Central Plant Building = $40,652.00 RFC#76 Relocate Trans. = $12,941.00
- -------------------------------------------------------------------------------------------------------------
RFC#51 Garage Finishes = $2,140,537.00 RFC#78 Credit RFC #67 = ($49,354.00)
- -------------------------------------------------------------------------------------------------------------
RFC#70 Credit Casino Tax = ($1,949.00) RFC#79 Credit water Door = ($760.00)
- -------------------------------------------------------------------------------------------------------------
RFC#52 Admin. Building = $3,327,801.00 RFC#80 Credit Mark up = ($136,572.00)
- -------------------------------------------------------------------------------------------------------------
RFC#71 Credit Garage Sealer = ($265.00) RFC#81 Casino Steel = $15,546.00
- -------------------------------------------------------------------------------------------------------------
RFC#72 Hotel Ext. Glass = $2,777,466.00 TOTAL THIS CHANGE ORDER $8,135,784.00
- -------------------------------------------------------------------------------------------------------------
This Change Order is not valid until signed by the Owner and Contractor or their assigns.
- -------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C>
1. The original contract amount (Guaranteed Maximum Price) was: 1. $12,325,546.00
-----------------------------------
2. Net change by previously authorized Change Orders: 2. $14,028,355.17
-----------------------------------
3. The Guaranteed Maximum Price prior to this Change Order: 3. $26,353,901.17
-----------------------------------
4. The Guaranteed Maximum Price will be increased by this Change Order
in the amount of: 4. $8,135,784.00
-----------------------------------
5. The new Guaranteed Maximum Price including this Change Order will
be: 5. $34,489,685.17
-----------------------------------
6. The Contract Time will be increased by: 6. Zero Days
-----------------------------------
7. The date of Substantial Completion as of the date of this Change
Order is: 7. 11/1/97
-----------------------------------
</TABLE>
<TABLE>
<S> <C> <C>
------------------------------------------------------------------------
PROJECT MANAGER OWNER CONTRACTOR
------------------------------------------------------------------------
The MATHIS Group, Inc. Horseshoe Gaming, Inc. Charles White Const. Co. Inc.
13313 S.W. Frwy. #286 1021 Casino Center Drive 115 Issaquena
Sugarland, TX 77478 Robinsonville, MS 38664 Clarksdale, MS 38614
ARCHITECT
Friedmutter & Associates By:________________________________ By:________________________________
4385 South Polaris, #100 Date:______________________________ Date:______________________________
Las Vegas, NV 89103
</TABLE>
<PAGE> 31
<TABLE>
<S> <C>
- -------------------------------------------------------------------------------------------------------------
CHANGE ORDER
- -------------------------------------------------------------------------------------------------------------
PROJECT: Horseshoe Casino Complex Additions & Renovations DISTRIBUTION TO:
Robinsonville, Mississippi OWNER
CONTRACTOR
PROJECT MANAGER
</TABLE>
<TABLE>
<S> <C> <C> <C>
OWNER: Robinson Property Group, a Limited Partnership and
Horseshoe Gaming, Inc.
128 East Freemont
Las Vegas, Nevada 89101
(800) 237 6537 Fax (702) 366-7342
CONTRACTOR: Charles White Construction Company Change Order Number: 6
115 Issaquena Date of this Change Order: 04/21/97
Clarksdale, MS 38614 Date of Contract: 08/06/96
(601) 627-4705 Fax (601) 627-3546
</TABLE>
<TABLE>
<S> <C>
The Contract between the Owner and Contractor is changed as follows:
- -------------------------------------------------------------------------------------------------------------
The following previously approved RFC's are to be added to the contract by this
Change Order:
- -------------------------------------------------------------------------------------------------------------
RFC#74 Casino Steel = $27,838.00 RFC#88 Hotel Electrical = $3,545,400.00
- -------------------------------------------------------------------------------------------------------------
RFC#82 Credit Access Road = ($14,833.00) RFC#89 Hotel Ext. Glass = $1,741,094.00
- -------------------------------------------------------------------------------------------------------------
RFC#83 Access Road Allow = $14,833.00 RFC#75 Hotel EIFS = $1,673,151.44
- -------------------------------------------------------------------------------------------------------------
RFC#84 Credit RFC #52 = ($3,327,801.00) RFC#90 Hotel Fire Prot = $563,891.00
- -------------------------------------------------------------------------------------------------------------
RFC#85 Admin. Foundation = $186,931.00 RFC#91 Hotel Wind Wash = $66,550.00
- -------------------------------------------------------------------------------------------------------------
RFC#86 Admin. Steel = $220,178.00 RFC#92 Casino Ext. Shell = $468,860.00
- -------------------------------------------------------------------------------------------------------------
RFC#87 Hotel Mechanical = $6,127,081.00 TOTAL THIS CHANGE ORDER $11,293,173.44
- -------------------------------------------------------------------------------------------------------------
This Change Order is not valid until signed by the Owner and Contractor or their assigns.
- -------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C>
8. The original contract amount (Guaranteed Maximum Price) was: 1. $12,325,546.00
-----------------------------------
9. Net change by previously authorized Change Orders: 2. $22,164,139.17
-----------------------------------
10. The Guaranteed Maximum Price prior to this Change Order: 3. $34,489,685.17
-----------------------------------
11. The Guaranteed Maximum Price will be increased by this Change Order
in the amount of: 4. $11,293,173.44
-----------------------------------
12. The new Guaranteed Maximum Price including this Change Order will
be: 5. $45,782,858.61
-----------------------------------
13. The Contract Time will be increased by: 6. Zero Days
-----------------------------------
14. The date of Substantial Completion as of the date of this Change
Order is: 7. 11/1/97
-----------------------------------
</TABLE>
<TABLE>
<S> <C> <C>
------------------------------------------------------------------------
PROJECT MANAGER OWNER CONTRACTOR
------------------------------------------------------------------------
The MATHIS Group, Inc. Horseshoe Gaming, Inc. Charles White Const. Co. Inc.
13313 S.W. Frwy. #286 1021 Casino Center Drive 115 Issaquena
Sugarland, TX 77478 Robinsonville, MS 38664 Clarksdale, MS 38614
ARCHITECT
Friedmutter & Associates By:________________________________ By:________________________________
4385 South Polaris, #100 Date:______________________________ Date:______________________________
Las Vegas, NV 89103
</TABLE>
<PAGE> 1
EXHIBIT 12.2
HORSESHOE GAMING, L.L.C. AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
QUARTER ENDED MARCH 31, YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------
-------------------------------------------
1997 1996 1996 1995 1994 1993
------- ------- ------- ------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Net income (loss) from
continuing operations before
minority interests and
extraordinary loss on early
retirement of debt........... $15,417 $16,198 $48,822 $55,969 $ 3,924 $(1,521)
Add:
Portion of rents
representative of the
interest factor........... 33 94 207 517 292 15
Interest on indebtedness..... 4,574 5,505 24,809 17,365 5,215 --
Amortization of debt......... 675 1,110 3,281 2,823 1,582 --
------- ------- ------- ------- ------- -------
Income as adjusted........ $20,699 $22,907 $77,119 $76,674 $11,013 $(1,506)
======= ======= ======= ======= ======= =======
Fixed charges
Portion of rents
representative of the
interest factor........... $ 33 $ 94 $ 207 $ 517 $ 292 $ 15
Interest on indebtedness..... 4,574 5,505 24,809 17,365 5,215
Amortization of debt
expense................... 675 1,110 3,281 2,823 1,582
Capitalized interest......... 2,013 -- 1,272 651 3,595 400
------- ------- ------- ------- ------- -------
Fixed charges............. $ 7,295 $ 6,709 $29,569 $21,356 $10,684 $ 415
======= ======= ======= ======= ======= =======
Ratio of earnings to fixed..... 2.8 3.4 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 21.2
SUBSIDIARIES OF HORSESHOE GAMING, L.L.C.
A. Name and jurisdiction of incorporation or organization of each direct
and indirect subsidiary:
1. Horseshoe Ventures, L.L.C., a Delaware limited liability
company.
2. Horseshoe GP, Inc., a Nevada corporation.
3. New Gaming Capital Partnership, a Nevada limited partnership.
4. Horseshoe Entertainment, a Louisiana limited partnership; also
does business under the name Horseshoe Casino and Hotel, Bossier City.
5. Robinson Property Group Limited Partnership, a Mississippi
limited partnership; also does business under the name Horseshoe Casino and
Hotel, Casino Center.
6. Red Oak Insurance Company Ltd., a Barbados corporation.
<PAGE> 1
EXHIBIT 23.4
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
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.
Las Vegas, Nevada /s/ ARTHUR ANDERSEN LLP
July 31, 1997
<PAGE> 1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
EXHIBIT 25.2
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A
TRUSTEE PURSUANT TO SECTION 305(b)(2) X
---------------
U.S. TRUST COMPANY OF TEXAS, N.A.
(Exact name of trustee as specified in its charter)
75-2353745
(State of incorporation (I.R.S. employer
if not a national bank) identification No.)
2001 Ross Avenue, Suite 2700 75201-2936
Dallas, Texas (Zip Code)
(Address of trustee's
principal executive offices)
Compliance Officer
U.S. Trust Company of Texas, N.A.
2001 Ross Avenue, Suite 2700
Dallas, Texas 75201-2936
(214) 754-1200
(Name, address and telephone number of agent for service)
---------------
Horseshoe Gaming, L.L. C.
(Exact name of obligor as specified in its charter)
Delaware 88-0343515
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification No.)
4024 Industrial Road
Las Vegas, Nevada 89103
(Address of principal executive offices) (Zip Code)
---------------
9 3/8% Senior Subordinated Notes
(Due 2007)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
GENERAL
1. General Information.
Furnish the following information as to the Trustee:
(a) Name and address of each examining or supervising authority to
which it is subject.
Federal Reserve Bank of Dallas (11th District), Dallas,
Texas (Board of Governors of the Federal Reserve System)
Federal Deposit Insurance Corporation, Dallas, Texas
The Office of the Comptroller of the Currency, Dallas,
Texas
(b) Whether it is authorized to exercise corporate trust powers.
The Trustee is authorized to exercise corporate trust
powers.
2. Affiliations with Obligor and Underwriters.
If the obligor or any underwriter for the obligor is an affiliate of the
Trustee, describe each such affiliation.
None.
3. Voting Securities of the Trustee.
Furnish the following information as to each class of voting securities
of the Trustee:
As of July 31, 1997
Col A. Col B.
Title of Class Amount Outstanding
Capital Stock - par value $100 per share 5,000 shares
4. Trusteeships under Other Indentures.
Not Applicable
5. Interlocking Directorates and Similar Relationships with the Obligor or
Underwriters.
Not Applicable
<PAGE> 3
6. Voting Securities of the Trustee Owned by the Obligor or its Officials.
Not Applicable
7. Voting Securities of the Trustee Owned by Underwriters or their
Officials.
Not Applicable
8. Securities of the Obligor Owned or Held by the Trustee.
Not Applicable
9. Securities of Underwriters Owned or Held by the Trustee.
Not Applicable
10. Ownership or Holdings by the Trustee of Voting Securities of Certain
Affiliates or Security Holders of the Obligor.
Not Applicable
11. Ownership or Holdings by the Trustee of any Securities of a Person
Owning 50 Percent or More of the Voting Securities of the Obligor.
Not Applicable
12. Indebtedness of the Obligor to the Trustee.
Not Applicable
13. Defaults by the Obligor.
Not Applicable
14. Affiliations with the Underwriters.
Not Applicable
15. Foreign Trustee.
Not Applicable
16. List of Exhibits.
T-1.1 - A copy of the Articles of Association of U.S. Trust Company
of Texas, N.A.; incorporated herein by reference to Exhibit
T-1.1 filed with Form T-1 Statement, Registration No.
22-21897.
<PAGE> 4
16. (con't.)
T-1.2 - A copy of the certificate of authority of the Trustee to
commence business; incorporated herein by reference to Exhibit
T-1.2 filed with Form T-1 Statement, Registration No.
22-21897.
T-1.3 - A copy of the authorization of the Trustee to exercise
corporate trust powers; incorporated herein by reference to
Exhibit T-1.3 filed with Form T-1 Statement, Registration No.
22-21897.
T-1.4 - A copy of the By-laws of the U.S. Trust Company of Texas,
N.A., as amended to date; incorporated herein by reference to
Exhibit T-1.4 filed with Form T-1 Statement, Registration No.
22-21897.
T-1.5 - The consent of the Trustee required by Section 321(b) of the
Trust Indenture Act of 1939.
T-1.6 - A copy of the latest report of condition of the Trustee
published pursuant to law or the requirements of its
supervising or examining authority.
NOTE
As of July 31, 1997 the Trustee had 5,000 shares of Capital Stock outstanding,
all of which are owned by U.S. T.L.P.O. Corp. As of April 18, 1997 U.S. T.L.P.O.
Corp. had 35 shares of Capital Stock outstanding, all of which are owned by U.S.
Trust Corporation. U.S. Trust Corporation had outstanding 19,296,927 shares of
$1 par value Common Stock as of July 31, 1997.
The term "Trustee" in Items 2, 5, 6, 7, 8, 9, 10 and 11 refers to each of U.S
Trust Company of Texas, N.A., U.S. T.L.P.O. Corp. and U.S. Trust Corporation.
Inasmuch as this Form T-1 is filed prior to the ascertainment by the Trustee of
all the facts on which to base responsive answers to Items 2, 5, 6, 7, 9, 10 and
11, the answers to said Items are based upon incomplete information. Items 2, 5,
6, 7, 9, 10 and 11 may, however, be considered correct unless amended by an
amendment to this Form T-1.
In answering any items in this Statement of Eligibility and Qualification which
relates to matters peculiarly within the knowledge of the obligors or their
directors or officers, or an underwriter for the obligors, the Trustee has
relied upon information furnished to it by the obligors and will rely on
information to be furnished by the obligors or such underwriter, and the Trustee
disclaims responsibility for the accuracy or completeness of such information.
<PAGE> 5
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939 the Trustee, U.S
Trust Company of Texas, N.A., a national banking association organized under the
laws of the United States of America, has duly caused this statement of
eligibility and qualification to be signed on its behalf by the undersigned,
thereunto duly authorized, all in the City of Dallas, and State of Texas on the
31st day of July, 1997.
U.S. Trust Company of Texas, N.A.,
Trustee
By: /s/ [SIG]
--------------------------------
Deborah Young
Authorized Officer
<PAGE> 6
Exhibit T-1.5
CONSENT OF TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust Indenture Act of
1939 as amended, we hereby consent that reports of examination by Federal,
State, Territorial or District authorities may be furnished by such authorities
to the Securities and Exchange Commission upon request therefor.
U.S. Trust Company of Texas, N.A.
By: /s/ [SIG]
---------------------------------
Deborah Young
Authorized Officer
<PAGE> 7
<TABLE>
<S> <C> <C> <C> <C> <C>
U.S. Trust Company of Texas, N.A. Call Date: 06/30/97 State #: 6797 FFIEC 034
2100 Ross Avenue, Suite 2700 Vendor ID: D Cert #: 33217 RC-1
Dallas, TX 75201 Transit #: 11101785 ---------
9
---------
</TABLE>
CONSOLIDATED REPORT OF CONDITION FOR INSURED COMMERCIAL
AND STATE-CHARTERED SAVINGS BANKS FOR JUNE 30, 1997
All schedules are to be reported in thousands of dollars. Unless otherwise
indicated, report the amount outstanding as of the last business day of the
quarter.
<TABLE>
<CAPTION>
Dollar Amounts in Thousands C100<
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ASSETS
1. Cash and balances due from depository institutions: RCON
a. Noninterest-bearing balances and currency and coin (1,2).................................. 0081 996 1.a
b. Interest-bearing balances (3)............................................................. 0071 679 1.b
2. Securities:
a. Held-to-maturity (from Schedule RC-B, column A)........................................... 1754 0 2.a
b. Available-for-sale securities (from Schedule RC-B, column D).............................. 1773 96,249 2.b
3. Federal funds sold(4) and securities purchased under agreements to resell.................... 1350 7,000 3
4. Loans and lease financing receivables: RCON
a. Loans and leases, net of unearned income (from Schedule RC-C)...... 2122 43,923 4.a
b. LESS: Allowance for loan and lease losses.......................... 3123 531 4.b
c. LESS: Allocated transfer risk reserve.............................. 3128 0 4.c
d. Loans and leases, net of unearned income, allowance, RCON
and reserve (Item 4.a minus 4.b and 4.c).................................................. 2125 43,392 4.d
5. Trading assets............................................................................... 3545 0 5.
6. Premises and fixed assets (including capitalized leases)..................................... 2145 725 6.
7. Other real estate owned (from Schedule RC-M)................................................. 2150 0 7.
8. Investments in unconsolidated subsidiaries and associated companies (from Schedule RC-M)..... 2130 0 8.
9. Customers' liability to this bank on acceptances outstanding................................. 2155 0 9.
10. Intangible assets (from Schedule RC-M)....................................................... 2143 0 10.
11. Other assets (from Schedule RC-F)............................................................ 2160 1,539 11.
12. a. Total assets (sum of Items 1 through 11).................................................. 2170 160,580 12.a
b. Losses deferred pursuant to 12 U.S.C. 1823(l)............................................. 0906 0 12.b
c. Total assets and losses deferred pursuant to 12 U.S.C. 1823(l) (sum of
Items 12.a and 12.b)...................................................................... 0907 150,580 12.c
(1) Includes cash items in process of collection and unposted debits.
(2) The amount reported in this item must be greater than or equal to the sum of Schedule RC-M, Items 3.a and 3.b
(3) Includes time certificates of deposit not held for trading.
(4) Report "term federal funds sold" in Schedule RC, Item 4.a, "Loans and Leases, net of unearned income", and in
Schedule RC-C, part 1.
</TABLE>
<PAGE> 8
<TABLE>
<S> <C> <C> <C> <C> <C>
U.S. Trust Company of Texas, N.A. Call Date: 06/30/97 State #: 6797 FFIEC 034
2100 Ross Avenue, Suite 2700 Vendor ID: D Cert #: 33217 RC-2
Dallas, TX 75201 Transits: 11101765
10
Schedule RC - Continued
Dollar Amounts in Thousands
- ------------------------------------------------------------------------------------------------------------------
LIABILITIES
13. Deposits:
a. In domestic offices (sum of totals of RCON
columns A and C from Schedule RC-E) .............................. RCON 2200 116,826 13.a
(1) Noninterest-bearing(1) ....................................... 6631 7,804 13.a.1
(2) Interest-bearing ............................................. 6636 109,022 13.a.2
b. In foreign offices, Edge and Agreement subsidiaries, and IBFs
(1) Noninterest-bearing ................................................
(2) Interest-bearing ................................................... RCON
14. Federal funds purchased(2) and securities sold under
agreements to repurchase .............................................................. 2800 0 14
15. a. Demand notes issued to the U.S. Treasury ........................................... 2840 0 15.a
b. Trading liabilities ................................................................ 3548 0 15.b
16. Other borrowed money (includes mortgage indebtedness and
obligations under capitalized leases):
a. With a remaining maturity of one year or less ...................................... 2332 5,000 16.a
b. With a remaining maturity of more than one year through
three years ........................................................................ A547 3,000 16.b
c. With a remaining maturity of more than three years ................................. A548 3,000 16.c
17. Not applicable
18. Bank's liability on acceptances executed and outstanding .............................. 2920 0 18.
19. Subordinated notes and debentures(3) .................................................. 3200 0 19.
20. Other liabilities (from Schedule RC-G) ................................................ 2930 1,393 20.
21. Total liabilities (sum of items 13 through 20) ........................................ 2948 129,219 21.
22. Not applicable
EQUITY CAPITAL
RCON
23. Perpetual preferred stock and related surplus ......................................... 3838 7,000 23.
24. Common stock .......................................................................... 3230 500 24.
25. Surplus (exclude all surplus related to preferred stock) .............................. 3639 8,384 25.
26. a. Undivided profits and capital reserves ............................................. 3632 5,404 26.a
b. Net unrealized holding gains (losses) on available-for-sale securities ............. 8434 73 26.b
27. Cumulative foreign currency translation adjustments ...................................
28. a. Total equity capital (sum of items 23 through 27) .................................. 3210 21,361 28.a
b. Losses deferred pursuant to 12 U.S.C. 1823(j) ...................................... 0306 0 28.b
c. Total equity capital and losses deferred pursuant to 12 U.S.C. 1823(j)
(sum of items 28.a and 28.b) ....................................................... 3559 21,361 28.c
29. Total liabilities, equity capital, and losses deferred pursuant to
12 U.S.C. 1823(j) (sum of items 21 and 28.c) .......................................... 2257 160,580 29.
Memorandum
To be reported only with the March Report of Condition.
1. Indicate in the box at the right the number of the statement below that describes
the most comprehensive level of auditing work performed for the bank by RCON Number
independent external auditors as of any date during 1996 ............................. 6724 N/A M.1
</TABLE>
1 = Independent audit of the bank conducted in accordance with generally
accepted auditing standards by a certified public accounting firm which
submits a report on the bank
2 = Independent audit of the bank's parent holding company conducted in
accordance with generally accepted auditing standards by a certified public
accounting firm which submits a report on the consolidated holding company
(but not on the bank separately)
3 = Director's examination of the bank conducted in accordance with generally
accepted auditing standards by a certified public accounting firm (may be
required by state chartering authority)
4 = Director's examination of the bank performed by other external auditors (may
be required by state chartering authority)
5 = Review of the bank's financial statements by external auditors
6 = Compilation of the bank's financial statements by external auditors
7 = Other audit procedures (excluding tax preparation work)
8 = No external audit work
(1) Includes total demand deposits and noninterest-bearing time and savings
deposits.
(2) Report term federal funds purchased in Schedule RC, item 16, `Other
borrowed money.'
(3) Includes limited-life preferred stock and related surplus.
<PAGE> 1
EXHIBIT 99.3
LETTER OF TRANSMITTAL
THE EXCHANGE OFFER WILL EXPIRE AT 5:00P.M., NEW YORK CITY
TIME, ON _____, 1997, UNLESS EXTENDED (THE "EXPIRATION DATE").
HORSESHOE GAMING, L.L.C.
LETTER OF TRANSMITTAL
9-3/8% SENIOR SUBORDINATED NOTES DUE 2007
To: U.S. Trust Company of Texas, N.A., The Exchange Agent
<TABLE>
<S> <C>
By Registered or Certified Mail: By Overnight Courier:
U.S. Trust Company of Texas, N.A. U.S. Trust Company of Texas, N.A.
c/o United States Trust Company of New York c/o United States Trust Company of New York
P.O. Box 841 770 Broadway, 13th Floor
Peter Cooper Station New York, New York 10003
New York, New York 10276-0841 Attention: Corporate Trust Municipal Operations
By Hand: By Facsimile:
U.S. Trust Company of Texas, N.A. (212) 420-6504
c/o United States Trust Company of New York Attention: Customer Service
111 Broadway, Lower Level
New York, New York 10006-1906 Confirm by telephone:
Attention: Corporate Trust Operations (800) 225-2398
</TABLE>
Delivery of this instrument to an address other than as set forth above
or transmission of instructions via a facsimile number other than the one listed
above will not constitute a valid delivery. The instructions accompanying this
Letter of Transmittal should be read carefully before this Letter of Transmittal
is completed.
The undersigned acknowledges that he or she has received the Prospectus
dated __________, 1997, (the "Prospectus") of Horseshoe Gaming, L.L.C. (the
"Company") and this Letter of Transmittal (the "Letter of Transmittal"), which
together constitute the Company's offer (the "Exchange Offer") to exchange
$1,000 principal amount of its 9-3/8% Senior Subordinated Notes due 2007, Series
B (the "New Notes") which have been registered under the Securities Act of 1933,
as amended (the "Securities Act"), pursuant to a Registration Statement of which
the Prospectus is a part, for each $1,000 principal amount of its outstanding
9-3/8% Senior Subordinated Notes due 2007, Series A (the "Old Notes"), of which
$160,000,000 principal amount is outstanding. Other capitalized terms used but
not defined herein have the meaning given to them in the Prospectus.
The Letter of Transmittal is to be used by Holders of Old Notes (i) if
certificates representing the Old Notes are to be physically delivered herewith;
or (ii) if tender of Old Notes is to be made by book-entry transfer to the
Exchange Agent's account at The Depository Trust Company ("DTC"), pursuant to
the procedures set forth in the Prospectus under "The Exchange Offer -
Procedures for Tendering" by any financial institution that is a participant in
DTC and whose name appears on a security position listing as the owner of Old
Notes; or (iii) if tender of Old Notes is to be made according to the guaranteed
delivery procedures set forth in the Prospectus under "The Exchange Offer -
Guaranteed Delivery Procedures." Delivery of documents to DTC does not
constitute delivery to the Exchange Agent.
The term "Holder" with respect to the Exchange Offer means any person
(i) 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; or (ii) whose Old Notes are held of record by DTC who desires
to deliver such Old Notes by book-entry transfer at DTC. The undersigned has
completed, executed and delivered this Letter of Transmittal to indicate the
action the undersigned desires to take with respect to the Exchange Offer.
Holders who wish to tender their Old Notes must complete this letter in its
entirety.
<PAGE> 2
PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL
CAREFULLY BEFORE CHECKING ANY BOX BELOW
<TABLE>
<S> <C> <C>
--------------------------------------------------------------------------------------------------
DESCRIPTION OF 9-3/8% SENIOR SUBORDINATED NOTES DUE 2007, SERIES A ("OLD NOTES"):
--------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
NAME(S) AND ADDRESS(ES) OF AGGREGATE PRINCIPAL TENDERED (MUST BE IN
REGISTERED HOLDER(S) AMOUNT REPRESENTED INTEGRAL MULTIPLE OF
(PLEASE FILL IN, IF BLANK) BY CERTIFICATE(S) $1,000)*
--------------------------------------------------------------------------------------------------
--------------------------------------------
--------------------------------------------
--------------------------------------------
--------------------------------------------
--------------------------------------------
--------------------------------------------
Total
--------------------------------------------------------------------------------------------------
</TABLE>
* Unless indicated in the column labeled "Principal Amount Tendered," any
tendering Holder of Old Notes will be deemed to have tendered the entire
aggregate principal amount represented by the column labeled "Aggregate
Principal Amount Represented by Certificate(s)."
If the space provided above is inadequate, list the principal amounts on a
separate signed schedule and affix the list to this Letter of Transmittal.
The minimum permitted tender is $1,000 in principal amount of Old Notes. All
other tenders must be in integral multiples of $1,000.
<TABLE>
<S> <C>
- --------------------------------------------- ---------------------------------------------
SPECIAL PAYMENT INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 4, 5 AND 6) (SEE INSTRUCTIONS 4, 5 AND 6)
To be completed ONLY if certificates for To be completed ONLY if certificates for
Old Notes in a principal amount not Old Notes in a principal amount not
tendered or not accepted for exchange, or tendered or not accepted for exchange, or
New Notes issued in exchange for Old Notes New Notes issued in exchange for Old Notes
accepted for exchange, are to be issued in accepted for exchange, are to be sent to
the name of someone other than the someone other than the undersigned, or to
undersigned, or if the Old Notes tendered the undersigned at an address other than
by book-entry transfer that are not that shown above.
accepted for exchange are to be credited
to an account maintained by DTC.
ISSUE CERTIFICATE(S) TO: MAIL TO:
Name_____________________________________ Name_____________________________________
(Please Print) (Please Print)
Address___________________________________ Address___________________________________
__________________________________________ ------------------------------------------
(Include Zip Code) (Include Zip Code)
__________________________________________ ------------------------------------------
(Tax Identification or Social Security No.) (Tax Identification or Social Security No.)
- ------------------------------------------- -------------------------------------------
</TABLE>
[ ] CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY DTC TO THE EXCHANGE
AGENT'S ACCOUNT AT DTC AND COMPLETE THE FOLLOWING:
Name of Tendering Institution:______________________________________________
DTC Book-Entry Account No.:_________________________________________________
Transaction Code No.:_______________________________________________________
[ ] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO.
Name:_______________________________________________________________________
Address:____________________________________________________________________
____________________________________________________________________
____________________________________________________________________
[ ] CHECK HERE IF YOU ARE A BROKER-DEALER AND ANY OF THE OLD NOTES YOU ARE
TENDERING WERE ACQUIRED DIRECTLY FROM THE COMPANY.
Principal Amount of Tendered Old Notes Acquired from the Company:
____________________________________________________________________________
2
<PAGE> 3
LADIES AND GENTLEMEN:
Subject to the terms and conditions of the Exchange Offer, the
undersigned hereby tenders to the Company the principal amount of Old Notes
indicated above. Subject to and effective upon the acceptance for exchange of
the principal amount of Old Notes tendered in accordance with this Letter of
Transmittal, the undersigned sells, assigns and transfers to, or upon the order
of, the Company all right, title and interest in and to the Old Notes tendered
hereby. The undersigned hereby irrevocably constitutes and appoints the Exchange
Agent its agent and attorney-in-fact (with full knowledge that the Exchange
Agent also acts as the agent of the Company) with respect to the tendered Old
Notes with full power of substitution to (i) deliver certificates for such Old
Notes to the Company, or transfer ownership of such Old Notes on the account
books maintained by DTC, and deliver all accompanying evidences of transfer and
authenticity to, or upon the order of, the Company; and (ii) present such Old
Notes for transfer on the books of the Company and receive all benefits and
otherwise exercise all rights of beneficial ownership of such Old Notes, all in
accordance with the terms of the Exchange Offer. The power of attorney granted
in this paragraph shall be deemed irrevocable and coupled with an interest.
The undersigned hereby represents and warrants that he or she has full
power and authority to tender, sell, assign and transfer the Old Notes tendered
hereby and that the Company will acquire good and unencumbered title thereto,
free and clear of all liens, restrictions, charges and encumbrances and not
subject to any adverse claim, when the same are acquired by the Company. THE
UNDERSIGNED HEREBY FURTHER REPRESENTS THAT ANY NEW NOTES ACQUIRED IN EXCHANGE
FOR OLD NOTES TENDERED HEREBY WILL HAVE BEEN ACQUIRED IN THE ORDINARY COURSE OF
BUSINESS OF THE HOLDER RECEIVING SUCH NEW NOTES, WHETHER OR NOT THE UNDERSIGNED,
THAT NEITHER THE HOLDER NOR ANY SUCH OTHER PERSON HAS AN ARRANGEMENT WITH ANY
PERSON TO PARTICIPATE IN THE DISTRIBUTION OF SUCH NEW NOTES AND THAT NEITHER THE
HOLDER NOR ANY SUCH OTHER PERSON IS AN "AFFILIATE," AS DEFINED UNDER RULE 405 OF
THE SECURITIES ACT, OF THE COMPANY OR ANY OF ITS SUBSIDIARIES. If the
undersigned is not a broker-dealer, the undersigned represents that it is not
engaged in, and does not intend to engage in, a distribution of New Notes. If
the undersigned is a broker-dealer that will receive New Notes, it represents
that, except to the extent indicated at the bottom of the preceding page, the
Old Notes to be exchanged for New Notes were acquired as a result of
market-making activities or other trading activities and not acquired directly
from the Company, and it acknowledges that it will deliver a prospectus in
connection with any resale of such New Notes; however, by so acknowledging and
by delivering a prospectus, the undersigned will not be deemed to admit that it
is an "underwriter" within the meaning of the Securities Act. IF THE UNDERSIGNED
IS A BROKER-DEALER, IT ACKNOWLEDGES THAT IT MAY NOT USE THE PROSPECTUS IN
CONNECTION WITH RESALES OF NEW NOTES RECEIVED IN EXCHANGE FOR OLD NOTES THAT
WERE ACQUIRED DIRECTLY FROM THE COMPANY. The undersigned will, upon request,
execute and deliver any additional documents deemed by the Exchange Agent or the
Company to be necessary or desirable to complete the assignment, transfer and
purchase of the Old Notes tendered hereby.
For purposes of the Exchange Offer, 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.
If any tendered Old Notes are not accepted for exchange pursuant to the
Exchange Offer for any reason, certificates for any such unaccepted Old Notes
will be returned (except as noted below with respect to tenders through DTC),
without expense, to the undersigned at the address shown below or at a different
address as may be indicated herein under "Special Payment Instructions" as
promptly as practicable after the Expiration Date.
All authority conferred or agreed to be conferred by this Letter of
Transmittal shall survive the death, incapacity or dissolution of the
undersigned and every obligation of the undersigned under this Letter of
Transmittal shall be binding upon the undersigned's heirs, personal
representatives, successors and assigns.
The undersigned understands that tenders of Old Notes pursuant to the
procedures described under the caption "The Exchange Offer - Procedures for
Tendering" in the Prospectus and in the instructions hereto will constitute a
binding agreement between the undersigned and the Company upon the terms and
subject to the conditions of the Exchange Offer.
Unless otherwise indicated under "Special Payment Instructions," please
issue the certificates representing the New Notes issued in exchange for the Old
Notes accepted for exchange and return any Old Notes not tendered or not
exchanged, in the name(s) of the undersigned (or in either such event in the
case of Old Notes tendered by DTC, by credit to the undersigned's account at
DTC). Similarly, unless otherwise indicated under "Special Delivery
Instructions," please send the certificates representing the New Notes issued in
exchange for the Old
3
<PAGE> 4
Notes accepted for exchange and any certificates for Old Notes not tendered or
not exchanged (and accompanying documents, as appropriate) to the undersigned at
the address shown below the undersigned's signature(s), unless, in either event,
tender is being made through DTC. In the event that both "Special Payment
Instructions" and "Special Delivery Instructions" are completed, please issue
the certificates representing the New Notes issued in exchange for the Old Notes
accepted for exchange and return any Old Notes not tendered or not exchanged in
the name(s) of, and send said certificates to, the person(s) so indicated. The
undersigned recognizes that the Company has no obligation pursuant to the
"Special Payment Instructions" and "Special Delivery Instructions" to transfer
any Old Notes from the name of the registered holder(s) thereof if the Company
does not accept for exchange any of the Old Notes so tendered.
Holders of Old Notes who wish to tender their Old Notes and (i) whose
Old Notes are not immediately available, or (ii) who cannot deliver their Old
Notes, this Letter of Transmittal or any other documents required hereby to the
Exchange Agent, or cannot complete the procedure for book-entry transfer, prior
to the Expiration Date, may tender their Old Notes according to the guaranteed
delivery procedures set forth in the Prospectus under the caption "The Exchange
Offer - Guaranteed Delivery Procedures". See Instruction 1 regarding the
completion of the Letter of Transmittal printed below.
PLEASE SIGN HERE WHETHER OR NOT
OLD NOTES ARE BEING PHYSICALLY TENDERED HEREBY
X
- ------------------------------------------- -------------
DATE
X
- ------------------------------------------- -------------
SIGNATURE(S) OF REGISTERED HOLDER(S) DATE
OR AUTHORIZED SIGNATORY
AREA CODE AND TELEPHONE NUMBER:
THE ABOVE LINES MUST BE SIGNED BY THE REGISTERED HOLDER(S) OF OLD NOTES
AS THEIR NAME(S) APPEAR(S) ON THE OLD NOTES OR, IF THE OLD NOTES ARE TENDERED BY
A PARTICIPANT IN DTC, AS SUCH PARTICIPANT'S NAME APPEARS ON A SECURITY POSITION
LISTING AS THE OWNER OF THE OLD NOTES, OR BY PERSON(S) AUTHORIZED TO BECOME
REGISTERED HOLDER(S) BY A PROPERLY COMPLETED BOND POWER FROM THE REGISTERED
HOLDER(S), A COPY OF WHICH MUST BE TRANSMITTED WITH THIS LETTER OF TRANSMITTAL.
IF OLD NOTES TO WHICH THIS LETTER OF TRANSMITTAL RELATES ARE HELD OF RECORD BY
TWO OR MORE JOINT HOLDERS, THEN ALL SUCH HOLDERS MUST SIGN THIS LETTER OF
TRANSMITTAL. IF SIGNATURE IS BY A TRUSTEE, EXECUTOR, ADMINISTRATOR, GUARDIAN,
ATTORNEY-IN-FACT, OFFICER OF A CORPORATION OR OTHER PERSON ACTING IN A FIDUCIARY
OR REPRESENTATIVE CAPACITY, SUCH PERSON MUST (I) SET FORTH HIS OR HER FULL TITLE
BELOW AND (II) UNLESS WAIVED BY THE COMPANY, SUBMIT EVIDENCE SATISFACTORY TO THE
COMPANY OF SUCH PERSON'S AUTHORITY SO TO ACT. SEE INSTRUCTION 4 REGARDING THE
COMPLETION OF THIS LETTER OF TRANSMITTAL PRINTED BELOW.
NAME(S): _________________________________________________________________
_________________________________________________________________
(PLEASE PRINT)
CAPACITY: _________________________________________________________________
ADDRESS: _________________________________________________________________
_________________________________________________________________
(INCLUDE ZIP CODE)
SIGNATURE(S) GUARANTEED BY AN ELIGIBLE INSTITUTION:
(IF REQUIRED BY INSTRUCTION 4)
____________________________________________________
(AUTHORIZED SIGNATURE)
____________________________________________________
(TITLE)
____________________________________________________
(NAME OF FIRM)
DATED:___________________________________, 199_
4
<PAGE> 5
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER
1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND OLD NOTES. The tendered
Old Notes (or a confirmation of a book-entry transfer into the Exchange Agent's
account at DTC of all Old Notes delivered electronically), as well as a properly
completed and duly executed copy of this Letter of Transmittal or facsimile
hereof and any other documents required by this Letter of Transmittal, 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. The method of delivery of the
tendered Old Notes, this Letter of Transmittal and all other required documents
to the Exchange Agent is at the election and risk of the Holder and, except as
otherwise provided below, the delivery will be deemed made only when actually
received by the Exchange Agent. Instead of delivery by mail, it is recommended
that the Holder 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.
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, this
Letter of Transmittal or any other documents required hereby to the Exchange
Agent, or cannot complete the procedure for book-entry transfer, prior to 5:00
P.M., New York City time, on the Expiration Date must tender their Old Notes
according to the guaranteed delivery procedures set forth in the Prospectus.
Pursuant to such procedures: (i) such tender must be made by or through 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 promulgated by the Securities and Exchange Commission under
the Securities Exchange Act of 1934, as amended (each, an "Eligible
Institution"); (ii) prior to the Expiration Date, the Exchange Agent must have
received from the 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, this Letter of Transmittal (or facsimile hereof)
together with the certificate(s) representing the Old Notes (or a confirmation
of electronic delivery of book-entry delivery into the Exchange Agent's account
at DTC) and any other required documents will be deposited by the Eligible
Institution with the Exchange Agent; and (iii) such properly completed and
executed Letter of Transmittal (or facsimile hereof), as well as all other
documents required by this Letter of Transmittal and the certificate(s)
representing all tendered Old Notes in proper form for transfer (or a
confirmation of electronic delivery of book-entry delivery into the Exchange
Agent's account at DTC), must be received by the Exchange Agent within five New
York Stock Exchange trading days after the Expiration Date, all as provided in
the Prospectus under the caption "Exchange Offer - Guaranteed Delivery
Procedures." Any Holder of Old Notes who wishes to tender his or her Old Notes
pursuant to the guaranteed delivery procedures described above must ensure that
the Exchange Agent receives the Notice of Guaranteed Delivery prior to 5:00
P.M., New York City time, on 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.
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 or
irregularities or conditions of tender as to the Exchange Offer and/or
particular Old Notes. The Company's interpretation of the terms and conditions
of the Exchange Offer (including the instructions in this Letter of Transmittal)
shall 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 defects or irregularities have been
cured or waived. Any Old Notes received by the
5
<PAGE> 6
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 this
Letter of Transmittal, as soon as practicable following the Expiration Date.
2. TENDER BY HOLDER. Only a Holder of Old Notes may tender such Old
Notes in the Exchange Offer. Any beneficial holder of Old Notes who is not the
registered holder and who wishes to tender should arrange with the registered
holder to execute and deliver this Letter of Transmittal on his or her behalf or
must, prior to completing and executing this Letter of Transmittal and
delivering his or her 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.
3. PARTIAL TENDERS. Tenders of Old Notes will be accepted only in
integral multiples of $1,000. If less than the entire principal amount of any
Old Notes is tendered, the tendering Holder should fill in the principal amount
tendered in the third column of the box entitled "Description of 9-3/8% Senior
Subordinated Notes due 2007, Series A ("Old Notes")" above. The entire principal
amount of Old Notes delivered to the Exchange Agent will be deemed to have been
tendered unless otherwise indicated. If the entire principal amount of all Old
Notes is not tendered, then Old Notes for the principal amount of Old Notes not
tendered and a certificate or certificates representing New Notes issued in
exchange for any Old Notes accepted will be sent to the Holder at his or her
registered address, unless a different address is provided in the appropriate
box on this Letter of Transmittal, promptly after the Old Notes are accepted for
exchange.
4. SIGNATURES ON THE LETTER OF TRANSMITTAL; BOND POWERS AND
ENDORSEMENTS; GUARANTEE OF SIGNATURES. If this Letter of Transmittal (or
facsimile hereof) is signed by the record Holder(s) of the Old Notes tendered
hereby, the signature must correspond with the name(s) as written on the face of
the Old Notes or, if the Old Notes are tendered by a participant in DTC, as such
participant's name appears on a security position listing as the owner of the
Old Notes, without alteration, enlargement or any change whatsoever.
If this Letter of Transmittal (or facsimile hereof) is signed by the
registered Holder or Holders of Old Notes tendered and the certificate or
certificates for New Notes issued in exchange therefor are to be issued (or any
untendered principal amount of Old Notes is to be reissued) to the registered
Holder, the said Holder need not and should not endorse any tendered Old Notes,
nor provide a separate bond power. In any other case, such Holder must either
properly endorse the Old Notes tendered or transmit a properly completed
separate bond power with this Letter of Transmittal, with the signatures on the
endorsement or bond power guaranteed by an Eligible Institution.
If this Letter of Transmittal (or facsimile hereof) is signed by a
person other than the registered Holder or Holders of any Old Notes listed, 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 this Letter of Transmittal (or facsimile hereof) or any Old Notes or
bond powers are signed by trustees, executors, administrators, guardians,
attorneys-in-fact or 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 this Letter of Transmittal.
Endorsements on Old Notes or signatures on bond powers required by this
Instruction 4 must be guaranteed by an Eligible Institution.
Except as otherwise provided below, all signatures on this Letter of
Transmittal (or facsimile hereof) must be guaranteed by an Eligible Institution.
Signatures on this Letter of Transmittal need not be guaranteed if (i) this
Letter of Transmittal is signed by the registered Holder(s) of the Old Notes
tendered herewith and such Holder(s) have not completed the box set forth herein
entitled "Special Payment Instructions" or the box entitled "Special Delivery
Instructions;" or (ii) such Old Notes are tendered for the account of an
Eligible Institution.
5. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. Tendering Holders should
indicate, in the applicable box or boxes, the name and address to which New
Notes or substitute Old Notes for principal amounts not tendered or not accepted
for exchange are to be issued or sent, if different from the name and address of
the person signing
6
<PAGE> 7
this Letter of Transmittal (or in the case of tender of Old Notes through DTC,
if different from DTC). In the case of issuance in a different name, the
taxpayer identification or social security number of the person named must also
be indicated.
6. TAX IDENTIFICATION NUMBER. Federal income tax law requires that a
Holder whose offered Old Notes are accepted for exchange must provide the
Company (as payor) with his, her or its correct Taxpayer Identification Number
("TIN"), which, in the case of an exchanging Holder who is an individual, is his
or her social security number. If the Company is not provided with the correct
TIN or an adequate basis for exemption, such Holder may be subject to a $50
penalty imposed by the Internal Revenue Service (the "IRS"). In addition,
delivery to such Holder of New Notes may be subject to backup withholding in an
amount equal to 31% of the gross proceeds resulting from the Exchange Offer. If
withholding results in an overpayment of taxes, a refund may be obtained from
the IRS by the Holder. Exempt Holders (including, among others, all corporations
and certain foreign individuals) are not subject to these backup withholding and
reporting requirements. See instructions to the enclosed Form W-9.
To prevent backup withholding, each exchanging Holder must provide his,
her or its correct TIN by completing the Form W-9 enclosed herewith, certifying
that the TIN provided is correct (or that such Holder is awaiting a TIN) and
that (i) the Holder is exempt from backup withholding; (ii) the Holder has not
been notified by the IRS that he, she or it is subject to backup withholding as
a result of a failure to report all interest or dividends; or (iii) the IRS has
notified the Holder that he, she or it is no longer subject to backup
withholding. In order to satisfy the Exchange Agent that a foreign individual
qualifies as an exempt recipient, such Holder must submit a statement signed
under penalty of perjury attesting to such exempt status. Such statements may be
obtained from the Exchange Agent. If the Old Notes are in more than one name or
are not in the name of the actual owner, consult the Form W-9 for information on
which TIN to report. If you do not provide your TIN to the Company within 60
days, backup withholding will begin and continue until you furnish your TIN to
the Company.
7. TRANSFER TAXES. 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 hereby, or if tendered Old Notes are registered in the
name of any person other than the person signing this 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 on 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 this Letter of Transmittal,
the amount of such transfer taxes will be billed directly to such tendering
Holder.
Except as provided in this Instruction 7, it will not be necessary for
transfer tax stamps to be affixed to the Old Notes listed in this Letter of
Transmittal.
8. WAIVER OF CONDITIONS. The Company reserves the absolute right to
amend, waive or modify specified conditions in the Exchange Offer in the case of
any Old Notes tendered.
9. MUTILATED, LOST, STOLEN OR DESTROYED OLD NOTES. Any tendering Holder
whose Old Notes have been mutilated, lost, stolen or destroyed should contact
the Exchange Agent at the address indicated herein for further instructions.
7
<PAGE> 8
10. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and requests
for assistance and requests for additional copies of the Prospectus or this
Letter of Transmittal may be directed to the Exchange Agent at the address
specified in the Prospectus. Holders may also contact their broker, dealer,
commercial bank, trust company or other nominee for assistance concerning the
Exchange Offer.
(DO NOT WRITE IN SPACE BELOW)
CERTIFICATE OLD NOTES OLD NOTES
SURRENDERED TENDERED ACCEPTED
----------------------------------------------------------------
----------------------------------------------------------------
----------------------------------------------------------------
Delivery Prepared by_____________________ Checked By__________ Date_____________
8
<PAGE> 9
<TABLE>
<S> <C>
FORM W-9 REQUEST FOR TAXPAYER GIVE FORM TO THE
(Rev. March 1994) IDENTIFICATION NUMBER AND CERTIFICATION REQUESTER. DO NOT
Department of the SEND TO THE IRS
Treasury Internal
Revenue Service)
- ------------------------------------------------------------------------------------------------------------------
Please Name (If joint names, list first and circle the name of the person or entity whose number you enter in
print Part 1 below. See instructions on page 2 if your name has changed.)
or ----------------------------------------------------------------------------------------------------------
type Business name (Sole proprietors see instructions on page 2.)
----------------------------------------------------------------------------------------------------------
Please check appropriate box: [ ] Individual/Sole proprietor [ ] Corporation
[ ] Partnership [ ] Other . . . . . . . . . . . . .
----------------------------------------------------------------------------------------------------------
Address (number, street, and apt. or suite no.) Requester's name and address (optional)
------------------------------------------------------------------
City, state, and ZIP code
- -------------------------------------------------------------------------------------------------------------------
Part I Taxpayer Identification Number (TIN) List account number(s) here (optional)
- ---------------------------------------------------------------------------
Enter your TIN in the appropriate box. For Social Social Security Number
Security Number individuals, this is your social
security number (SSN). For sole proprietors, see
the instructions on page 2. For other entities,
it is your employer identification number (EIN).
If you do not have a number, see HOW TO GET A
TIN below. OR Part II For Payees Exempt From Backup
With-holding (See Part II
Instructions on page 2)
Note: If the account is in more than one name, Employer Identification
see the chart on page 2 for guidelines on whose Number
number to enter.
</TABLE>
Part III
- --------------------------------------------------------------------------------
Under penalties of perjury, I certify that:
1. The number shown on this form is my correct taxpayer identification (or I am
waiting for a number to be issued to me), and
2. I am not subject to backup withholding because: (a) I am exempt from backup
withholding, or (b) I have not been notified by the Internal Revenue Service
that I am subject to backup withholding as a result of a failure to report
all interest or dividends, or (c) the IRS has notified me that I am no
longer subject to backup withholding.
CERTIFICATION INSTRUCTIONS. - You must cross out item 2 above if you have been
notified by the IRS that you are currently subject to backup withholding
because of underreporting interest or dividends on your tax return. For real
estate transactions, item 2 does not apply. For mortgage interest paid, the
acquisition or abandonment of secured property, cancellation of debt,
contributions to an individual retirement arrangement (IRA), and generally
payments other than interest and dividends, you are not required to sign the
Certification, but you must provided your correct TIN. (Also, see Part III
Instructions on page 2.)
- --------------------------------------------------------------------------------
Sign
Here Signature Date
- --------------------------------------------------------------------------------
Section references are to the Internal Revenue Code.
PURPOSE OF FORM. - A person who is required to file an information return with
the IRS must get your correct TIN to report income paid to you, real estate
transactions, mortgage interest you paid, the acquisition or abandonment of
secured property, cancellation of debt, or contributions you made to an IRA. Use
Form W-9 to give your correct TIN to the requester (the person requesting your
TIN) and, when applicable, (1) to certify the TIN you are giving is correct (or
you are waiting for a number to be issued), (2) to certify you are not subject
to backup withholding, or (3) to claim exemption from backup withholding if you
are an exempt payee. Giving your correct TIN and making the appropriate
certifications will prevent certain payments from being subject to backup
withholding.
Note: If a requester gives you a form other than a W-9 to request your TIN, you
must use the requester's form if it is substantially similar to this Form W-9.
WHAT IS BACKUP WITHHOLDING? - Persons making certain payments to you must
withhold and pay to the IRS 31% of such payments under certain conditions. This
is called "backup withholding." Payments that could be subject to backup
withholding include interest, dividends, broker and barter exchange
transactions, rents, royalties, nonemployee pay, and certain payments from
fishing boat operators. Real estate transactions are not subject to backup
withholding.
If you give the requester your correct TIN, make the proper certifications,
and report all your taxable interest and dividends on your tax return, your
payments will not be subject to backup withholding. Payments you receive will be
subject to backup withholding if:
1. You do not furnish your TIN to the requester, or
2. The IRS tells the requester that you furnished an incorrect TIN, or
3. The IRS tells you that you are subject to backup withholding because you
did not report all your interest and dividends on your tax return (for
reportable interest and dividends only), or
4. You do not certify to the requester that you are not subject to backup
withholding under 3 above (for reportable interest and dividend accounts opened
after 1983 only), or
5. You do not certify your TIN. See the Part III instructions for
exceptions.
Certain payees and payments are exempt from backup withholding and
information reporting. See the Part II instructions and the separate
INSTRUCTIONS FOR THE REQUESTER OF FORM W-9.
HOW TO GET A TIN. - If you do not have a TIN, apply for one immediately. To
apply, get Form SS-5, Application for a Social Security Number Card (for
individuals), from your local office of the Social Security Administration, or
FORM SS-4, Application for Employer Identification Number (for businesses and
all other entities), from your local IRS office.
If you do not have a TIN, write "Applied For" in the space for the TIN in
Part I, sign and date the form, and give it to the requester. Generally, you
will then have 60 days to get a TIN and give it to the requester. If the
requester does not receive your TIN within 60 days, backup withholding, if
applicable, will begin and continue until you furnish your TIN.
<PAGE> 10
Form W-9 (Rev. 3-94) Page 2
- --------------------------------------------------------------------------------
Note: Writing "Applied For" on the form means that you have already applied for
a TIN or that you intend to apply for one soon.
As soon as you receive your TIN, complete another Form W-9, include
your TIN, sign and date the form, and give it to the requester.
PENALTIES
FAILURE TO FURNISH TIN. - If you fail to furnish your correct TIN to a
requester, you are subject to a penalty of $50 for each such failure unless your
failure is due to reasonable cause and not to willful neglect.
CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING. - If you make a
false statement with no reasonable basis that results in no backup withholding,
you are subject to a $500 penalty.
CRIMINAL PENALTY FOR FALSIFYING INFORMATION. - Willfully falsifying
certifications or affirmations may subject you to criminal penalties including
fines and/or imprisonment.
MISUSE OF TINS. - If the requester discloses or uses TINs in violation of
Federal law, the requester may be subject to civil and criminal penalties.
SPECIFIC INSTRUCTIONS
NAME. - If you are an individual, you must generally enter the name shown on
your social security card. However, if you have changed your last name, for
instance, due to marriage, without informing the Social Security Administration
of the name change, please enter your first name, the last name shown on your
social security card, and your new last name.
Sole Proprietor. You must enter your individual name. (Enter either
your SSN or EIN in Part 1.) You may also enter your business name or "doing
business as" name on the business name line. Enter your name as shown on your
social security card and business name as it was used to apply for your EIN on
Form SS-4.
PART I - TAXPAYER IDENTIFICATION NUMBER (TIN)
You must enter your TIN in the appropriate box. If you are a sole proprietor,
you may enter your SSN or EIN. Also see the chart on this page for further
clarification of name and TIN combinations. If you do not have a TIN, follow
the instructions under HOW TO GET A TIN on page 1.
PART II - FOR PAYEES EXEMPT FROM BACKUP WITHHOLDING
Individuals (including sole proprietor(s) are not exempt from backup,
withholding. Corporations are exempt from backup withholding for certain
payments, such as interests and dividends. For a complete list of exempt
payees, see the separate instructions for the Requester of Form W-9.
If you are exempt from backup withholding, you should still complete
this form to avoid possible erroneous backup withholding. Enter your correct
TIN in Part I, write "Exempt" in Part II, and sign and date the form. If you
are a nonresident alien or a foreign entity not subject to backup withholding,
give the requester a completed Form W-8, Certificate of Foreign Status.
PART III - CERTIFICATION
For a joint account, only the person whose TIN is shown in Part 1 should sign.
1. INTEREST, DIVIDEND, AND BARTER EXCHANGE ACCOUNTS OPENED BEFORE 1984
AND BROKER ACCOUNTS CONSIDERED ACTIVE DURING 1983. You must give your correct
TIN, but you do not have to sign the certification.
2. INTEREST, DIVIDEND, BROKER, AND BARTER EXCHANGE ACCOUNTS OPENED
AFTER 1983 AND BROKER ACCOUNTS CONSIDERED INACTIVE DURING 1983. You must sign
the certification or backup withholding will apply. If you are subject to
backup withholding and you are merely providing your correct TIN to requester,
you must cross out Item 2 in the certification before signing the form.
3. REAL ESTATE TRANSACTIONS. You must sign the certification. You may
cross out Item 2 of the certification.
4. OTHER PAYMENTS. You must give your correct TIN, but you do not have
to sign the certification unless you have been notified of an incorrect TIN.
Other payments include payments made in the course of the requester's trade or
business for rents, royalties, goods (other than bills for merchandise),
medical and health care services, payments to a nonemployee for services
(including attorney and accounting fees), and payments to certain fishing boat
crew members.
5. MORTGAGE INTEREST PAID BY YOU. ACQUISITION OR ABANDONMENT OF SECURED
PROPERTY, CANCELLATION OF DEBT, OR IRA CONTRIBUTIONS. You must give your
correct TIN, but you do not have to sign the certification.
PRIVACY ACT NOTICE
Section 6109 requires you to give your correct TIN to persons who must file
information returns with the IRS to report interest, dividends, and certain
other income paid to you, mortgage interest you paid, the acquisition of
abandonment of secured property, cancellation of debt, or contributions you
made to an IRA. The IRS uses the numbers for identification purposes and to
help verify the accuracy of your tax return. You must provide your TIN whether
or not you are required to file a tax return. Payers must generally withhold
31% of taxable interest, dividend, and certain other payments to a payee who
does not give a TIN to a payer. Certain penalties may also apply.
WHAT NAME AND NUMBER TO GIVE THE REQUESTER
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
FOR THIS TYPE OF ACCOUNT GIVE NAME AND SSN OF:
- -------------------------------------------------------------------------------
<S> <C>
1. Individual The Individual
2. Two or more The actual owner of the
Individuals (joint account, or if combined
account) funds, the first individual
on the account.(1)
3. Custodian account of
a minor (Uniform Gift The minor(2)
to Minors Act)
4. a. The usual revocable
savings trust The grantor-trustee(1)
(grantor is also
trustee)
b. So-called trust
account that is not
a legal or valid The actual owner(1)
trust under state
law
5. Sole proprietorship The owner(3)
<CAPTION>
- -------------------------------------------------------------------------------
FOR THIS TYPE OF ACCOUNT GIVE NAME AND EIN OF:
- -------------------------------------------------------------------------------
<S> <C>
6. Sole proprietorship The owner(3)
7. A valid trust, estate, Legal entity(4)
or pension trust
8. Corporate The corporation
9. Association, club,
religious, charitable,
educational, or other The organization
tax-exempt organization
10. Partnership The partnership
11. A broker or registered
nominee The broker or nominee
12. Account with the
Department of
Agriculture in the
name of a public
entity (such as a state
or local government, The public entity
school district, or
prison) that receives
agricultural program
payments
</TABLE>
(1) List first, and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's SSN.
(3) You must show your individual name, but you may also enter your business or
"doing business as" name. You may use either your SSN or EIN.
(4) List first and circle the name of the legal trust, estate or pension trust.
(Do not furnish the TIN of the personal representative or trustee unless the
legal entity itself is not designated in the account title.)
Note: If no name is circled when more than one name is listed, the number
will be considered to be that of the first name listed.
<PAGE> 1
EXHIBIT 99.4
Notice of Guaranteed Delivery
for
9-3/8% Senior Subordinated Notes due 2007
of
HORSESHOE GAMING, L.L.C.
This form or one substantially equivalent hereto must be used to
accept the Exchange Offer of Horseshoe Gaming, L.L.C. (the "Company") made
pursuant to the Prospectus dated __________, 1997 (the "Prospectus") if
certificates for the 9-3/8% Senior Subordinated Notes due 2007, Series A (the
"Old Notes") of the Company are not immediately available or if the Old Notes,
the Letter of Transmittal or any other documents required thereby cannot be
delivered to the Exchange Agent or the procedure for book-entry transfer cannot
be completed, prior to 5:00 P.M., New York City time, on the Expiration Date
(as defined in the Prospectus). Such form may be delivered by hand or
transmitted by facsimile transmission, overnight courier or mail to the
Exchange Agent. Capitalized terms used but not defined herein have the meaning
given to them in the Prospectus.
To: U.S. Trust Company of Texas, N.A., The Exchange Agent
<TABLE>
<S> <C>
By Registered or Certified Mail: By Overnight Courier:
U.S. Trust Company of Texas, N.A. U.S. Trust Company of Texas, N.A.
c/o United States Trust Company of New York c/o United States Trust Company of New York
P.O. Box 841 770 Broadway, 13th Floor
Peter Cooper Station New York, New York 10003
New York, New York 10276-0841 Attention: Corporate Trust Municipal Operations
By Hand: By Facsimile:
U.S. Trust Company of Texas, N.A. (212) 420-6504
c/o United States Trust Company of New York Attention: Customer Service
111 Broadway, Lower Level
New York, New York 10006-1906 Confirm by telephone:
Attention: Corporate Trust Operations (800) 225-2398
</TABLE>
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS, OR TRANSMISSION OF
INSTRUCTIONS VIA A FACSIMILE, OTHER THAN AS SET FORTH ABOVE, DOES NOT
CONSTITUTE A VALID DELIVERY.
This form is not to be used to guarantee signatures. If a signature
on the Letter of Transmittal to be used to tender Old Notes is required to be
guaranteed by an "Eligible Institution" under the instructions thereto, such
signature guarantee must appear in the applicable space provided in the Letter
of Transmittal.
LADIES AND GENTLEMEN:
The undersigned hereby tenders to Horseshoe Gaming, L.L.C., a Delaware
limited liability company (the "Company"), upon the terms and subject to the
conditions set forth in the Prospectus and the Letter of Transmittal (which
together constitute the "Exchange Offer"), receipt of which is hereby
acknowledged, _______________________________ Old Notes pursuant to the
(principal amount of Old Notes)
guaranteed delivery procedures set forth in Instruction 1 of the Letter of
Transmittal.
<PAGE> 2
NOTE: SIGNATURES MUST BE PROVIDED WHERE INDICATED BELOW.
<TABLE>
<CAPTION>
Principal Amount(s) of Old Notes Name(s) of Record Holder(s)
<S> <C>
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PLEASE PRINT OR TYPE
Address . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . .
ZIP CODE
Area Code and Tel. No. . . . . . . . . . . . . .
Signature(s) . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . .
Dated: . . . . . . . . . . . . . . . . . . . . .
If Old Notes will be delivered by book-entry
transfer at The Depository Trust Company ("DTC"),
Depository Account No: . . . . . . . . . . . . .
</TABLE>
This Notice of Guaranteed Delivery must be signed by the registered
Holder(s) of Old Notes exactly as its (their) name(s) appear on certificates
for Old Notes or on a security position listing as the owner of Old Notes, or
by person(s) authorized to become registered Holder(s) by endorsements and
documents transmitted with this Notice of Guaranteed Delivery. If signature is
by a trustee, executor, administrator, guardian, attorney-in-fact, officer or
other person acting in a fiduciary or representative capacity, such person must
provide the following information.
Please print name(s) and address(es)
Name(s): . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capacity:. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Address(es): . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, 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 a commercial bank or trust company having an office or
correspondent in the United States or an "Eligible Guarantor Institution"
within the meaning of Rule 17Ad-15 under the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), hereby (a) represents that the above named
person(s) "own(s)" the Old Notes tendered hereby within the meaning of Rule
10b-4 under the Exchange Act, (b) represents that such tender of Old Notes
complies with Rule 10b-4 and (c) guarantees that delivery to the Exchange Agent
of certificates for the Old Notes tendered
2
<PAGE> 3
hereby, in proper form for transfer (or confirmation of the book-entry transfer
of such Old Notes into the Exchange Agent's Account at DTC, pursuant to the
procedures for book-entry transfer set forth in the Prospectus), with delivery
of a properly completed and duly executed Letter of Transmittal (or manually
signed facsimile thereof) with any required signature and any other required
documents, will be received by the Exchange Agent at one of its addresses set
forth above within five New York Stock Exchange trading days after the
Expiration Date.
THE UNDERSIGNED ACKNOWLEDGES THAT IT MUST DELIVER THE LETTER OF
TRANSMITTAL AND OLD NOTES TENDERED HEREBY TO THE EXCHANGE AGENT WITHIN THE TIME
PERIOD SET FORTH ABOVE AND THAT FAILURE TO DO SO COULD RESULT IN FINANCIAL LOSS
TO THE UNDERSIGNED.
<TABLE>
<S> <C>
Name of Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
AUTHORIZED SIGNATURE
Address . . . . . . . . . . . . . . . . . . . . .
Name . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . PLEASE PRINT OR TYPE
ZIP CODE
Title . . . . . . . . . . . . . . . . . . . . . .
Area Code and Tel. No. . . . . . . . . . . . . .
Date . . . . . . . . . . . . . . . . . . . . . .
Dated: , 199_
---------------------
</TABLE>
NOTE: DO NOT SEND OLD NOTES WITH THIS FORM; OLD NOTES SHOULD BE SENT WITH
YOUR LETTER OF TRANSMITTAL SO THAT THEY ARE RECEIVED BY THE EXCHANGE
AGENT WITHIN FIVE NEW YORK STOCK EXCHANGE TRADING DAYS AFTER THE
EXPIRATION DATE.
3
