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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 333-0214
HORSESHOE GAMING, L.L.C.
(Exact name of registrant as specified in its charter)
Delaware 88-0343515
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
4024 Industrial Road
Las Vegas, Nevada 89103
(Address of principal executive offices)
Registrant's telephone number, including area code: (702) 650-0080
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES [X] NO [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
The aggregate market value of the equity of Horseshoe Gaming, L.L.C.
held by non-affiliates of Horseshoe Gaming, L.L.C. is inapplicable as the equity
of Horseshoe Gaming, L.L.C. is privately held.
DOCUMENTS INCORPORATED BY REFERENCE
None.
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HORSESHOE GAMING, L.L.C.
INDEX TO ANNUAL REPORT ON FORM 10-K
For the fiscal year ended December 31, 1998
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PART I
Item 1. Business................................................................... 3
Item 2. Properties................................................................. 12
Item 3. Legal Proceedings.......................................................... 13
Item 4. Submission of Matters to a Vote of Security Holders........................ 13
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters...... 13
Item 6. Selected Financial Data.................................................... 14
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations.............................................................. 14
Item 7A Qualitative and Quantitative Disclosures About Market Risk................. 21
Item 8. Financial Statements and Supplementary Data................................ 21
Item 9. Changes In and Disagreements With Accountants on Accounting and
Financial Disclosure....................................................... 21
PART III
Item 10. Directors and Executive Officers of the Registrant......................... 21
Item 11. Executive Compensation..................................................... 23
Item 12. Security Ownership of Certain Beneficial Owners and Management............. 25
Item 13. Certain Relationships and Related Transactions............................. 26
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K........... 26
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PART I
ITEM 1. BUSINESS
GENERAL
We are a leading, multi-jurisdictional gaming company with riverboat
casinos in Bossier City, Louisiana and Tunica County, Mississippi. Bossier City
and Tunica County are among the fastest growing gaming markets in the United
States. We operate under the "Horseshoe" and "Binion" names which, we believe,
are among the most recognized names in the gaming industry.
BOSSIER CITY OPERATIONS
Market
The Bossier City/Shreveport market is the largest gaming market in the
State of Louisiana. While approximately 350,000 people are full-time residents
of Bossier City/Shreveport, approximately 16.5 million people reside within 250
miles of the Company's Bossier City casino (approximately four hours driving
distance). The Bossier City/Shreveport market attracts a significant amount of
its gaming clientele from the Dallas/Fort Worth area of Texas.
Horseshoe Casino Bossier City
The Horseshoe Casino Bossier City has the largest market share of gaming
positions and gaming revenues in its market. The casino is located on an
approximately 30-acre site which is highly visible and easily accessible from
Interstate 20, an east-west traffic artery connecting Bossier City/Shreveport to
Dallas/Fort Worth. According to the Louisiana Department of Transportation and
Development, Interstate 20 is used by an average of 84,000 travelers daily. The
casino is located on a new riverboat which was part of a recent $204 million
expansion. The riverboat is the only one in the Bossier City/Shreveport market
that provides an escalator to facilitate access to each gaming floor.
Before entering the gaming area, patrons pass the famous "Million Dollar
Wall", a collection of $100 bills totaling $1 million. Just beyond the wall is
an expansive 30-foot wide entrance inviting patrons into the gaming areas.
Dramatically treated 16-foot high ceilings and a 108-foot wide beam create a
spacious gaming environment characteristic of land-based casinos. As part of the
recent expansion, the riverboat contains all new furnishings and equipment,
including 1,343 new gaming devices, 58 table games and 11 poker tables
representing an increase in total gaming positions of approximately 27%. The
casino also has a high-limit slot area and a stage featuring live entertainment.
In addition, the Company has recently added a new entertainment facility that
provides seating for 1,300 guests and has expanded its parking structure to
include 1,000 additional spaces.
Also as part of the recent expansion, we constructed a new 25-story,
all-suite hotel tower, making us the first casino operator in the market to open
an on-site hotel. The hotel contains 606 tower suites (including penthouse
suites), meeting facilities, a health club and other luxury hotel amenities. Out
of all the hotels either completed or currently under construction in the
Bossier City/Shreveport market, we have the only all-suite hotel.
Louisiana Gaming Environment
In 1991, the state of Louisiana legalized casino gaming on the water and
in one land location in New Orleans. The state has granted approval to
applicants for 14 of the 15 legislatively authorized licenses, five of which
have been approved for the northern region of the State in Bossier
City/Shreveport. While the Louisiana gaming regulations state that riverboat
casinos must cruise, the Bossier City/Shreveport casinos were granted a
legislative exemption in June 1993 that allows them to operate as dockside
facilities. Louisiana permits most types of casino games (other than bingo and
sports betting) and has neither betting nor loss limits. Moreover, house credit
may be extended to qualified patrons. The only significant limitation imposed by
Louisiana gaming regulations restricts gaming space on riverboats to no more
than 30,000 square feet. The State of Louisiana imposes a fee on gaming revenue
at the rate of 18.5%. The city of Bossier City also imposes a 3.2% tax on gaming
revenue plus an annual fee of $700,000.
In addition, legislation was passed in 1996 authorizing the Bossier
Police Jury, the governing body of Bossier Parish, to impose a boarding fee of
$0.50 per patron entering riverboat gaming facilities in Bossier Parish. In
response to this legislation, Horseshoe Casino and the Isle of Capri Casino in
Bossier City commenced
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litigation against the Bossier Police Jury, asserting that the Bossier Police
Jury had previously contracted away their right to impose an additional $0.50
boarding fee. In January 1997, Horseshoe Casino separately settled with the
Bossier Police Jury, and the lawsuit was dismissed as it relates to Horseshoe
Casino (but not Isle of Capri Casino) and the Bossier Police Jury. As part of
the settlement, Horseshoe agreed to pay a 1% tax on its gross gaming revenues to
Bossier Parish with a minimum annual payment of $1,500,000, regardless of actual
revenue. Under the terms of the settlement, Horseshoe has the right to receive a
credit against gross gaming tax for the amount of increased property taxes
assessed against its property in Bossier Parish resulting from increased
assessments attributable to its major expansion project. Such credit may be
taken up to a maximum of 80% of the tax on gaming revenues, and applies during
the entire ten-year term of the agreement.
In the 1997 Regular Session of the Louisiana Legislature, a law was
passed authorizing the operation of slot machines at certain horse racing tracks
in Louisiana, including a racetrack situated in Bossier Parish. The legislation
limits slot machine space at each racetrack to 15,000 square feet. Within the
gaming space, however, there is no numerical limit on the number of slot
machines that can be permissibly installed. Before slot machines can be operated
at the racetrack facilities, passage of companion legislation is required to
establish the tax rate to be levied on slot machine revenue.
Competition
The Horseshoe Bossier City competes directly with Harrah's in Shreveport
and the Isle of Capri and Casino Magic in Bossier City. These four riverboats
together currently comprise the Bossier City/Shreveport market. The Louisiana
Gaming Control Board has recently granted approval to Hollywood Casinos and New
Orleans Paddlewheels Company to relocate the license for the New Orleans
Flamingo Hilton Casino, which is now closed, to a new proposed facility to be
located adjacent to Harrah's in Shreveport. The state has granted approval to
applicants for 14 of the 15 legislatively authorized licenses, five of which
have been approved for the northern region of the State in Bossier
City/Shreveport. The Louisiana Gaming Control Board has not granted the
remaining fifteenth license. If this license is granted, it may be located in
the Bossier City/Shreveport market. The impact on operating margins from the
overall increase in supply to this market is uncertain. As only 15 Louisiana
riverboats and one land-based casino in New Orleans have been authorized by law,
potential competition in Louisiana is presently limited. The Bossier
City/Shreveport casinos capture the Dallas/Ft. Worth market and share the
Houston area market with four existing riverboats in Lake Charles, a land-based
casino owned by the Coushatta Indian Tribe located near Lake Charles and two
riverboats in Baton Rouge. If Texas or Arkansas were to approve gaming,
competition would increase, which would have an adverse effect on our
operations.
Management believes that the Bossier City/Shreveport casinos have an
operational advantage over the other Louisiana riverboats because the Bossier
City/Shreveport riverboats do not have to cruise in three-hour increments. The
cruising exemption for the Bossier City/Shreveport market was included in the
Louisiana Gaming Statutes to account for the difficult navigational aspects of
the Red River. The Horseshoe Bossier City casino remains dockside, allowing
passengers to enter and exit as they please and enabling Management to conduct
24-hour a day continuous gaming operations.
TUNICA OPERATIONS
Market
The Tunica County, Mississippi market is the largest gaming market in
the State of Mississippi and the closest legalized gaming jurisdiction to the
Memphis, Tennessee metropolitan area, which is only 30 miles away. Tunica County
benefits from its proximity to several major population centers and to the
popularity of the Memphis region as a vacation destination. Over 2.5 million
people live within 90 miles and over 10.7 million people live within 200 miles
of the Horseshoe Casino Center. Within 500 miles of the Company's Tunica County
casino (approximately eight hours driving distance or approximately one-hour
flight time) the total population base increases to approximately 54.9 million.
Horseshoe Casino Tunica
The Horseshoe Casino Tunica is in the central location in a 70-acre,
three property Casino Center complex that features the Gold Strike and Sheraton
casinos on either side.
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As part of our recent $110 million expansion, we increased our gaming
square footage to 45,000 square feet, an increase of 50%, and increased the
number of gaming devices to a total of 1,546, an increase of 51%. We also added
a new 14-story hotel tower with 312 new suites, giving us a total of 507 rooms,
a health club and meeting room facilities, and we constructed a new 1,100 space,
four-level parking garage. In addition, we completed a new 1,000-seat themed
entertainment facility, "Bluesville," that has hosted some of the world's
renowned musical talent such as Julio Iglesias, Vince Gill, Roger Daltrey and
Ringo Starr. The addition or renovation of several full-service, themed, gourmet
restaurants and retail facilities served to complement the expansion project.
Mississippi Gaming Environment
The State of Mississippi legalized casino gaming on the waters of the
Mississippi River, on navigable waters within any county bordering on the
Mississippi River when such navigable waters empty into the Mississippi River,
and waters adjacent to the three counties of the Mississippi Gulf Coast region
in June 1990. The Mississippi gaming laws were patterned after the gaming laws
in Nevada. While the Mississippi gaming regulations state that the casinos must
be located on the water, they need not cruise or have engines.
Other aspects of the Mississippi gaming regulations include: the
relatively low gaming tax rate (8.8% at the state level, approximately 3.2% at
the city or county level, an annual table game device fee of $81,200 for the
first 35 games and $100 per game thereafter at the state level, and an annual
$5,000 fee at the state level), the ability to offer 24-hour a day continuous
gaming, the ability to offer all types of casino games (other than bingo and
race and/or sports betting), no betting or loss limits, and no space or size
restrictions. Moreover, house credit may be extended to qualified patrons. While
there are no legislative limitations on the number of licenses in Tunica County,
competition is limited by the availability of legal and accessible sites on the
Mississippi River or the Gulf Coast.
In November 1996, the Mississippi county closest to Memphis (DeSoto
County) voted against permitting legal gaming to be conducted aboard vessels
located in DeSoto County. Legislation passed in 1997 precludes DeSoto County
from holding a subsequent election on the issue until at least October 2004. If
gaming were approved in DeSoto County or in Arkansas or Tennessee, numerous
additional sites closer to Memphis would be available for gaming. Thus, while
Tunica County is currently the closest legalized gaming jurisdiction to the
Memphis metropolitan area, there is no assurance that this situation will not
change in the future. If DeSoto County, Arkansas or Tennessee were to approve
gaming, competition would increase, which would have an adverse effect on our
operations.
Mississippi Voter Initiative to Ban Gaming
In Mississippi, two requests were filed with the Secretary of State in
1998 to place on the November 1999 statewide ballot a voter initiative to ban
gaming in the state. The local circuit court found the wording of both
initiatives invalid. The sponsor appealed the local circuit court's decision on
one of the initiatives to the Mississippi Supreme Court, which affirmed the
ruling that the initiative's wording was invalid. Therefore, the legal process
for neither initiative was completed in time for the inclusion of such
initiative on the November 1999 ballot. Since Mississippi is a voter initiative
state, it is possible that the gaming ban initiative could be re-worded and meet
the requirements for placement on the ballot of a later election. Indeed, a
third request was filed with the Secretary of State which, if surviving
anticipated legal challenge, could place on the November 2000 statewide ballot a
voter initiative to ban gaming in the state. Passage of any Mississippi
initiative requires an affirmative vote representing both a majority of the
votes cast with respect to such initiative and at least 40% of the voters
casting votes on any matter in the election.
Approval by the requisite number of voters of a Mississippi initiative
similar to those proposed in 1998 and 1999 would repeal the legislation
authorizing gaming in the state subject to the final results of any legal
challenges which might be raised regarding the initiative and its impact on any
current casino operations and/or pending applications for gaming licenses in
such state. We are unable to determine at this time whether any such initiative
will be submitted to voters. If any such initiative is submitted to the voters
of Mississippi for their consideration, no assurance can be given regarding the
outcome of the vote or the impact of the vote on the Company's gaming operations
in Mississippi.
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Competition
The Horseshoe Casino Center competes with eight other casinos in the
competitive Tunica County, Mississippi, market. Horseshoe Casino Center has
substantially completed a significant expansion of its facilities. Some of our
competitors are presently undergoing expansion and others may do so in the
future. Such expansion may have an adverse effect on our operations.
PROPOSED ACQUISITION
On September 2, 1998, we entered into an "Agreement and Plan of Merger"
to acquire the operating subsidiaries of Empress Entertainment, Inc. ("Empress")
for an estimated $609 million, including assumption of a portion of Empress'
existing debt aggregating approximately $150 million. Empress owns two riverboat
gaming operations: one in Hammond, Indiana with 44,000 square feet of gaming
space; and one in Joliet, Illinois with 36,000 square feet of gaming space. We
intend to finance the acquisition through new borrowings. Under the terms of the
agreement relating to the Empress acquisition (the "Merger Agreement"), we made
a down payment of $10 million towards the purchase price. The transactions
contemplated by the Merger Agreement are subject to the approval of the
Mississippi Gaming Commission, the Louisiana Riverboat Gaming Commission, the
Illinois Gaming Board and the Indiana Gaming Commission. The Merger Agreement
provides that each party has the right to terminate the agreement certain
circumstances, which in some instances provides for Empress to retain the $10
million down payment as well as receive other consideration not to exceed $3
million. There can be no assurance that we will be successful in obtaining the
necessary approvals or additional financing to complete the Empress acquisition.
GAMING REGULATORY MATTERS
We are 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 we are 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 relatively 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. In addition, approvals of the gaming authorities in each of the our
existing jurisdictions, Mississippi and Louisiana and in Empress' jurisdictions,
Indiana and Illinois will be required with respect to the Empress acquisition.
There can be no assurance that the Company will receive all of the necessary
approvals to consummate the acquisition of Empress.
Mississippi Gaming Regulation
The ownership and operation of casino gaming facilities in Mississippi
are subject to extensive state and local regulation primarily through the
licensing and regulatory control of the Mississippi Gaming Commission and the
Mississippi State Tax Commission. We 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 December 31, 1998, 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
that may be utilized for gaming. There are no
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limitations on the number of gaming licenses that 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 emptying into the Mississippi River. On
May 29, 1993, the Mississippi Gaming Commission granted approval for the site of
the Horseshoe Casino Center. 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 Robinson Property Group, L.P.
("RPG"), our subsidiary that owns and operates Horseshoe Casino Center, were
found suitable. The license is required to be renewed every two years. The
license was most recently renewed in September 1998, effective as of October
1998, and all findings of suitability have been maintained and are current.
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 they request.
Our directors, officers and key employees 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 therefore, and may be required to be licensed, by the
Mississippi Gaming Commission. The finding of suitability is comparable to
licensing, and both require submission of detailed personal financial
information followed by a thorough investigation. In addition, any individual
who is found to have a material relationship to, or material involvement with,
the Company or RPG may be required to be investigated in order to be found
suitable or to be licensed as a business associate of the Company or RPG. Key
employees, controlling persons or others who exercise significant influence upon
the management or affairs of the Company or RPG may also be deemed to have such
a relationship or involvement. There can be no assurance that such persons will
be found suitable by the Mississippi Gaming Commission. An application for
licensing may be denied for any cause deemed reasonable by the Mississippi
Gaming Commission. Changes in licensed positions must be reported to the
Mississippi Gaming Commission. In addition to its authority to deny an
application for a license, the Mississippi Gaming Commission has jurisdiction to
disapprove a change in corporate position. If the Mississippi Gaming Commission
were to find a director, officer or key employee unsuitable for licensing or
unsuitable to continue having a relationship with the Company or RPG, the
Company or the general partner of RPG would have to suspend, dismiss and sever
all relationships with such person. The Company or RPG would have similar
obligations with regard to any person who refuses to file appropriate
applications. Each gaming employee must obtain a work permit that 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 securities so offered for cash at fair
market value within 10 days.
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The Company and RPG will be required to maintain current ownership
ledgers in the State of Mississippi that 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 certain of the Company's indebtedness. In addition, the Mississippi Gaming
Commission under the Mississippi Act may, in its discretion, (i) require holders
of debt securities 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.
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 certain indebtedness and certain other transactions consummated in
connection therewith.
The Mississippi Act requires that certificates representing securities
of the Company or RPG bear a legend to the general effect that the securities
are subject to the Mississippi Act and regulations of the Mississippi Gaming
Commission. The Mississippi Gaming Commission, through the power to regulate
licensees, has the power to impose additional restrictions on the holders of the
Company's or RPG's securities at any time.
Neither the Company nor RPG may engage in gaming activities in
Mississippi while also conducting gaming operations outside of Mississippi
without approval of the Mississippi Gaming Commission. Such approvals were
initially granted by the Mississippi Gaming Commission on October 13, 1994, and
additional approvals have been granted on a jurisdiction-by-jurisdiction basis.
The failure to obtain or retain any such approval could have a material adverse
effect on the Company or RPG.
The licenses obtained by the Company and RPG are not transferable and
must 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 are conducted. Depending upon the
particular fee or tax involved, these fees and taxes are payable either weekly,
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.
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
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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 these requirements. In January 1999, the Mississippi Gaming
Commission amended its infrastructure regulation thereby increasing the minimum
level of infrastructure investment from 25% to 100% of the casino cost. However,
the 100% infrastructure investment requirement would apply only to new casino
development and existing casino developments that are not in operation at the
time of their acquisition or purchase, and therefore does not apply to Horseshoe
Casino Center. In any event, the Horseshoe Casino Center would comply 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.
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 provided that it 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 Louisiana gaming law authorizes the 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.
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<PAGE> 10
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 (5%) or greater interests in the licensee, and persons exercising
influence over a licensee ("Affiliated Gaming Persons"), are subject to the
application and suitability requirements of the Louisiana gaming law.
The Louisiana gaming law specifies certain restrictions and conditions
relating to the operation of riverboat gaming, including the following: (i)
gaming is not permitted while a riverboat is docked, other than the forty-five
minutes between excursions, and during times when dangerous weather or water
conditions exist, except that the 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. The Louisiana gaming law provides that a renewal application
for each one-year 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. Horseshoe Entertainment, L.P. ("HE"), the Company's subsidiary that
owns and operates Horseshoe Bossier City, was issued an initial operator's
license by the Louisiana Enforcement Division on November 22, 1993, and HE
timely submitted its renewal application to the Louisiana Enforcement Division.
On October 20, 1998, the Louisiana Gaming Control Board granted HE's license
renewal subject to suitability review, and HE is currently in the process of
completing the suitability review with the Louisiana Enforcement Division.
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 must 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.
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<PAGE> 11
The Louisiana gaming law restricts gaming space on riverboats to no more
than 30,000 square feet. 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.
OTHER APPLICABLE NON-GAMING REGULATORY MATTERS
We are subject to certain Federal, state and local safety and health
laws, regulations and ordinances that apply to non-gaming businesses generally,
such as the Clean Air Act, Clean Water Act, Occupational Safety and Health Act,
Resource Conservation Recovery Act and the Comprehensive Environmental Response,
Compensation and Liability Act. We have not made, and do not anticipate making,
material expenditures with respect to such environmental laws and regulations.
However, the coverage and attendant compliance costs associated with such laws,
regulations and ordinances may result in future additional costs to our
operations. For example, in 1990 Congress enacted the Oil Pollution Act to
consolidate and rationalize mechanisms under various oil spill response laws.
The Department of Transportation has proposed regulations requiring owners and
operators of certain vessels to establish through the U.S. Coast Guard evidence
of financial responsibility in the amount of $5.5 million for clean-up of oil
pollution. This requirement would be satisfied by either proof of adequate
insurance (including self-insurance) or the posting of a surety bond or
guaranty.
The riverboats we operate must comply with U.S. Coast Guard requirements
as to boat design, on-board facilities, equipment, personnel and safety. Each of
them must hold a Certificate of Seaworthiness or must be approved by the
American Bureau of Shipping ("ABS") for stabilization and flotation, and may
also be subject to local zoning and building codes. The U.S. Coast Guard
requirements establish design standards, set limits on the operation of the
vessels and require individual licensing of all personnel involved with the
operation of the vessels. Loss of a vessel's Certificate of Seaworthiness or ABS
approval would preclude its use as a floating casino.
All of our shipboard employees, including those who have nothing to do
with the actual operation of the vessel (such as dealers, waiters and security
personnel) may be subject to the Jones Act which, among other things, exempts
those employees from state workers' compensation awards.
IRS REGULATIONS
The Internal Revenue Service ("IRS") requires operators of casinos
located in the United States to file information returns for U.S. citizens
(including names and addresses of winners) for keno and slot machine winnings in
excess of stipulated amounts. The IRS also requires operators to withhold taxes
on certain keno, bingo and slot machine winnings of nonresident aliens.
Management is unable to predict the extent, if any, to which such requirements,
if extended, might impede or otherwise adversely affect operations of, and/or
income from, such other games.
Regulations adopted by the Financial Crimes Enforcement Network of the
Treasury Department and the gaming regulatory authorities in certain domestic
jurisdictions in which we operate casinos, or in which we have applied for
licensing to operate a casino, require the reporting of currency transactions in
excess of $10,000 occurring within a gaming day, including identification of the
patron by name and social security number. This reporting obligation commenced
in May 1985 and may have resulted in the loss of gaming revenues to
jurisdictions outside the United States that are exempt from the ambit of such
regulations.
OTHER LAWS AND REGULATIONS
Each of the riverboat casinos we operate is subject to extensive state
and local regulations and, on a periodic basis, must obtain various licenses and
permits, including those required to sell alcoholic beverages. Management
believes that we have obtained all required licenses and permits and our
businesses are conducted in substantial compliance with applicable laws. In
connection with the Empress acquisition, we will be required to obtain certain
regulatory approvals.
ENVIRONMENTAL MATTERS
We are, like others in our industry, subject to various federal, state,
local and, in some cases, foreign laws, ordinances and regulations that (i)
govern activities or operations that may have adverse environmental effects,
such as discharges to air and water, as well as handling and disposal practices
for solid and hazardous or toxic wastes, or (ii) may impose liability for the
costs of cleaning up, and certain damages resulting from, sites of
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<PAGE> 12
past spills, disposals or other releases of hazardous or toxic substances or
wastes (together, "Environmental Laws").
We endeavor to maintain compliance with Environmental Laws, but, from
time to time our operations may have resulted or may result in noncompliance or
liability for cleanup pursuant to Environmental Laws. In that regard, we may
incur costs related to cleaning up contamination related to historical uses of
certain of its properties.
EMPLOYEES
As of March 1, 1999, we employed 5,277 persons of which 2,464 are
employed at the Horseshoe Casino Center in Tunica, Mississippi, 2,790 are
employed at the Horseshoe Bossier City in Bossier City, Louisiana and 23 are
employed in our corporate office. At such date, none of our employees were
covered by collective bargaining agreements.
We believe that its relationship with its employees is excellent and are
not aware of any threatened labor activity affecting our employees. We have
never experienced a work stoppage due to a labor dispute.
ITEM 2. PROPERTIES
The Company owns and operates casinos in Bossier City, Louisiana and
Tunica County, Mississippi. All of the Company's real properties are subject to
first priority liens securing the Company's senior secured credit facility and
second priority liens securing the 12.75% senior notes due 2000.
The Horseshoe Bossier City
The Horseshoe Bossier City is located on an approximately 30-acre site
on the east side of the Red River, directly facing downtown Shreveport,
Louisiana. The newly expanded development, construction of which is
substantially complete, consists of an approximately 62,400-square foot,
four-deck riverboat with approximately 30,000 square feet of gaming area and an
approximately 55,000-square foot dockside pavilion, including a 606 room, 25
story, all-suite hotel tower and an 1,100 car parking garage. The riverboat and
pavilion are joined via an enclosed, climate-controlled boarding ramp with
handicap access and escalators serving each of the gaming decks. In addition,
the Company has recently added a new entertainment facility that provides
seating for 1,300 guests, and has expanded its parking structure to include
1,000 additional spaces.
The entire dockside facility has recently been renovated and expanded.
The newly expanded casino pavilion includes two specialty restaurants, a coffee
shop, an expanded buffet and over 7,800 square feet of specialty retail space.
The expanded facility also includes over 60,000 square feet of administrative
space.
The main, second and third decks of the riverboat feature a total of
1,343 slot machines, 58 table games and a poker room containing 11 poker tables.
The casino area includes a deli/snack bar, one casino bar containing video poker
machines and an entertainment stage. The lowest level of the riverboat contains
the engine room, offices, count rooms, security and surveillance offices and
facilities for the Louisiana State Police.
Management believes that the new hotel tower and dockside pavilion
offers the largest and most varied hotel and restaurant facilities in the
market. The 25 story, all-suite hotel tower features 606 rooms, a health club
and approximately 4,000 square feet of meeting space. The restaurants have been
designed to offer moderately priced, high quality food in order to attract local
and repeat patrons; this attraction is a hallmark of the marketing strategy at
the Horseshoe casinos.
The Horseshoe Casino Center
The Horseshoe Casino Center is located in Tunica County, Mississippi, at
Casino Center, a 70-acre three-casino complex. The Company has just completed
the expansion and renovation of the Tunica facility and has increased the
overall size to approximately 327,000 square feet from 162,000 square feet.
The gaming area comprises approximately 62,000 square feet and contains
1,546 slot machines, 64 table games and 12 poker tables. The casino facility
also includes two specialty restaurants, a newly expanded buffet, bars and
retail outlets. The Horseshoe Casino Center has also added 313 hotel suites in a
14-story tower, to add to its existing 194 room facility, and a multi-level,
1,100 space parking garage. In addition to the parking garage
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<PAGE> 13
there are approximately 4,000 lighted parking spaces provided in the Casino
Center complex. The facility includes over 46,000 square feet of expanded
administrative space and over 30,000 square feet of entertainment space,
featuring "Bluesville," a 1,000-seat entertainment venue connected to the casino
and hotel.
ITEM 3. LEGAL PROCEEDINGS.
There are no material legal proceedings pending against the Company or
any of its properties.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
There is no established public trading market for the equity interests in
the Company. As of March 1, 1999, the number of record holders of equity
interests in the Company was 54.
The Company pays tax distributions in accordance with its debt
agreements to enable the holders of equity interests in the Company to pay state
and federal income taxes on their proportionate share of the Company's income.
The amount of tax distributions paid during 1998, 1997 and 1996 were
$13,312,000, $11,056,000 and $18,853,000, respectively. In addition to these
permitted tax distributions, the Company paid non-tax distributions amounting to
$18,700,000 during 1998. The Company's debt agreements contain provisions which
restrict the ability of the Company to make distributions to the holders of
equity interests, based on the Company's earnings, the ability of the Company to
meet certain restrictions on borrowing, and certain other criteria.
RECENT SALES OF UNREGISTERED SECURITIES
On December 29,1998 the Company issued an aggregate of 126,245 ownership
units in Horseshoe Gaming, L.L.C. (.13%) to one individual upon exercise of an
option. There were no underwriters involved in the foregoing issuance of equity
securities and such issuance was exempt from registration under Section 4(2) of
the Securities Act of 1933, as amended, as transactions not involving a public
offering. The excess price of such option is not due to be paid to the Company
until the value of the underlying ownership units is fixed according to the
procedure established in the option agreement.
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<PAGE> 14
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA.
The following table summarizes certain selected consolidated financial
data, which should be read in conjunction with the Company's Consolidated
Financial Statements and notes thereto included elsewhere herein and with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations." The selected consolidated financial data as of and for the years
ended December 31, 1998, 1997, 1996, 1995 and 1994 have been derived from the
Company's audited consolidated financial statements included elsewhere herein.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
------------------------------------------------------
1998 1997 1996 1995(B) 1994(A)
---------- --------- ---------- -------- ---------
(Thousands)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues:
Casino $429,825 $321,236 $ 317,479 $283,402 $ 59,230
Non-casino 31,351 13,857 14,258 14,983 4,173
---------- --------- ---------- -------- --------
461,176 335,093 331,737 298,385 63,403
OPERATING EXPENSES:
Casino 245,234 175,394 162,408 133,299 24,339
Non-casino 34,654 20,283 20,474 20,131 4,987
Other 58,370 48,217 51,980 54,331 26,637
Asset write-down 12,911 - - - -
Corporate expenses (f) 12,947 22,490 10,254 3,375
Depreciation and amortization 33,888 19,411 15,989 12,545 2,499
---------- --------- ---------- -------- ---------
Operating income 63,172 49,298 70,632 74,704 4,941
Interest (expense) income, net (37,672) (15,796) (21,964) (18,735) (6,259)
Gain on sale of land - - - - 5,242
Other, net (228) (429) 154 - -
---------- --------- ---------- -------- ---------
Net income before extraordinary
loss on early retirement of debt and
minority interest 25,272 33,073 48,822 55,969 3,924
Extraordinary loss on early
retirement of debt (787) (5,243) (7,179)
Minority interest in (income) loss
of subsidiaries (c) 640 (420) (1,861) (8,850) (5,691)
---------- --------- ---------- -------- ---------
Net income (loss) $ 25,125 $ 27,410 $ 46,961 $ 39,940 $ (1,767)
---------- --------- ---------- -------- ---------
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31
------------------------------------------------------
1998 1997 1996 1995(b) 1994(a)
---------- --------- ---------- -------- ---------
(Thousands)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents (e) $ 84,151 $ 48,710 $ 79,159 $65,541 $ 18,584
Total Assets 560,448 511,556 377,597 300,088 145,535
Long-term debt, including
current maturities (d) 388,718 313,275 232,708 197,603 124,963
Total members' equity 71,151 64,595 79,782 52,747 3,633
</TABLE>
(a) The Horseshoe Bossier City opened on July 9, 1994.
(b) The Horseshoe Casino Center opened on February 13, 1995.
(c) The Company owns less than 100% of certain subsidiaries. Minority
interest represents the share of each subsidiary's income attributable
to those interests not owned by The Company 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.
(d) Includes deferred interest payable on notes payable to affiliates of
$2,467,000 as of December 31, 1994.
(e) Excludes escrow funds, restricted for expansion of existing facilities,
development of new projects or repayment of debt, amounting to
approximately $42,235,000 (1996) and $31,316,000 (1995).
(f) Includes deferred compensation charges related to redeemable ownership
interests of $4,245,000, $15,066,000, $4,340,000 and $2,557,000 for the
years ended December 31, 1998, 1997, 1996 and 1995, respectively.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
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 included
elsewhere herein.
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<PAGE> 15
INTRODUCTION
Entities controlled by Mr. Jack B. Binion developed and opened the
Horseshoe Bossier City, which is owned by HE and which commenced operations on
July 9, 1994, and developed and opened the Horseshoe Casino Center, which is
owned by RPG and which commenced operations on February 13, 1995. Effective
October 1, 1995, Mr. Binion and certain related and unrelated parties
transferred their ownership interests in HE and RPG to Horseshoe Gaming in
exchange for ownership interests in the Company (the "Roll-up Transaction"). The
Roll-Up Transaction resulted in in the Company (a holding company) owning 50% or
more of several entities that were previously owned by Mr. Binion, certain
related parties and certain unrelated parties.
As a result of the Roll-Up Transaction, in the Company owned 89% of HE,
100% of RPG, and 80% of Horseshoe Ventures, L.L.C., a Delaware limited liability
company that was formed to pursue casino development opportunities in new
jurisdictions ("Horseshoe Ventures"). As of December 31, 1995, in the Company
acquired an additional 2.92% ownership interest in HE bringing its total
ownership to 91.92%. 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, Mr. Binion
incurred certain expenses pursuing casino development opportunities in new
jurisdictions. Horseshoe Ventures reimbursed Mr. Binion for these expenses 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 Casino Center competes with eight other casinos in the
competitive Tunica County, Mississippi, market. Horseshoe Casino Center has
substantially completed a significant expansion of its facilities (see
"Liquidity and Capital Resources" for additional discussion of such project).
Several of the other existing Tunica casinos have also substantially expanded
their gaming facilities, including constructing additional hotel rooms. While
Management expects that its competitors' expansions will affect the Horseshoe
Casino Center's revenues and operating income in the near term, Management
believes they will increase the size and scope of the overall Tunica gaming
market, mitigating, at least in part, the potential adverse impact on operating
levels at the Horseshoe Casino Center in the long term. The impact on operating
margins from the overall increase in supply to this market is uncertain.
The Horseshoe Bossier City is one of four riverboat casinos currently
operating in the Bossier City/Shreveport, Louisiana market. The Louisiana Gaming
Control Board recently granted approval to transfer the license for a New
Orleans casino, which is now closed, to a new proposed facility to be located
adjacent to an existing competitor's facility in Shreveport, which is expected
to open for business in 2000. The Louisiana Legislature has also passed a law
authorizing slot machines at the horse racing track in Shreveport, although
when, and if, slot operations will actually begin at the track is uncertain. The
Horseshoe Bossier City has substantially completed its major expansion project
(see "Liquidity and Capital Resources" section for additional discussion of such
project). While Management expects that possible new competition from the
transferred license will affect the Horseshoe Bossier City's revenues and
operating income in the near term, management believes the expansion of the
Horseshoe Bossier City and the addition of a riverboat casino and slot machines
at the racetrack in the Bossier City/Shreveport market will increase the size
and scope of the overall gaming market, mitigating, at least in part, the
potential adverse impact on operating levels at the Horseshoe Bossier City in
the long term. The impact on operating margins from the overall increase in
supply to this market is uncertain
YEARS ENDED DECEMBER 31, 1998 AND 1997
Net revenues for the year ended December 31, 1998 were $461.2 million,
compared to $335.1 million for the year ended December 31, 1997. Operating
profit before corporate expenses, development expenses and asset write-down
increased to $89.5 million for the year ended December 31, 1998, from $73.4
million for the comparable 1997 period. The increase in net revenues and
operating profit before corporate expenses, development expenses and asset
write-down occurred as a result of an increase in gaming capacity from the
expansions that occurred at both the Horseshoe Casino Center and Horseshoe
Bossier City.
The Horseshoe Casino Center
The Horseshoe Casino Center contributed net revenues and operating
profit before corporate expenses of $221.8 million and $51.2 million,
respectively, for the year ended December 31, 1998 and $167.2 million and $45.6
million, respectively, for year ended December 31, 1997.
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<PAGE> 16
The Horseshoe Casino Center's net revenues included casino revenues and
non-casino revenues of $212.0 million and $9.8 million, respectively, for the
year ended December 31, 1998 and $161.3 million and $5.9 million, respectively,
for the year ended December 31, 1997. The increase in net revenues for the year
ended December 31, 1998 compared to the prior year period was primarily due to
increases in both slot revenue and table games revenue as a result of the
recently completed expansion. Casino revenues were negatively impacted by a
lower than normal win percentage in table games. Casino revenue per day
increased approximately 31% in the year ended December 31, 1998 to $581,000 from
$442,000 in the comparable 1998 period.
The increase to $29.7 million in promotional allowances for the year
ended December 31, 1998 compared to $14.3 million for the prior year period was
partially due to an increase in the pricing structure of non-casino services.
The recently completed expansion of the property (including the addition and/or
upgrading of restaurants and hotel accommodations) provided management with an
opportunity to increase the retail cost of hotel and food prices. Of the $15.4
million increase, $5.0 million was caused by an increase in prices. The majority
of the remaining increase was caused by an increase in overall volume, primarily
in hotel rooms and entertainment that were not present during 1997.
The Horseshoe Casino Center's operating profit margin before corporate
expenses for the year ended December 31, 1998 was 23.1% compared with 27.9% for
the year ended December 31, 1997. The reduction in the margin was primarily
caused by an increase in depreciation and amortization expense due to the
expansion of the casino facility and by an increase in bad debt expense of $4.6
million.
The Horseshoe Bossier City
The Horseshoe Bossier City contributed net revenues and operating profit
before corporate expenses, asset write-down and pre-opening expenses of $239.4
million and $38.7 million, respectively, for the year ended December 31, 1998
and $167.9 million and $27.9 million, respectively, for the year ended December
31, 1997.
The Horseshoe Bossier City's net revenues include casino revenues and
non-casino revenues of $217.8 million and $21.6 million, respectively, for the
year ended December 31, 1998 and $160.0 million and $7.9 million, respectively,
for the year ended December 31, 1997. The increase in net revenues for the year
ended December 31, 1998 compared to the prior year period was primarily due to
an increase in casino revenue resulting from the recently completed expansion at
such property. Casino revenue per day increased approximately 36% in the year
ended December 31, 1998 to $597,000 from $438,000 in the comparable 1997 period.
The increase to $32.7 million in promotional allowances for the year
ended December 31, 1998 compared to $14.9 million for the prior year period was
partially due to an increase in the pricing structure of non-casino services.
The recently completed expansion of the property (including the addition and/or
upgrading of restaurants and hotel accommodations) provided management with an
opportunity to increase the retail cost of hotel and food prices. Of the $17.8
million increase, $6.0 million was caused by an increase in prices. The majority
of the remaining increase was caused by an increase in overall volume, primarily
in hotel rooms.
The Horseshoe Bossier City's operating profit margin before corporate
expenses, asset write-down and pre-opening expenses for the year ended December
31, 1998 was 16.2% compared with 17.7% for the year ended December 31, 1997. The
reduction was primarily caused by an increase in depreciation and amortization
expense due to the expansion of the casino facility.
The Horseshoe Bossier City's new riverboat casino facility replaced the
existing riverboat casino facility (the "Queen of the Red"). The Queen of the
Red, along with related gaming equipment, is included in assets held for sale in
the Consolidated Balance Sheets at December 31, 1998. During the year ended
December 31, 1998, the Company recorded a charge of $12.9 million to adjust the
carrying value of the Queen of the Red to management's estimate of its net
realizable value.
Other Factors Affecting Earnings
Corporate expenses decreased approximately $9.5 million during 1998
primarily due to the compensation expense recorded in 1997 to reflect the
increased value of redeemable ownership interests in the Company based on an
independent appraisal. Certain of the Company's employees have ownership
interests that are subject to provisions that require the Company to repurchase
these ownership interests in the event of their termination at a price equal to
the then fair market of the Company based on an independent appraisal (see
"Employee Put/Call and Other Equity Repurchase Arrangements").
The increase of $21.9 million in interest expense, net for year ended
December 31, 1998, compared with the year ended December 31, 1997, is largely
due to the increase in debt outstanding and the capitalization of
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<PAGE> 17
interest in 1997. Approximately $11.2 million of construction period interest
related to the expansion programs at Horseshoe Casino Center and Horseshoe
Bossier City was capitalized in the year ended December 31, 1997. Total debt
outstanding increased to $388.7 million as of December 31, 1998, from $313.3
million as of December 31, 1997. The increased borrowings were necessary to fund
a major portion of the construction, as well as the Company's subsequent
purchase of outstanding warrants (see Liquidity and Capital Resources below).
YEARS ENDED DECEMBER 31, 1997 AND 1996
Net revenues of the Company for the year ended December 31, 1997 were
$335.0 million as compared to $331.7 million for the comparable period in 1996.
The overall increase in net revenues of $3.3 million, or 1%, was comprised of a
$3.8 million increase in casino revenues, offset by a slight decrease in
non-casino revenues. The Horseshoe Bossier City reported a decrease in casino
revenues of $6.8 million, whereas the Horseshoe Casino Center reported an
increase in casino revenues of $10.6 million over 1996.
The Horseshoe Casino Center
The Horseshoe Casino Center contributed net revenues and operating
profit before corporate expenses, respectively, of $167.2 million and $45.6
million for the year ended December 31, 1997 and $156.9 million and $50.2
million for the year ended December 31, 1996.
The Horseshoe Casino Center's net revenues include casino revenues and
non-casino revenues, respectively, of $161.3 million and $5.9 million for the
year ended December 31, 1997 and $150.7 million and $6.2 million for the year
ended December 31, 1996. The increase in net revenues for the year ended
December 31, 1997 compared to the prior year period is primarily due to an
increase in total volume in slot machine revenue of 10.8%. Casino revenue per
day increased in 1997 to $442,000 from $412,000 for the year ended December 31,
1996 despite disruption related to the property's expansion project.
The Horseshoe Casino Center's margin for operating profit before
corporate expenses for the year ended December 31, 1997 was 27.9% before the
write-off of pre-opening expenses, compared with 32.0% for the year ended
December 31, 1996. The reduction in operating profit before corporate expenses
margin of 4.1 percentage points was primarily caused by three factors: (1) an
increase in bad debt reserves because total gaming receivables increased more
rapidly than revenue; (2) an increase in depreciation and amortization expense
due to the expansion of the casino facility; and (3) increases in promotional
programs and direct marketing programs.
The Horseshoe Bossier City
The Horseshoe Bossier City contributed net revenues and operating profit
before corporate expenses, respectively, of $167.9 million and $27.9 million for
the year ended December 31, 1997 and $174.9 million and $36.9 million for the
year ended December 31, 1996.
The Horseshoe Bossier City's net revenues include casino revenues and
non-casino revenues, respectively, of $160.0 million and $7.9 million for the
year ended December 31, 1997 and $166.8 million and $8.1 million for the year
ended December 31, 1996. The decrease in net revenues for the year ended
December 31, 1997 compared to the prior year period is due to a 2.8% decrease in
slot machine revenue, as well as decreases in win percentages in both slots and
table games. Casino revenue per day decreased approximately 3.9% for the year
ended December 31, 1997 to $438,000 from $456,000. The reduction in total casino
volume occurred as a result of increased competition in the Bossier
City/Shreveport market as well as the ongoing development and expansion of the
entire operating facility.
The Horseshoe Bossier City's margin for operating profit before
corporate expenses for the year ended December 31, 1997 was 17.7% before the
write-off of pre-opening expenses, compared with 21.1% for year ended December
31, 1996. The reduction in operating profit before corporate expense margin of
3.4 percentage points was primarily caused by two factors: (1) an increase in
depreciation and amortization due to the property improvements and (2) a
decrease in win percentage in slots and table games.
Other Factors Affecting Earnings
Development expenses, which are included in operating income, were $1.7
million and $6.6 million for the years ended December 31, 1997 and 1996,
respectively. The 1996 period includes expenses associated with the Company's
failure to obtain a license to conduct gaming in the State of Indiana.
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<PAGE> 18
Corporate expenses increased approximately $12.2 million during 1997
primarily due to the non-cash charge to compensation expense to reflect the
increased value of redeemable ownership interests in the Company. Certain of the
Company's employees have ownership interests that are subject to provisions that
require the Company to repurchase these ownership interests in the event of
their termination at a price equal to the then fair market of the Company based
on an independent appraisal (see "Employee Put/Call and Other Equity Repurchase
Arrangements").
Interest expense declined approximately $7.3 million in 1997 as compared
to 1996, principally as a result of the capitalization of interest expense
related to the Horseshoe Casino Center and Horseshoe Bossier City expansion
projects. Total interest capitalized for the years ended December 31, 1997 and
1996 was $11.2 million and $1.3 million, respectively.
In November 1997, the Company completed the exchange offering of its
$160 million of 9.375% Senior Subordinated Notes due June 15, 2007, for publicly
registered notes with substantially identical terms. Proceeds from the original
offering of notes in a private placement in June 1997 were used to extinguish
certain borrowings of the Company and fund a portion of the expansion of the
Company's existing facilities. An extraordinary loss of approximately $5.2
million was recognized in the second quarter in conjunction with the debt
redemption.
LIQUIDITY AND CAPITAL RESOURCES
In October 1995, the Company refinanced substantially all of its existing
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 12.75% Senior Notes due 2000 ("Senior Notes"). The Senior Notes
were sold with warrants to purchase an additional $50 million of Senior Notes at
98.15% of the par value of the Senior Notes. The Company received approximately
$49 million in net proceeds, after deducting fees and expenses, when the
warrants were exercised in 1996.
On June 15, 1997, the Company issued $160 million of 9.375% Subordinated
Notes due 2007 ("Subordinated Notes"). The Subordinated Notes were issued at
99.899% of par value and have an effective interest rate of 9.39%. The
Subordinated Notes are unsecured and require semi-annual interest payments. A
portion of the proceeds from the Subordinated Notes was used to substantially
retire variable rate debt and to purchase $13 million of the Senior Notes. An
extraordinary loss on early retirement of debt of $5.2 million was recognized in
1997 for prepayment penalties and premium and the write-off of unamortized
discounts and deferred finance charges. The remaining proceeds were used to fund
a portion of the expansion of the Company's existing facilities.
On November 12, 1997, the Company finalized a restructuring of its bank
facility. Pursuant to the terms of the agreement, the lender agreed to provide a
$130 million Senior Secured Revolving Credit Facility. As of December 31, 1998,
the Company had drawn $100.0 million under the credit facility, which have
enabled the Company to fund the completion of the expansion of the Bossier City
and Tunica properties.
Cash and cash equivalents totaled $84.2 million as of December 31, 1998.
Management believes that the Company's cash and cash equivalents on hand, cash
from operations and additional borrowings under its credit facility will be
adequate to meet the Company's existing debt service obligations and capital
expenditure commitments for the next twelve months.
DEVELOPMENT
Tunica, Mississippi
Horseshoe Casino Center has substantially completed the expansion of its
casino facility at a cost of approximately $109.8 million. The newly expanded
casino complex, which was completed on January 21, 1998, includes an additional
15,000 square feet of gaming space (the gaming facility now includes 1,546 slot
machines, 64 table games and 12 poker tables), 312 hotel suites (in addition to
the existing 195 room hotel facility), a health club and meeting room
facilities, a multi-level, 1,100 space parking garage and Bluesville, an
entertainment facility which accommodates approximately 1,000 customers. The
addition or renovation of several full-service, themed, gourmet restaurants and
retail facilities served to complement the expansion project.
Bossier City, Louisiana
Horseshoe Bossier City has substantially completed the expansion of its
entire casino facility at a cost of approximately $204.4 million. The newly
expanded casino facility, which was completed on January 28, 1998, features a
new riverboat casino facility with approximately 27% more gaming positions (the
gaming facility now
18
<PAGE> 19
includes a total of 1,343 slot machines, 58 table games and 11 poker tables), a
25 story hotel tower with 606 suites, meeting room facilities, a health club,
the renovation and expansion of existing dockside facilities, the addition of
two specialty restaurants, the complete renovation and expansion of the existing
buffet, as well as the recently completed 1,100 space parking garage,
administration building and remodeled existing steak house restaurant. In
December, 1998 the Horseshoe Bossier City completed construction of an
entertainment facility at a cost of approximately $3 million and has just
recently completed an expansion of its current parking facility which include an
additional 1,000 spaces. The total cost of the additional parking facility is
estimated to be approximately $9 million. Management is funding the additional
parking and entertainment facility through cash from operations.
PROPOSED ACQUISITION
On September 2, 1998, we entered into an "Agreement and Plan of Merger" to
acquire the operating subsidiaries of Empress Entertainment, Inc. ("Empress")
for an estimated $609 million, including assumption of a portion of Empress'
existing debt aggregating approximately $150 million. Empress owns two riverboat
gaming operations: one in Hammond, Indiana with 44,000 square feet of gaming
space; and one in Joliet, Illinois with 36,000 square feet of gaming space. We
intend to finance the acquisition through new borrowings. Under the terms of the
agreement relating to the Empress acquisition (the "Merger Agreement"), we made
a down payment of $10 million towards the purchase price. The transactions
contemplated by the Merger Agreement are subject to the approval of the
Mississippi Gaming Commission, the Louisiana Riverboat Gaming Commission, the
Illinois Gaming Board and the Indiana Gaming Commission. The Merger Agreement
provides that each party has the right to terminate the agreement certain
circumstances, which in some instances provides for Empress to retain the $10
million down payment as well as receive other consideration not to exceed $3
million. There can be no assurance that we will be successful in obtaining the
necessary approvals or additional financing to complete the Empress acquisition.
OTHER ITEMS
On October 13, 1998 the Company was notified by Lady Luck Gaming
Corporation that it was terminating the joint venture agreement to develop a
casino in Vicksburg, Mississippi. Management of Lady Luck indicated that it was
terminating the joint venture plans because of extended legal proceedings
concerning the suitability of gaming on the nearby Big Black River.
On January 13, 1999 the Company repurchased outstanding warrants held by
a third party which entitled such third party to purchase approximately 6.99%
ownership in the Company from its largest shareholder, Horseshoe Gaming, Inc.
("HGI"), for an exercise price of $510,000. Upon acquisition, the Company
exercised the warrants and retired the membership units acquired from HGI. The
total cost of the warrants, including fees, expenses and the exercise price paid
to HGI was approximately $34.4 million, which will be recorded as a reduction in
members' equity in the first quarter of 1999.
EMPLOYEE PUT/CALL AND OTHER EQUITY REPURCHASE ARRANGEMENTS
The Company has employment agreements with certain officers (and an
option agreement with one officer) which contain put/call options whereby, upon
termination of employment, the Company must, at the election of such officer,
and may, at the Company's election, purchase such officer's ownership interest
in the Company for an amount equal to the fair market value of such interest as
determined by an independent appraisal or an arbitration process. As of December
31, 1998, the aggregate fair market value of all interests subject to such
put/call options (representing approximately 9.3% ownership of the Company) was
$53.7 million based on an appraisal obtained by the Company in November 1997.
Such agreements provide that the purchase price for the employee's ownership
interest shall be paid in cash, either upon transfer of the interest to the
Company or in installments over a three-year or five-year period, depending on
the aggregate purchase price. Five former officers of the Company that have
recently elected not to renew their employment contracts, or have been
terminated, held ownership interests totaling 7.4% and had employment agreements
which contained a put/call option. The Company has been notified that four of
the put/call options will be exercised by the former employees. One employee has
agreed not to exercise his put/call option until January 1, 2001. The Company
expects to fund such repurchase obligations through working capital or
additional borrowings.
The Company has a 1997 Unit Option Plan under which they may grant
options in an aggregate of up to 631,225 Units in Horseshoe Gaming to officers,
key employees and consultants. The Company has granted to four employees Options
to purchase 631,225 Units pursuant to the plan through Unit Option Agreements
which contain a put/call provision under the same terms as described above for
the employment put/calls. One former employee that has a Unit Option Agreement
with the Company has elected not to renew his employment agreement and has
exercised his put.
19
<PAGE> 20
CERTAIN ACCOUNTING PRONOUNCEMENTS
During the first quarter of 1998, the Company adopted SFAS No. 130,
Reporting Comprehensive Income. There was no impact of such adoption on the
Company's consolidated financial statements, as total comprehensive income is
the same as net income for all periods presented.
YEAR 2000 READINESS DISCLOSURE
The Year 2000 problem is the result of computer programs being written
using two digits rather than four to define the applicable year. Any of the
Company's programs that have time-sensitive software may recognize a date using
"00" as the year 1900 rather than the year 2000. This could result in a major
system failure or miscalculations.
If the Company's systems (Gaming or Non-Gaming) do not function, or fail
to function properly as a result of the century change, the Company would have
to operate under alternative procedures (some manual) until a proper resolution
of the failure can be ACHIEVED. The Company has not completed its assessment of
its Year 2000 issues, but has initiated a company-wide program to identify and
address issues associated with the ability of its hardware and software to
properly recognize the Year 2000 to avoid interruption of its operation as a
result of the century change on January 1, 2000. The Company has divided its
Year 2000 compliance program into three phases. As a part of the first phase of
the Company's Year 2000 compliance program, the Company conducted an internal
review of its computer systems to identify the systems that could be affected by
the Year 2000 problem, including both "information technology" systems (such as
software that processes financial and other information) and non-information
technology systems (such as fire protection and environmental control).
The Company is in the process of completing the second phase of its Year
2000 compliance program, which involves (1) the implementation of its existing
remediation plan to resolve the Company's internal Year 2000 issues, and (2) the
identification of any potential year 2000 issues with the Company's significant
vendors and suppliers. Material vendors and suppliers were sent questionnaires
so that their internal compliance could be outlined to the Company in a uniform
and consistent manner. A secondary review of these vendors by a committee is
being performed, and the more significant vendors will be extensively audited or
be required to provide more extensive evidence of internal compliance. The
second phase of its compliance program is expected to be completed by June 1,
1999.
The Company will soon commence with the third and final phase of its
Year 2000 compliance program which involves the (1) extensive testing of all
systems for any remaining Year 2000 concerns, and (2) the extensive construction
and review of contingency plans by an internal Year 2000 task force comprised of
both key corporate and property executives and personnel. This task force will
consider every possible scenario of non-compliance, both internally and
externally, and insure an alternate procedure (either manual or systematic)
exists for the contingency. This phase is expected to be completed by September
30, 1999.
Two of the major internal hardware and software systems (financial
accounting software system and human resource system) utilized by the Company
have been identified to be not compliant with the Year 2000. These systems will
be required to be upgraded to a current platform that is Year 2000 compliant.
The Company is also undertaking the installation of a Year 2000 compliant slot
accounting software product in the Bossier City property to replace the current
system that is not Year 2000 compliant. The majority of the remaining internal
hardware and software systems are in the process of being converted to Year 2000
compliant equipment.
The Company presently believes that, with modifications to existing
software and converting to new software, the Year 2000 issue will not pose
significant operational problems for the Company's internal computer systems as
so modified and converted. However, if such modifications and conversions are
not completed on a timely basis, the Year 2000 problem may have a material
adverse impact on the financial condition and results of operations of the
Company. In addition, in the event that any of the Company's significant
suppliers and other parties with which the Company has a material relationship
do not successfully and timely achieve Year 2000 compliance, the Company's
business or operations could be adversely affected. Management estimates that
the total cost associated with the Year 2000 compliance program will be
approximately $500,000. The Company plans to fund expenditures associated with
Year 2000 compliance from working capital.
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<PAGE> 21
ITEM 7A QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's exposure to market risk is changes in its interest rate
risk associated with long term debt. To date, the Company has not held or issued
derivative financial instruments for trading purposes, and the Company does not
enter into derivative transactions that would be considered speculative
positions. For debt obligations, the table presents principal cash flows and
related weighted average interest rates by expected maturity dates.
(Dollars in thousands)
<TABLE>
<CAPTION>
Maturity Date
--------------------------------------------------------------------------------- Fair
1999 2000 2001 2002 2003 Thereafter Total Value(1)
------ -------- ------ ------ ----- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Liabilities
Long-term debt
Fixed rate $1,175 $127,681 $ -- $ -- $ -- $159,863 $288,719 $304,145
Average interest rate 8.250% 12.750% -- -- -- 9.375%
Variable rate $ -- $100,000 $ -- $ -- $ -- $ -- $100,000 $100,000
Average interest rate(2) -- 7.150% -- -- -- --
</TABLE>
(1) The fair values are based on the borrowing rates currently available for
debt instruments with similar terms and maturities and market quotes of the
Company's publicly traded debt.
(2) The average interest rates were based on December 31, 1998, variable rates.
Actual rates in future periods could vary.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
See the Index to Consolidated Financial Statements and the Index to
Financial Statement Schedules included at "Item 14. Exhibits, Financial
Statement Schedules, and Reports on Form 8-K".
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE. None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
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.
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<PAGE> 22
The current executive officers and directors of HGI and certain officers
of RPG and HE, are listed below, together with their ages and all positions and
offices held by them.
<TABLE>
<CAPTION>
Age Position
--- --------
<S> <C> <C>
Jack B. Binion 62 Chairman of the Board of Directors and Chief Executive
Officer, President and Secretary of HGI.
Leslie Kenny 43 Director of HGI.
Peri Howard 38 Director of HGI.
Roger Wagner 51 Senior Vice President and Chief Operating Officer of HGI.
Kirk C. Saylor 42 Treasurer and Chief Financial Officer of HGI.
Jon Wolfe 31 Vice President - Chief Information Officer of HGI.
Gary Border 49 Senior Vice President - Marketing of HGI.
David Carroll 44 Senior Vice President - Human Resources of HGI.
J. Lawrence Lepinski 52 Senior Vice President and General Manager of Horseshoe
Bossier City.
Bob McQueen 45 Senior Vice President and General Manager of Horseshoe Casino
Center.
John Moran 35 Vice President-Database Marketing and Analysis for HGI.
</TABLE>
Mr. Binion has served as Chairman of the Board, Chief Executive Officer,
President and Secretary of HGI since January 1, 1999. Prior thereto, he served
as the Chief Executive Officer of HGI, the manager of the Company, since its
inception (under the name New Gaming Capital Corporation) in December 1992 and
as Chief Executive Officer of the general partner of New Gaming Capital
Partnership since immediately prior to the Roll-Up Transaction. Mr. Binion also
served as the Chief Executive Officer of the general partner of RPG, the entity
that operates the Horseshoe Bossier City, from its inception in May 1993 until
it merged into HGI in the Roll-Up Transaction. From 1964 to July 1998, Mr.
Binion was the President and Chief Executive Officer of the Horseshoe Club,
which owns and operates Binion's Horseshoe Casino in Las Vegas, Nevada. Mr.
Binion will serve as Chairman of the Board until further notice.
Ms. Kenny is the daughter of Mr. Binion's wife. She was elected director
in September 1998 and will serve until further notice. Ms. Kenny has been
self-employed since 1983.
Ms. Howard is the daughter of Mr. Binion's wife. She was elected
director in September 1998 and will serve until further notice. Ms. Howard has
served in various capacities with Horseshoe Casino Center since 1995 and
Binion's Horseshoe Casino in Las Vegas from 1993 to 1995.
Mr. Wagner has been Senior Vice President and Chief Operating Officer of
HGI since November 1998. From March 1998 to November 1998 Mr. Wagner was not
employed. From October 1996 to March 1998, Mr. Wagner served as President of the
development company for Trump Hotel and Casino Resorts in Atlantic City, New
Jersey. Prior thereto, Mr. Wagner served as President and Chief Operating
Officer of Trump Castle Casino in Atlantic City, New Jersey since January 1991.
Mr. Saylor has been Vice President and Chief Accounting Officer of HGI
since November 1998. He has also served as the Company's Chief Financial Officer
since August 1, 1998. From November 1995 to November 1998, Mr. Saylor served as
HGI's Corporate Controller. From October 1994 to November 1995, Mr. Saylor
served as Vice President and Chief Financial Officer of Lone Star Casino Corp.
in Las Vegas. From June 1993 to October 1994, Mr. Saylor served as Chief
Financial Officer of Binion's Horseshoe Casino in Las Vegas.
Mr. Wolfe has been Vice President and Chief Information Officer of HGI
since October 1998. From October 1995 to October 1998 Mr. Wolfe was Director of
Information Systems for HGI. From July 1994 to October 1995 Mr. Wolfe was
Director of Information Systems for Horseshoe Casino Center and from October
1993 to July 1994 Mr. Wolfe was Director of Information Systems for President
Casinos.
Mr. Border has been Senior Vice President - Marketing of HGI since July
1996. Since 1987, Mr. Border served as President and founder of Marketing
Results, Inc.
Mr. Carroll has been Senior Vice President - Human Resources of HGI
since November 1998. From August 1997 to November 1998, Mr. Carroll was Vice
President - Human Resources of HGI. From September 1993 to November 1998, Mr.
Carroll was Director of Human Resources for Harrah's Casino in Shreveport,
Louisiana.
Mr. Lepinski has been Senior Vice President and General Manager of the
Horseshoe Bossier City since September 1995. Prior thereto, Mr. Lepinski served
as General Manager of Bally's Saloon and Gambling Hall in Tunica, Mississippi
since August 1993.
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<PAGE> 23
Mr. McQueen has been 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.
Mr. Moran has been Vice President-Database Marketing and Analysis of HGI
since November 1998. From December 1996 to November 1998 Mr. Moran was Director
of Club Operations and Analysis for HGI. From September 1995 to December 1996
Mr. Moran was Director of Club Operations and Analysis for the Horseshoe Club
and from February 1987 to September 1995 was Director of Marketing Operations
for the Claridge Casino and Hotel.
ITEM 11. EXECUTIVE COMPENSATION.
The following table sets forth all compensation awarded to, earned by or
paid to the Chief Executive Officer and the six most highly compensated
executive officers (the "Named Executive Officers") for their services to the
Company for the years ended December 31, 1998, 1997 and 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
NAME AND PRINCIPAL ------------------------------------ OTHER ANNUAL ALL OTHER
POSITION YEAR SALARY BONUS COMPENSATION COMPENSATION(4)
------------------ ---- ---------- -------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
Jack B. Binion 1998 $1,000,000 $ 0 $ 0 $ 0
Chairman of the Board, 1997 0 0 0 0
CEO President and 1996 0 0 0 0
Secretary
Gary A. Border Senior VP 1998 350,000 0 0 3,550
Marketing 1997 350,000 0 0 3,550
1996 168,996 0 0 1,646
J. Larry Lepinski Senior VP 1998 189,231 94,493 0 5,867
General Manager - 1997 180,000 120,000 0 5,525
Horseshoe Bossier City 1996 180,000 71,980 0 1,856
Bob McQueen Senior VP 1998 168,476 95,000 0 12,594
General Manager - 1997 161,510 95,000 0 4,636
Horseshoe Casino Center 1996 127,203 95,000 0 1,607
Kirk C. Saylor (1) 1998 132,488 75,000 0 4,107
Chief Financial Officer 1997 126,966 15,000 0 4,006
1996 122,901 15,000 0 1,659
Paul R. Alanis (2) 1998 517,308 0 0 12,982
Former President 1997 500,000 195,000 0 19,355
1996 494,636 200,000 0 7,351
J. Michael Allen (3) 1998 362,115 0 0 8,992
Former Senior VP- 1997 350,000 0 0 10,853
Operations 1996 367,713 0 0 1,792
</TABLE>
(1) Mr. Saylor has served as the Company's Chief Financial Officer since
August 1, 1998.
(2) Mr. Alanis' served as the Company's President until September 1998.
(3) Mr. Allen served as the Company's Senior VP-Operations until September
1998.
(4) Premium on insurance policies.
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<PAGE> 24
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. The Chairman of the Board of Directors receives no compensation for
services on the board, Peri Howard receives $150,000 and Leslie Kenny receives
no compensation for services on the board.
Officers serve at the discretion of the Board. The Board has no
Compensation Committee.
EMPLOYMENT AGREEMENTS
Mr. Binion has provided services pursuing, developing and managing gaming
operations for the Company and its subsidiaries. A salary of $1,000,000 was
accrued for Mr. Binion for his services during 1998. There is no 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 1999.
Gary Border is employed as the Senior Vice President - Marketing for the
Company pursuant to an employment agreement with the Company dated November 23,
1998. Mr. Border's term of employment under the employment agreement expires
December 1, 2002. Mr. Border is responsible for supervising the marketing
departments of the Company, developing and creating marketing strategies,
creative strategies, planning and support for all national local markets,
assisting the general managers of various properties owned by subsidiaries or
affiliates of the Company and coordinating and overseeing the various department
heads charged with casino and hotel marketing. Mr. Border earns compensation of
three hundred fifty thousand dollars ($350,000) per year base salary and a
discretionary bonus not to exceed 50% of the base salary. In addition, Mr.
Border was granted a one-hundred thousand dollar ($100,000) signing bonus upon
execution of the employment agreement.
Larry Lepinski is employed as a Senior Vice President and General Manager
of the Bossier Facility for the Company pursuant to an employment agreement with
the Company dated November 23, 1998. Mr. Lepinski's term of employment under the
employment agreement expires December 1, 2002. Mr. Lepinski is responsible for
supervising the day to day operations of the Company's Bossier City, Louisiana
Facility. Mr. Lepinski earns compensation of two hundred eight thousand dollars
($208,000) per year base salary and a discretionary bonus not to exceed 50% of
the base salary. In addition, Mr. Lepinski was granted an eighteen thousand
dollar ($18,000) signing bonus upon execution of the employment agreement.
Robert McQueen is employed as a Senior Vice President - General Manager
of the Tunica Facility of the Company pursuant to an employment agreement with
the Company dated October 15, 1998. Mr. McQueen's term of employment under the
employment agreement expires October 15, 2001. Mr. McQueen is responsible for
supervising the day to day activities of the Company's Tunica Facility. Mr.
McQueen earns compensation of two hundred thousand dollars ($200,000) per year
base salary and a bonus of ninety-five thousand dollars ($95,000) for calendar
years 1998 and 1999, and a discretionary bonus not to exceed 50% of his base
salary for each year thereafter.
Kirk Saylor is employed as a Vice President - Chief Accounting Officer
for the Company pursuant to an employment agreement with the Company dated
November 15, 1998. Mr. Saylor is also serving as the Company's Chief Financial
Officer. Mr. Saylor's term of employment under the employment agreement expires
December 1, 2002. Mr. Saylor is responsible for overseeing the senior accounting
operations of the Company's facilities and assisting in the opening of any
casino and hotel facilities to be developed or acquired by subsidiaries or
affiliates of the Company. Mr. Saylor earns compensation of one hundred fifty
thousand dollars ($150,000) per year base salary and a discretionary bonus not
to exceed 50% of the base salary.
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<PAGE> 25
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth certain information regarding beneficial
ownership of membership interests in the Company ("Units"), as of March 1, 1999,
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
NAME(1) NUMBER OF UNITS OF UNITS
------- --------------- --------
<S> <C> <C>
Jack B. Binion ........... 73,692,122(2) 78.62 %
Phyllis M. Cope........... 6,555,882(3) 6.99 %
Leslie Kenney............. 378,025 *
HGI....................... 23,697,909 25.28 %
Peri Howard............... 8,737,315(4) 9.32 %
Larry Lepinski............ 252,490(5) *
Bob McQueen............... 144,862 *
Paul Alanis (6)........... 3,155,935 3.37 %
Mike Allen (7)............ 1,316,203 1.40 %
Directors and executive
officers as a group (9 78,561,612 83.82 %
persons)..................
</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. Unless
otherwise indicated, the address for each of the persons or entities
listed above is c/o the Company at 4024 Industrial Road, Las Vegas, NV
89103.
(2) Includes (a) the 17,366,247 Units held by Mr. Binion as an individual;
(b) the 23,697,909 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 8,737,315 Units owned
by Peri Howard; (e) the 378,025 units owned by Leslie Kenney; and (f)
16,956,744 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 56,325,875 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) 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, and 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), 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.
(5) Represents options that are currently exercisable.
(6) Former President. Mr. Alanis' address is 675 Burleigh Drive, Pasadena,
CA 91005.
(7) Former Vice President-Operations. Mr. Allen's address is 8408 Turtle
Creek Circle, Las Vegas, NV 89113.
25
<PAGE> 26
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
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 for fees and
reimbursable expenses totaled $3,625,000, $2,648,000 and $1,632,000 for the
years ended December 31, 1998, 1997 and 1996, respectively.
The Company has made loans to various employees (including some who are
now former employees) with ownership interests in the Company. The amount
outstanding under these loans was $2,677,000 and $2,214,000 as of December 31,
1998 and 1997, respectively. The loans to employees, which are evidenced by
notes, are secured by their ownership interests in the Company. The notes have
various due dates through October 1999 with interest rates ranging from 7% to
10%, and will be repaid out of the proceeds of the put/call provisions relating
to such ownership interests.
The Company and Walter Haybert, the former Chief Financial Officer of
the Company, are parties to an agreement whereby the Company has agreed to pay
Mr. Haybert $150,000 per year for each of 1999 and 2000 as advances against the
purchase price for his interest in the Company. Mr. Haybert's interest in the
Company is subject to purchase by the Company pursuant to the put/call
provisions that were contained in his employment agreement with the Company.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
<TABLE>
<CAPTION>
PAGE
NUMBER
------
<S> <C> <C>
(a)(1) INDEX TO CONSOLIDATED FINANCIAL STATEMENTS:
HORSESHOE GAMING L.L.C. AND SUBSIDIARIES...........................................F-2
NEW GAMING CAPITAL PARTNERSHIP AND SUBSIDIARY ....................................F-17
ROBINSON PROPERTY GROUP, L.P. ....................................................F-29
(a)(2) INDEX TO FINANCIAL STATEMENT SCHEDULES:
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS....................................S-2
</TABLE>
All other 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 thereto.
The exhibits listed on the accompanying Exhibit Index are filed as part
of this Form 10-K.
(b) REPORTS ON FORM 8-K:
There were no reports filed on Form 8-K for the quarter ended December
31, 1998.
26
<PAGE> 27
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of Las
Vegas, State of Nevada, on March 23, 1999.
Horseshoe Gaming, L.L.C.,
a Delaware limited liability company
By: Horseshoe Gaming, Inc.,
a Nevada corporation
Its: Manager
By: /s/ Jack B. Binion
------------------------
Jack B. Binion
Its: Chief Executive Officer,
President, Secretary and
Chairman of the Board of
Directors
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Jack B. Binion Chief Executive Officer, President, Secretary and March 23, 1999
- ----------------------- Chairman of the Board of Directors
Jack B. Binion (Principal Executive Officer) of
Horseshoe Gaming, Inc.
/s/ Peri Howard Director March 23, 1999
- -----------------------
Peri Howard
/s/ Leslie Kenney Director March 23, 1999
- -----------------------
Leslie Kenney
/s/ Kirk C. Saylor Chief Financial Officer and Treasurer March 23, 1999
- ----------------------- (Principal Financial and Accounting
Kirk C. Saylor Officer) of Horseshoe Gaming, Inc.
</TABLE>
27
<PAGE> 28
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, 1998 and 1997 F-3
Statements of operations for the years ended December 31, 1998, 1997 and 1996 F-4
Statements of members' equity for the years ended December 31, 1998, 1997 and 1996 F-5
Statements of cash flows for the years ended December 31, 1998, 1997 and 1996 F-6
Notes to consolidated financial statements F-7
New Gaming Capital Partnership and Subsidiary
Report of Independent Public Accountants F-17
Consolidated Financial Statements:
Balance sheets as of December 31, 1998 and 1997 F-18
Statements of operations for the years ended December 31, 1998, 1997 and 1996 F-19
Statements of partners' capital for the years ended December 31, 1998, 1997 and 1996 F-20
Statements of cash flows for the years ended December 31, 1998, 1997 and 1996 F-21
Notes to consolidated financial statements F-22
Robinson Property Group, L.P.
Report of Independent Public Accountants F-29
Financial Statements:
Balance sheets as of December 31, 1998 and 1997 F-30
Statements of operations for the years ended December 31, 1998, 1997 and 1996 F-31
Statements of partners' capital for the years ended December 31, 1998, 1997 and 1996 F-32
Statements of cash flows for the years ended December 31, 1998, 1997 and 1996 F-33
Notes to financial statements F-34
</TABLE>
F-1
<PAGE> 29
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, 1998 and 1997, and the related consolidated statements of
operations, members' equity and cash flows for each of the three years in the
period ended December 31, 1998. 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, 1998 and 1997, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1998, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Memphis, Tennessee,
March 8, 1999.
F-2
<PAGE> 30
HORSESHOE GAMING, L.L.C. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
December 31,
---------------------------
1998 1997
--------- ---------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 84,151 $ 48,710
Accounts receivable, net of allowance for doubtful
accounts of $10,346 and $8,965 9,653 13,518
Inventories 3,548 2,958
Prepaid expenses and other 4,484 2,102
--------- ---------
Total current assets 101,836 67,288
--------- ---------
Property and Equipment:
Land 16,093 14,688
Buildings, boat, barge and improvements 333,071 276,936
Furniture, fixtures and equipment 83,360 68,194
Less: accumulated depreciation (61,330) (42,769)
--------- ---------
371,194 317,049
Construction in progress 4,113 67,428
--------- ---------
Net property and equipment 375,307 384,477
--------- ---------
Other Assets:
Assets held for resale 12,000 --
Goodwill, net 36,124 37,960
Other 35,181 21,831
--------- ---------
$ 560,448 $ 511,556
========= =========
LIABILITIES AND MEMBERS' EQUITY
Current Liabilities:
Current maturities of long-term debt $ 1,174 $ 1,674
Accounts payable 6,558 8,784
Construction payables 1,694 27,984
Accrued expenses and other 40,599 46,601
--------- ---------
Total current liabilities 50,025 85,043
Long-term Debt, less current maturities 387,544 311,601
Minority Interest (1,965) (1,317)
Commitments and Contingencies (Notes 8 and 9)
Redeemable Ownership Interests, net of deferred
compensation of $272 and $1,954 53,693 51,634
Members' Equity 71,151 64,595
--------- ---------
$ 560,448 $ 511,556
========= =========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
F-3
<PAGE> 31
HORSESHOE GAMING, L.L.C. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
Years Ended December 31,
---------------------------------------------
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Revenues:
Casino $ 429,825 $ 321,236 $ 317,479
Food and beverage 48,263 29,990 26,947
Hotel 35,448 8,773 7,919
Retail and other 9,980 4,305 4,425
--------- --------- ---------
523,516 364,304 356,770
Promotional allowances (62,340) (29,211) (25,033)
--------- --------- ---------
Net revenues 461,176 335,093 331,737
--------- --------- ---------
Expenses:
Casino 245,234 175,394 162,408
Food and beverage 15,959 10,981 12,317
Hotel 11,785 7,877 6,798
Retail and other 6,910 1,425 1,359
General and administrative 57,202 43,600 45,351
Depreciation and amortization 33,888 19,411 15,989
Preopening 653 2,964 --
Development 515 1,653 6,629
--------- --------- ---------
Total expenses 372,146 263,305 250,851
--------- --------- ---------
Operating Profit Before Corporate Expenses and Asset Write-down 89,030 71,788 80,886
Corporate expenses 12,947 22,490 10,254
Asset write-down 12,911 -- --
--------- --------- ---------
Operating Income 63,172 49,298 70,632
Other Income (Expense):
Interest expense (39,861) (20,792) (28,090)
Interest income 2,189 4,996 6,126
Other, net (228) (429) 154
Minority interest in (income) loss of subsidiary 640 (420) (1,861)
--------- --------- ---------
Income Before Extraordinary
Loss on Early Retirement of Debt 25,912 32,653 46,961
Extraordinary Loss on Early Retirement of Debt (787) (5,243) --
--------- --------- ---------
Net Income $ 25,125 $ 27,410 $ 46,961
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
F-4
<PAGE> 32
HORSESHOE GAMING, L.L.C. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF MEMBERS' EQUITY
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
Members' Contributions
Equity Receivable Total
-------- ---------- --------
<S> <C> <C> <C>
Balance at December 31, 1995 $ 54,102 $(1,355) $ 52,747
Collection of contributions receivable -- 1,355 1,355
Cash 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
Distributions:
Cash (11,056) -- (11,056)
Payable (15,000) -- (15,000)
Increase in redeemable ownership interests (16,541) -- (16,541)
Net income 27,410 -- 27,410
-------- ------- --------
Balance at December 31, 1997 64,595 -- 64,595
Cash distributions (17,012) -- (17,012)
Revaluation of land contribution (1,109) -- (1,109)
Increase in redeemable ownership interests (448) -- (448)
Net income 25,125 -- 25,125
-------- ------- --------
Balance at December 31, 1998 $ 71,151 $ -- $ 71,151
======== ======= ========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
F-5
<PAGE> 33
HORSESHOE GAMING, L.L.C. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
Years Ended December 31,
-------------------------------------------
1998 1997 1996
-------- --------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 25,125 $ 27,410 $ 46,961
Adjustments to reconcile net income to
net cash provided by operating activities:
Minority interest in income (loss) of subsidiary (640) 420 1,861
Depreciation and amortization 33,888 19,411 15,989
Asset write-down 12,911 -- --
Amortization of debt discounts,
deferred finance charges and other 2,741 2,313 3,032
Loss on disposal of property -- 389 1,011
Provision for doubtful accounts 11,937 7,556 4,388
Increase in redeemable ownership interests 4,245 15,066 4,546
Extraordinary loss on early retirement of debt 787 5,243 --
Net change in assets and liabilities (22,238) (6,482) (8,390)
-------- --------- --------
Net cash provided by operating activities 68,756 71,326 69,398
-------- --------- --------
Cash flows from investing activities:
Purchases of property and equipment (46,576) (215,576) (58,824)
Increase (decrease) in construction payables (26,290) 13,879 10,906
Proceeds from sale of property 383 -- 1,400
Net decrease (increase) in escrow funds -- 42,235 (10,919)
Net increase in other assets (17,902) (1,717) (8,024)
-------- --------- --------
Net cash used in investing activities (90,385) (161,179) (65,461)
-------- --------- --------
Cash flows from financing activities:
Proceeds from long-term debt 85,000 175,438 49,073
Payments on debt (10,185) (97,877) (15,547)
Capital distributions (17,012) (11,056) (20,710)
Distributions to minority holders (8) (910) (1,560)
Debt issue costs and commitment fees (725) (6,191) (1,575)
-------- --------- --------
Net cash provided by financing activities 57,070 59,404 9,681
-------- --------- --------
Net change in cash and cash equivalents 35,441 (30,449) 13,618
Cash and cash equivalents, beginning of period 48,710 79,159 65,541
-------- --------- --------
Cash and cash equivalents, end of period $ 84,151 $ 48,710 $ 79,159
======== ========= ========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
F-6
<PAGE> 34
HORSESHOE GAMING, L.L.C. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND BASIS OF PRESENTATION
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, 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 business segment. A
description of each principal subsidiary is as follows:
o 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, 1998 and 1997,
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).
o 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.
o 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 and is 80% owned and managed
by the Company. The consolidated statements of operations include 100% of
the losses of Horseshoe Ventures with no minority interest reported,
because the Company funds 100% of such losses and is obligated to fund
all future losses.
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.
F-7
<PAGE> 35
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 on the straight-line basis over the estimated useful
lives as follows:
Buildings, boat, barge and improvements 15 to 30 years
Furniture, fixtures and equipment 3 to 10 years
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, 1998, 1997 and 1996, was $163,000,
$11,191,000 and $1,272,000, respectively.
Goodwill
Goodwill is amortized on a straight-line basis over 25 years, which management
estimates is the related benefit period. 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 down the carrying amount of goodwill to its estimated fair value based on
discounted cash flows. The amount of amortization expense recorded for the years
ended December 31, 1998, 1997 and 1996, was $1,668,000, $1,662,000 and
$1,654,000, respectively.
Deferred Finance Charges
Deferred finance charges, which are included in other assets, consist of fees
and expenses incurred to obtain the Company's debt. The deferred finance charges
are being amortized over the term of the related debt using the effective
interest method (see Note 6).
Redeemable Ownership Interests
The Company is obligated to repurchase ownership interests totaling 4.2% issued
to certain employees pursuant to employment agreements in the event of their
termination at a price equal to the then fair market value, based on an
independent appraisal. The estimated fair value of such ownership interests is
reported outside of members' equity in the accompanying consolidated balance
sheets for all periods presented and expensed 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, 1998, 1997 and 1996. The estimated fair
value of these ownership interests, of $33,381,000 and $32,931,000, based on a
valuation dated November 1997, has also been classified outside of members'
equity in the accompanying consolidated balance sheets as of December 31, 1998
and 1997, respectively.
F-8
<PAGE> 36
Capital Distributions
The Company's debt agreements 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.
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>
Years Ended December 31,
-------------------------------------
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
Food and beverage $36,705 $24,967 $22,055
Hotel 8,325 3,360 3,034
Other operating expenses 5,067 664 619
------- ------- -------
$50,097 $28,991 $25,708
======= ======= =======
</TABLE>
Advertising Costs
The Company expenses all costs associated with advertising as incurred, and such
amounts are included in general and administrative expenses in the accompanying
consolidated statements of operations.
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 during the
expansion and development of existing casino properties are expensed as
incurred. Total preopening costs of $653,000 and $2,964,000 were expensed during
1998 and 1997 in conjunction with the expansion efforts at the Horseshoe Bossier
City and Horseshoe Casino Center. There were no preopening costs in 1996. In the
future, the Company will expense as incurred all preopening costs related to new
construction in accordance with Statements of Position 98-5 "Reporting on the
Cost of Start-up Activities."
Corporate Expenses
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 as corporate expenses and are reflected in the accompanying
consolidated statements of operations in the period such expenses are incurred
by HGI.
F-9
<PAGE> 37
Included in corporate expenses for the years ended December 31, 1998, 1997 and
1996 are normal operating expenses of HGI. Also included in corporate expenses
is the compensation expenses related to ownership interest in the Company issued
to employees pursuant to employment agreements (see Note 8).
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 $3,847,000 and $1,613,000 at
December 31, 1998 and 1997, respectively. Taxable income was in excess of net
income reported in the accompanying consolidated statements of operations for
all periods presented.
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, there were no significant
impairments of long-lived assets that occurred during the years ended December
31, 1997 and 1996. During 1998, the Company recorded a write-down in the
carrying value of an idle riverboat (see Note 4).
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.
3. CONSOLIDATED STATEMENTS OF CASH FLOWS
Cash payments made for interest, excluding amounts capitalized, totaled
$36,530,000, $29,524,000 and $24,799,000 for the years ended December 31, 1998,
1997 and 1996, respectively.
A capital contribution of $1,150,000 was made to RPG through the issuance of a
contribution receivable during the year ended December 31, 1995. RPG received
land in satisfaction of the receivable during 1996. During 1998, the carrying
value of the land was adjusted to its estimated fair market value as agreed to
by RPG and the contributing partner. As a result, RPG reduced the value of the
land by $941,000 and reduced goodwill by $168,000 with a corresponding reduction
in partners' capital of $1,109,000.
F-10
<PAGE> 38
Distributions totaling $15,000,000, which were accrued at December 31, 1997 were
paid in February 1998.
The net change in assets and liabilities consists of the following (in
thousands):
<TABLE>
<CAPTION>
Years Ended December 31,
-----------------------------------------
1998 1997 1996
-------- -------- -------
<S> <C> <C> <C>
(Increase) decrease in assets:
Accounts receivable $ (8,072) $(13,091) $(7,207)
Inventories (590) (1,523) 46
Prepaid expenses and other (2,382) (493) (281)
Increase (decrease) in liabilities:
Accounts payable (2,226) 5,600 (726)
Accrued expenses and other (8,968) 3,025 (222)
-------- -------- -------
$(22,238) $ (6,482) $(8,390)
======== ======== =======
</TABLE>
4. ASSETS HELD FOR RESALE
In January 1998, NGCP's new riverboat casino facility replaced the existing
riverboat facility ("Queen of the Red"). The Queen of the Red, along with the
related gaming equipment is reported as assets held for resale in the
accompanying consolidated balance sheet. Additionally, NGCP recorded an asset
write-down of $12,911,000 based on an appraisal of the Queen of the Red.
Management is continuing to evaluate various options for use of the Queen of the
Red, including sale.
5. ACCRUED EXPENSES AND OTHER
Accrued expenses and other consist of the following (in thousands):
<TABLE>
<CAPTION>
December 31,
----------------------
1998 1997
------- -------
<S> <C> <C>
Payroll and related tax liabilities $ 8,674 $ 8,814
Vacation and other employee benefits 3,157 3,050
Accrued interest 5,491 5,165
Gaming, sales, use and property taxes 3,815 2,542
Progressive slot and slot club liabilities 6,691 4,681
Distributions payable -- 15,000
Other accrued expenses 12,771 7,349
------- -------
$40,599 $46,601
======= =======
</TABLE>
F-11
<PAGE> 39
6. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
December 31,
---------------------------
1998 1997
--------- ---------
(in thousands)
<S> <C> <C>
12.75% Senior Notes (effective interest rate of 12.75%), due September
30, 2000, net of unamortized
discount of $909,000 and $1,522,000 $ 127,681 $ 135,478
9.375% Senior Subordinated Notes (effective interest of 9.375%), due June 15,
2007, net of unamortized
discount of $137,000 and $152,000 159,863 159,848
Senior Secured Revolving Credit Facility, secured by substantially all of the
assets of the Company, $130 million borrowing capacity, due June 15, 2000,
with varying interest
rates ranging from 6.812% to 7.50% 100,000 15,100
Notes Payable, interest ranging from 6% to
8.25%, due in various installments through
January 1999 1,174 2,849
--------- ---------
388,718 313,275
Less: current maturities (1,174) (1,674)
--------- ---------
$ 387,544 $ 311,601
========= =========
</TABLE>
The Senior Notes were issued at 98% of par value and included warrants to
purchase an additional $50,000,000 of 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 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 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 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 Senior Notes are not redeemable prior to September 30, 1999.
On June 15, 1997, the Company issued $160,000,000 of 9-3/8% Senior Subordinated
Notes ("Subordinated Notes") due June 15, 2007. The Subordinated Notes were
issued at 99.899% of par value. The Subordinated Notes are unsecured and require
semi-annual interest payments on June 15 and December 15. A portion of the
proceeds were used to retire a previously outstanding credit facility (see
below), as well as retire $13 million in Senior Notes. An extraordinary loss on
early retirement of debt of $5,243,000 was recognized in 1997 for prepayment
penalties and premium, and the write-off of unamortized discounts and deferred
finance charges. The remaining proceeds were used to fund a portion of the
expansion of the Company's existing facilities.
On November 12, 1997, the Company finalized a restructuring of its Senior
Secured Credit Facility. Pursuant to the terms of the amended and restated loan
agreement, CIBC Wood Gundy Securities Corp. agreed to provide a $130 million
Senior Secured Revolving Credit Facility (the "Amended and Restated Credit
Facility").
F-12
<PAGE> 40
The Amended and Restated 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 Amended and Restated 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; and (iii) a first pledge of the minority interest
in all present and future subsidiaries owned by Mr. Binion and certain
affiliates of Mr. Binion.
The Senior Notes and the Amended and Restated Credit Facility contain covenants
that, among other things, (i) limit the amount of distributions the Company can
pay to its members; (ii) limit the amount of additional indebtedness which may
be incurred by the Company and its subsidiaries; (iii) 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 (iv) 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.
During 1998, the Company repurchased some of its Senior Notes from individual
note holders in the open market totaling $8,410,000. An extraordinary loss on
early retirement of debt of $787,000 was recognized in 1998 for prepayment
penalties, premium and the write-off of unamortized discounts and deferred
finance charges.
As of December 31, 1998 the five year maturities for long-term debt were
$1,174,000 (1999), $227,681,000 (2000), $0 (2001), $0 (2002) and $0 (2003).
As of December 31, 1998 and 1997, the fair market value of the Senior Notes,
based on quoted market prices was $138,170,000 and $151,385,000, respectively.
As of December 31, 1998 and 1997, the fair market value of the Senior
Subordinated Notes, based on quoted market prices was $164,800,000 and
$168,000,000, respectively. The fair market value of the Company's other
long-term debt approximated its carrying value as of December 31, 1998 and 1997,
based on the borrowing rates currently available for debt with similar terms.
7. TRANSACTIONS WITH RELATED PARTIES
Mr. Binion has provided services pursuing, developing and managing gaming
operations for the Company and its subsidiaries. Mr. Binion has never received
compensation for his services, although the Company accrued compensation at
December 31, 1998 for Mr. Binion equal to the fair value of his services. Mr.
Binion does not have an employment agreement to receive compensation for his
services; however, the Company and Mr. Binion may enter into such an employment
agreement during 1999.
KII-Pasadena, Inc., which is owned by two individuals who were executive
officers of HGI between January 1, 1996 and December 31, 1998, 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. Additionally, one of the placement
agents for the Senior Notes and Credit Facility discussed in Note 6 agreed to
pay the principals of KII-Pasadena, Inc. a finders' fee equal to 30% of the net
fees, commissions and other compensation received, or to be received, by the
placement agent for its services related to these financing transactions. The
total fees paid to KII-Pasadena, Inc., or its principals, by the placement agent
was $260,000 during the year ended December 31, 1996.
F-13
<PAGE> 41
The principals of the placement agent referred to above own approximately 3.9%
of the Company. Fees were paid to the placement agent during 1997 and 1996 for
various financial advisory services totaling $600,000 and $510,000,
respectively.
Notes receivable (including accrued interest) from employees with ownership
interests in the Company and limited partners of HE totaling $11,201,000 and
$6,844,000 are included in other assets in the accompanying consolidated balance
sheets are as of December 31, 1998 and 1997, 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 and interest rates ranging from 6% to 10%.
The Company conducts a portion of its marketing through an entity that is owned
by the wife of an officer. Fees and expenses paid to this company totaled
$3,625,000, $2,648,000 and $1,632,000 for the years ended December 31, 1998,
1997 and 1996, respectively.
8. EMPLOYEE COMPENSATION AND BENEFITS
Employment Agreements
HE and RPG have 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 term
specified in the various employment agreements, which is generally five years.
These employment agreements include a put/call provision which, if exercised by
the employee, would require the Company to repurchase these ownership interests
in the event of termination at the then fair market value based on an
independent appraisal. Accordingly, these compensation agreements are accounted
for as variable stock purchase plans. Compensation expense is recorded each
period equal to the change in the fair market value of ownership interests
issued and the vesting schedule 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 2, 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 4.1% as of December 31, 1998, 1997 and 1996. As of
December 31, 1998, all employees/former employees were fully vested. The amount
of compensation expense recorded in the accompanying consolidated statements of
operations related to these ownership interests was $4,245,000, $15,066,000 and
$4,340,000 for the years ended December 31, 1998, 1997 and 1996, respectively.
During 1998, the employment agreements of five officers of the Company expired
or were terminated. These officers hold ownership interests in the Company
totaling 7.4% (including 5.0% which were received prior to the officers becoming
employees) which are subject to put/call provisions. Four of the officers have
notified the Company of their intent to exercise their put options and one
employee has agreed not to exercise his put option prior to January 1, 2001. The
purchase price of these ownership interests has not yet been agreed to by the
parties and may ultimately be determined by an arbitrator, as provided for in
the employment agreements. The employment agreements also provide for the final
purchase price to be paid to the employees over three to five years.
F-14
<PAGE> 42
Some of the employment agreements also include a guaranteed severance payment in
the event of termination. The amount of such liability was $1,810,000 and
$5,795,000 at December 31, 1998 and 1997, respectively. Three former employees
were paid their severance payments in 1998.
Unit Option Plan
During 1997, HGI 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 exercise 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 December 31, 1998,
631,225 units had been granted, 589,144 of which had vested.
The Unit Option Plan contains a put/call provision under the same terms as
described above for the employment agreements. Accordingly, the unit option plan
is accounted for as a variable stock purchase plan. Compensation expense is
recorded each period based on vesting an amount equal to the change in the fair
market value of the vested membership units in the Company, provided such value
exceeds the exercise price of the options. The net value is included in
redeemable ownership interests in the accompanying consolidated balance sheets.
The Company recognized compensation expense of $1,544,000 and $1,107,000 related
to this option plan during 1998 and 1997, respectively.
One former employee that has a Unit Option Agreement (126,245 units) has elected
not to renew his employment agreement and has exercised his option to purchase
the units pursuant to the Unit Option Agreement and his option to put the units
back to the Company at fair market value. The employee and the Company have
agreed that the exercise price shall be deducted from the proceeds to be
received by the employee for the redemption of his units.
401(k) Savings Plan
Effective January 1, 1995, a 401(k) savings plan was established for 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 $923,000, $716,000 and
$667,000 for the years ended December 31, 1998, 1997 and 1996, 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
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 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
F-15
<PAGE> 43
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, 1998, 1997 and 1996,
the earnings criteria were met and additional consideration was recorded. Of the
additional consideration recorded, $799,500 was allocated to the non-compete
agreement, and the remaining $700,500 was allocated to goodwill. The unamortized
balance of the non-compete agreement included in other assets in the
accompanying consolidated balance sheets was $1,229,000 as of December 31, 1997.
The non-compete agreement was fully amortized as of December 31, 1998.
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.
Proposed Acquisition
On September 2, 1998, the Company entered into an Agreement and Plan of Merger
to acquire the operating subsidiaries of Empress Entertainment, Inc. ("Empress")
for an estimated $609 million, including assumption of a portion of Empress'
existing debt aggregating approximately $150 million. Empress owns two riverboat
gaming operations: one in Hammond, Indiana; and one in Joliet, Illinois. The
Company intends to finance the acquisition through new borrowings. Under the
terms of the agreement relating to the Empress acquisition (the "Merger
Agreement"), the Company made a down payment of $10 million towards the purchase
price. The transactions contemplated by the Merger Agreement are subject to the
approval of the Mississippi Gaming Commission, the Louisiana Riverboat Gaming
Commission, the Illinois Gaming Board and the Indiana Gaming Commission. The
Merger Agreement provides that each party has the right to terminate the
agreement certain circumstances, which in some instances provides for Empress to
retain the $10 million down payment as well as receive other consideration not
to exceed $3 million. There can be no assurance that the Company will be
successful in obtaining the necessary approvals or additional financing to
complete the Empress acquisition.
10. SUBSEQUENT EVENT
On January 13, 1999, the Company repurchased outstanding warrants held by a
third party which entitled such third party to purchase a 7% ownership interest
in the Company from HGI, for an exercise price of approximately $510,000. Upon
acquisition, the Company exercised the warrants and retired the membership units
acquired from HGI. The total amount the Company paid for the warrants, including
fees, expenses and the exercise price paid to HGI, was $34.4 million, which will
be recorded as a reduction in members' equity in the first quarter on 1999.
F-16
<PAGE> 44
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,
1998 and 1997, and the related consolidated statements of operations, partners'
capital and cash flows for each of the three years in the period ended December
31, 1998. 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, 1998 and 1997, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1998, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Memphis, Tennessee,
March 8, 1999.
F-17
<PAGE> 45
NEW GAMING CAPITAL PARTNERSHIP AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
December 31,
---------------------------
1998 1997
--------- ---------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 17,609 $ 16,143
Accounts receivable, net of allowance for doubtful
accounts of $1,628 and $2,410 3,509 2,589
Inventories 1,834 1,535
Prepaid expenses and other 2,456 1,329
--------- ---------
Total current assets 25,408 21,596
--------- ---------
Property and Equipment:
Land 12,925 10,579
Buildings, boat and improvements 194,123 145,781
Furniture, fixtures and equipment 44,702 34,914
Less: accumulated depreciation (27,696) (23,452)
--------- ---------
224,054 167,822
Construction in progress 4,113 67,428
--------- ---------
Net property and equipment 228,167 235,250
--------- ---------
Other Assets:
Goodwill, net 17,487 18,290
Other 13,970 12,137
Assets held for resale 12,000 --
--------- ---------
$ 297,032 $ 287,273
========= =========
LIABILITIES AND PARTNERS' CAPITAL
Current Liabilities:
Current maturities of long-term debt $ 18,793 $ 15,003
Accounts payable 3,732 3,568
Due to affiliates, net 20,417 12,796
Construction payables 1,694 18,757
Accrued expenses and other 19,683 9,793
--------- ---------
Total current liabilities 64,319 59,917
Long-term Debt, less current maturities 214,702 199,989
Minority Interest (1,964) (1,317)
Commitments and Contingencies (Note 9)
Partners' Capital 19,975 28,684
--------- ---------
$ 297,032 $ 287,273
========= =========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
F-18
<PAGE> 46
NEW GAMING CAPITAL PARTNERSHIP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
Years Ended December 31,
---------------------------------------------
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Revenues:
Casino $ 217,788 $ 159,956 $ 166,768
Food and beverage 27,214 16,389 15,573
Hotel 22,436 4,726 4,431
Retail and other 4,630 1,741 1,650
--------- --------- ---------
272,068 182,812 188,422
Promotional allowances (32,689) (14,918) (13,559)
--------- --------- ---------
Net revenues 239,379 167,894 174,863
--------- --------- ---------
Expenses:
Casino 127,381 90,709 89,713
Food and beverage 10,736 6,728 8,484
Hotel 8,111 4,679 3,429
Retail and other 2,539 473 597
General and administrative 32,726 25,034 26,414
Depreciation and amortization 18,563 10,553 8,855
Preopening 653 1,819 --
Development -- -- 500
--------- --------- ---------
Total expenses 200,709 139,995 137,992
--------- --------- ---------
Operating Profit Before Corporate Expenses and Asset Write-down 38,670 27,899 36,871
Corporate expenses 6,474 11,245 4,676
Asset write-down 12,911 -- --
--------- --------- ---------
Operating Income 19,285 16,654 32,195
Other Income (Expense):
Interest expense (29,441) (13,124) (11,436)
Interest income 877 893 867
Other, net (65) (18) 418
Minority interest in (income) loss of subsidiary 640 (420) (1,861)
--------- --------- ---------
Net Income (Loss) $ (8,704) $ 3,985 $ 20,183
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
F-19
<PAGE> 47
NEW GAMING CAPITAL PARTNERSHIP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(IN THOUSANDS)
<TABLE>
<S> <C>
Balance at December 31, 1995 $ 34,414
Net income 20,183
Cash distributions (29,235)
--------
Balance at December 31, 1996 25,362
Net income 3,985
Cash distributions (663)
--------
Balance at December 31, 1997 28,684
Net loss (8,704)
Cash distributions (5)
--------
Balance at December 31, 1998 $ 19,975
========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
F-20
<PAGE> 48
NEW GAMING CAPITAL PARTNERSHIP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
Years Ended December 31,
---------------------------------------------
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (8,704) $ 3,985 $ 20,183
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Asset write-down 12,911 -- --
Minority interest in income (loss) of subsidiary (640) 420 1,861
Depreciation and amortization 18,563 10,553 8,855
Provision for doubtful accounts 1,416 1,646 987
Amortization of debt discounts,
deferred finance costs and other 2,164 1,266 708
Loss (gain) on disposal of property (16) 38 (96)
Change in assets and liabilities 5,465 (33) (2,359)
--------- --------- ---------
Net cash provided by operating activities 31,159 17,875 30,139
--------- --------- ---------
Cash flows from investing activities:
Purchase of property and equipment (33,290) (138,597) (37,326)
Increase (decrease) in construction payables (17,063) 11,596 3,961
Proceeds from sale of property 383 -- 1,440
Increase in other assets (3,807) (934) (4,379)
--------- --------- ---------
Net cash used in investing activities (53,777) (127,935) (36,304)
--------- --------- ---------
Cash flows from financing activities:
Proceeds from long-term debt 36,533 120,900 40,000
Payments on long-term debt (18,030) (15,599) (8,821)
Capital distributions (5) (663) (31,092)
Distributions to minority interests (10) (910) (1,560)
Increase (decrease) in due to affiliates 7,519 10,167 (3,128)
Debt issue costs and commitment fees (1,923) (2,605) (1,346)
--------- --------- ---------
Net cash provided by (used in) financing activities 24,084 111,290 (5,947)
--------- --------- ---------
Net change in cash and cash equivalents 1,466 1,230 (12,112)
Cash and cash equivalents, beginning of period 16,143 14,913 27,025
--------- --------- ---------
Cash and cash equivalents, end of period $ 17,609 $ 16,143 $ 14,913
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
F-21
<PAGE> 49
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. Effective
December 31, 1995, the Partnership purchased a 2.92% limited partnership
interest from one of the minority owners (see Note 9). The minority interest
amounts in the accompanying consolidated financial statements represent the
remaining 8.08% of HE owned by limited partners. HE was formed on February 4,
1993 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 must
be renewed. HE submitted for license renewal in July 1998 and is awaiting final
approval. Management expects renewal of the license will be granted.
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.
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 on the straight-line basis over the estimated useful
lives of the assets as follows:
Buildings, boat and improvements 15 to 30 years
Furniture, fixtures and equipment 3 to 10 years
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, 1998, 1997 and 1996, was $120,000,
$7,777,000 and $667,000, respectively.
F-22
<PAGE> 50
Goodwill
Goodwill, which represents various intangibles with indeterminate values, is
amortized on a straight-line basis over 25 years, which management estimates is
the related benefit period. 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 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 years ended December 31, 1998, 1997 and 1996, was
$803,000, $793,000 and $793,000, respectively.
Deferred Finance Charges
Deferred finance charges, which are included in other assets, consist of fees
and expenses incurred by Gaming in connection with its corporate borrowings.
Gaming charges the Partnership its pro-rata share of the total deferred finance
charges as funds are borrowed by the Partnership from Gaming. Deferred finance
charges of $4,103,000 and $4,344,000 as of December 31, 1998 and 1997,
respectively, and are being amortized over the period from the initial funding
of the debt through the latest date for repayment using the effective interest
method.
Capital Distributions
Gaming's debt agreements 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 1998, 1997 and 1996 were made in full
prior to the end of each year.
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 are substantially included in casino department expenses as follows (in
thousands):
<TABLE>
<CAPTION>
Years Ended December 31,
-------------------------------------
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
Food and beverage $17,999 $11,648 $10,276
Hotel 4,196 1,396 1,631
Other operating expenses 1,418 191 112
------- ------- -------
$23,613 $13,235 $12,019
======= ======= =======
</TABLE>
F-23
<PAGE> 51
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 consolidated statements of operations.
Preopening Expenses
Preopening costs incurred during the expansion of the existing casino property
are expensed as incurred and were $652,000 and $1,819,000 during 1998 and 1997,
respectively. There were no preopening expenses in 1996. In the future, the
Partnership will expense as incurred all preopening costs related to new
construction in accordance with Statements of Position 98-5 "Reporting on the
Cost of Start-up Activities."
Corporate Expenses
Gaming manages the Partnership and related entities. The Partnership reimburses
Gaming for its proportionate share of these expenses. Corporate expenses include
normal operating costs, as well as the compensation expense relating to
ownership interests in Gaming issued to employees pursuant to employment
contracts (see Note 8).
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 $5,239,000 and $3,461,000 at
December 31, 1998 and 1997, respectively. Taxable income was in excess of net
income reported in the accompanying consolidated statements of operations for
all periods presented.
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, there were no significant
impairments of long-lived assets that occurred during the years ended December
31, 1997 and 1996. During 1998, the Partnership recorded a write-down in the
carrying value of an idle riverboat (see Note 4).
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.
F-24
<PAGE> 52
3. CONSOLIDATED STATEMENTS OF CASH FLOWS
Cash payments made for interest, excluding amounts capitalized, totaled
$22,972,000, $19,378,000 and $10,530,000 for the years ended December 31, 1998,
1997 and 1996.
The net change in assets and liabilities consists of the following (in
thousands):
<TABLE>
<CAPTION>
Years Ended December 31,
---------------------------------------
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
(Increase) decrease in assets:
Accounts receivable $(2,335) $(2,334) $(1,063)
Inventories (299) (578) 106
Prepaid expenses and other (1,127) (227) 123
Increase (decrease) in liabilities:
Accounts payable 164 1,686 643
Accrued expenses and other 9,062 1,420 (2,168)
------- ------- -------
$ 5,465 $ (33) $(2,359)
======= ======= =======
</TABLE>
4. ASSETS HELD FOR RESALE
In January 1998, the Partnership's new riverboat casino facility replaced the
existing riverboat facility ("Queen of the Red"). The Queen of the Red, along
with the related gaming equipment, is reported as assets held for resale in the
accompanying consolidated balance sheet. Additionally, the Partnership recorded
an asset write-down of $12,911,000 based on an appraisal of the Queen of the
Red. Management is continuing to evaluate various options for use of the Queen
of the Red, including sale.
5. ACCRUED EXPENSES AND OTHER
Accrued expenses and other consist of the following (in thousands):
<TABLE>
<CAPTION>
December 31,
----------------------
1998 1997
------- -------
<S> <C> <C>
Payroll and related tax liabilities $ 2,476 $ 2,154
Vacation and other employee benefits 2,071 1,424
Accrued interest 5,764 372
Gaming, sales, use and property taxes 1,985 1,090
Outstanding chip and token liabilities 1,610 1,190
Progressive slot and slot club liabilities 2,181 1,225
Other accrued expenses 3,596 2,338
------- -------
$19,683 $ 9,793
======= =======
</TABLE>
F-25
<PAGE> 53
6. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
December 31,
---------------------------
1998 1997
--------- ---------
(in thousands)
<S> <C> <C>
Notes payable to Gaming:
9.39%, due June 15, 2007, semi-annual payments of
interest only on June 15 and December 15 $ 50,000 $ 50,000
9.39%, due June 15, 2000, semi-annual payments of
interest only on June 15 and December 15
(available borrowing of $100,000,000) 51,899 24,000
13.31%, due in semi-annual installments of 5% of the
outstanding principal balance, including interest
through September 30, 2000 130,596 138,492
Promissory Note Payable, 6%, due in annual installments
through January 1999 (see Note 9) 1,000 2,500
--------- ---------
233,495 214,992
Less: current maturities (18,793) (15,003)
--------- ---------
$ 214,702 $ 199,989
========= =========
</TABLE>
HE's notes with Gaming are senior obligations of the Partnership and also serve
as collateral for the repayment of the debt obligations of Gaming, which totaled
$393,149,000 including accrued interest, at December 31, 1998.
The Company's debt agreements 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.
As of December 31, 1998, the five year maturities for long-term debt are
$18,793,000 (1999), $164,703,000 (2000), $0 (2001), $0 (2002) and $0 (2003).
7. TRANSACTIONS WITH RELATED PARTIES
The due to affiliates balance relates primarily to costs and expenses of the
Partnership and HE paid for by Gaming.
Notes receivable (including accrued interest) from limited partners of HE
totaling $8,164,000 and $4,630,000 are included in other assets in the
accompanying consolidated balance sheets are as of December 31, 1998 and 1997,
respectively. The notes are secured by their ownership interests in HE and are
due on demand with interest rates varying from 7% to 10%.
The Partnership conducts a portion of its marketing through an entity that is
owned by the wife of an officer of Gaming. Fees and expenses paid to this
company totaled $2,355,000, $1,594,000 and $393,000 for the years ended December
31, 1998, 1997 and 1996, respectively.
F-26
<PAGE> 54
8. EMPLOYEE COMPENSATION AND BENEFITS
Employment Agreements
HE has employment agreements with certain key employees that provide certain
benefits in the event such employees are terminated. These employees also
received ownership interests in the Partnership, which were subsequently
exchanged for membership interests in Gaming and vest over terms specified in
the various employment agreements, which is generally five years. These
employment agreements include a put/call provision which, if exercised by the
employee, would require Gaming to repurchase these ownership interests in the
event of termination at the then fair market value based on an independent
appraisal. Accordingly, these compensation agreements are accounted for as
variable stock purchase plans. Compensation expense is recorded each period
equal to the change in the fair market value of ownership interests issued and
the vesting schedule 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 consolidated balance
sheets for the years ended at December 31, 1998 and 1997.
Compensation expense related to employee ownership interests is included in
corporate expenses. Compensation expense related to redeemable ownership
interest was $2,123,000, $7,533,000 and $1,720,000 for the years ended December
31, 1998, 1997 and 1996, respectively.
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 matches
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
$473,000, $341,000 and $368,000 for the years ended December 31, 1998, 1997 and
1996, respectively.
9. COMMITMENTS AND CONTINGENCIES
Litigation
The Partnership and its subsidiary, during the normal course of operating its
business, become 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
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 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, 1998, 1997 and 1996, the earnings
criteria were met and additional consideration was recorded. Of the additional
consideration recorded, $799,500 was allocated to the non-compete agreement and
the remaining $700,500 was allocated to goodwill. The unamortized balance of the
non-compete agreement included in other assets in the accompanying consolidated
balance sheets was $1,229,000 as of December 31, 1997. The balance was fully
amortized as of December 31, 1998.
F-27
<PAGE> 55
Proposed Acquisition
On September 2, 1998, Gaming entered into an Agreement and Plan of Merger to
acquire the operating subsidiaries of Empress Entertainment, Inc. ("Empress")
for an estimated $609 million, including assumption of a portion of Empress'
existing debt aggregating approximately $150 million. Empress owns two riverboat
gaming operations: one in Hammond, Indiana; and one in Joliet, Illinois. Gaming
intends to finance the acquisition through new borrowings. Under the terms of
the agreement relating to the Empress acquisition (the "Merger Agreement"),
Gaming made a down payment of $10 million towards the purchase price. The
transactions contemplated by the Merger Agreement are subject to the approval of
the Mississippi Gaming Commission, the Louisiana Riverboat Gaming Commission,
the Illinois Gaming Board and the Indiana Gaming Commission. The Merger
Agreement provides that each party has the right to terminate the agreement
certain circumstances, which in some instances provides for Empress to retain
the $10 million down payment as well as receive other consideration not to
exceed $3 million. There can be no assurance that Gaming will be successful in
obtaining the necessary approvals or additional financing to complete the
Empress acquisition.
F-28
<PAGE> 56
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, 1998 and 1997, and the
related statements of operations, partners' capital and cash flows for each of
the three years in the period ended December 31, 1998. 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, 1998 and 1997, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1998, in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Memphis, Tennessee,
March 8, 1999.
F-29
<PAGE> 57
ROBINSON PROPERTY GROUP, L.P.
BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
December 31,
---------------------------
1998 1997
--------- ---------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 21,838 $ 23,159
Accounts receivable, net of allowance for doubtful
accounts of $8,718 and $6,555 6,137 10,718
Inventories 1,714 1,424
Prepaid expenses and other 1,930 505
--------- ---------
Total current assets 31,619 35,806
--------- ---------
Property and Equipment:
Land 3,168 4,110
Buildings, barge and improvements 138,948 131,154
Furniture, fixtures and equipment 37,902 32,670
Less: accumulated depreciation (33,260) (19,066)
--------- ---------
Net property and equipment 146,758 148,868
--------- ---------
Other Assets:
Goodwill, net 18,637 19,670
Other 4,719 4,739
--------- ---------
$ 201,733 $ 209,083
========= =========
LIABILITIES AND PARTNERS' CAPITAL
Current Liabilities:
Accounts payable $ 2,784 $ 4,941
Construction payables -- 9,228
Due to affiliates 12,376 10,315
Accrued expenses and other 13,269 9,901
--------- ---------
Total current liabilities 28,429 34,385
Long-term Debt 65,400 85,400
Commitments and Contingencies (Note 8)
Partners' Capital 107,904 89,298
--------- ---------
$ 201,733 $ 209,083
========= =========
</TABLE>
The accompanying notes are an integral part of these
financial statements.
F-30
<PAGE> 58
ROBINSON PROPERTY GROUP, L.P.
STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
Years Ended December 31,
---------------------------------------------
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Revenues:
Casino $ 212,037 $ 161,280 $ 150,711
Food and beverage 21,049 13,601 11,374
Hotel 13,012 4,047 3,488
Retail and other 5,350 2,564 2,775
--------- --------- ---------
251,448 181,492 168,348
Promotional allowances (29,651) (14,293) (11,474)
--------- --------- ---------
Net revenues 221,797 167,199 156,874
--------- --------- ---------
Expenses:
Casino 117,853 84,685 72,695
Food and beverage 5,223 4,253 3,833
Hotel 3,674 3,198 3,369
Retail and other 4,371 952 762
General and administrative 24,182 18,566 18,937
Depreciation and amortization 15,305 8,838 7,114
Preopening -- 1,144 --
--------- --------- ---------
Total 170,608 121,636 106,710
--------- --------- ---------
Operating Profit Before Corporate Expenses 51,189 45,563 50,164
Corporate expenses 6,474 11,245 5,578
--------- --------- ---------
Operating Income 44,715 34,318 44,586
Other Income (Expense):
Interest expense (10,198) (4,088) (6,190)
Interest income 493 569 797
Other, net (50) (356) (6)
--------- --------- ---------
Net Income $ 34,960 $ 30,443 $ 39,187
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these
financial statements.
F-31
<PAGE> 59
ROBINSON PROPERTY GROUP, L.P.
STATEMENTS OF PARTNERS' CAPITAL
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
Partners' Contributions
Capital Receivable Total
--------- ---------- ---------
<S> <C> <C> <C>
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
Cash distributions (8,200) -- (8,200)
--------- --------- ---------
Balance at December 31, 1996 72,419 -- 72,419
Net income 30,443 -- 30,443
Cash distributions (13,564) -- (13,564)
--------- --------- ---------
Balance at December 31, 1997 89,298 -- 89,298
Net income 34,960 -- 34,960
Cash distributions (15,245) -- (15,245)
Revaluation of land contribution (1,109) -- (1,109)
--------- --------- ---------
Balance at December 31, 1998 $ 107,904 $ -- $ 107,904
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these
financial statements.
F-32
<PAGE> 60
ROBINSON PROPERTY GROUP, L.P.
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------------------------
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 34,960 $ 30,443 $ 39,187
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 15,305 8,838 7,114
Amortization of debt discount,
deferred finance charges and other 948 651 482
Loss on disposal of property 16 351 --
Provision for doubtful accounts 10,522 5,910 3,401
Change in assets and liabilities (7,067) (6,856) (7,302)
-------- -------- --------
Net cash provided by operating activities 54,684 39,337 42,882
-------- -------- --------
Cash flows from investing activities:
Purchases of property and equipment (13,059) (76,882) (21,007)
Increase (decrease) in construction payables (9,228) 2,283 6,945
Increase in other assets -- (503) (257)
-------- -------- --------
Net cash used in investing activities (22,287) (75,102) (14,319)
-------- -------- --------
Cash flows from financing activities:
Proceeds from long-term debt 5,000 42,400 5,000
Payments on long-term debt (25,000) -- (32,000)
Capital distributions (15,245) (13,564) (8,200)
Increase (decrease) in due to affiliates 1,959 8,486 (3,042)
Debt issue costs and commitment fees (432) (1,256) (169)
-------- -------- --------
Net cash (used in) provided by financing activities (33,718) 36,066 (38,411)
-------- -------- --------
Net change in cash and cash equivalents (1,321) 301 (9,848)
Cash and cash equivalents, beginning of period 23,159 22,858 32,706
-------- -------- --------
Cash and cash equivalents, end of period $ 21,838 $ 23,159 $ 22,858
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these
financial statements.
F-33
<PAGE> 61
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 is for a two-year period and must be renewed. In September 1998, the
Partnership renewed its license for an additional two-year period.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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 on the straight-line basis over the estimated useful
lives as follows:
Buildings, barge and improvements 15 to 30 years
Furniture, fixtures and equipment 3 to 10 years
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, 1998, 1997 and 1996 was $43,000, $3,413,000
and $620,000, respectively.
Goodwill
Goodwill is amortized on a straight-line basis over 25 years, which management
estimates is the related benefit period. 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 recorded in 1998, 1997 and 1996 was $865,000, $869,000
and $861,000, respectively.
F-34
<PAGE> 62
Deferred Finance Charges
Deferred finance charges, which are included in other assets, consist of fees
and expenses incurred by Gaming in conjunction with its corporate borrowings.
Gaming charges the Partnership its pro-rata share of the total deferred finance
charges as funds are borrowed by the Partnership from Gaming. Deferred finance
charges of $2,013,000 and $2,529,000 as of December 31, 1998 and 1997,
respectively, and are being amortized over the period from the initial funding
of the debt through the latest date for repayment using the effective interest
method.
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>
Years Ended December 31,
-------------------------------------
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
Food and beverage $18,706 $13,319 $11,779
Hotel 4,129 1,964 1,403
Other operating expenses 3,649 473 507
------- ------- -------
$26,484 $15,756 $13,689
======= ======= =======
</TABLE>
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.
Preopening Expenses
Preopening costs incurred during the expansion of the existing casino property
were expensed as incurred and were $1,144,000 in 1997. There were no preopening
costs during 1998. In the future, the Partnership will expense as incurred all
preopening costs related to new construction in accordance with Statements of
Position 98-5 "Reporting on the Cost of Start-up Activities."
Corporate Expenses
The Partnership reimburses Gaming for its share of expenses incurred associated
with the management of Gaming and related entities. Included in corporate
expenses are normal operating costs, as well as the compensation expense
relating to ownership interests in Gaming issued to employees pursuant to
employment contracts (see Note 7).
F-35
<PAGE> 63
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 individual partners may also change. The tax bases in the Partnership's
assets and liabilities were less than the amounts reported in the accompanying
financial statements by $1,392,000 and $1,848,000 at December 31, 1998 and 1997,
respectively. In 1998 and 1997, taxable income was in excess of net income
reported in the accompanying statements of operations and in 1996, taxable
income was less than 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, 1998.
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.
3. STATEMENTS OF CASH FLOWS
Cash payments for interest, excluding amounts capitalized, totaled $10,734,000,
$6,727,000 and $8,436,000 for the years ended December 31, 1998, 1997 and 1996,
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. During 1998, the
carrying value of the land was adjusted to its estimated fair market value as
agreed to by the Partnership and the contributing partner. As a result, the
Partnership reduced the value of the land by $941,000 and reduced goodwill by
$168,000, with a corresponding reduction in partners capital of $1,109,000.
The net change in assets and liabilities consists of the following (in
thousands):
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------------------------
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
(Increase) decrease in assets:
Accounts receivable $ (5,941) $(10,745) $ (6,140)
Inventories (290) (946) (60)
Prepaid expenses and other (1,548) (230) 196
Increase (decrease) in liabilities:
Accounts payable (2,157) 3,667 (1,397)
Accrued expenses and other 2,869 1,398 99
-------- -------- --------
$ (7,067) $ (6,856) $ (7,302)
======== ======== ========
</TABLE>
F-36
<PAGE> 64
4. ACCRUED EXPENSES AND OTHER
Accrued expenses and other consists of the following (in thousands):
<TABLE>
<CAPTION>
December 31,
----------------------
1998 1997
------- -------
<S> <C> <C>
Payroll and related tax liabilities $ 3,154 $ 1,879
Vacation and other employee benefits 1,092 1,611
Gaming, sales, use and property taxes 1,830 1,450
Outstanding chip and token liabilities 1,163 1,053
Progressive slot and slot club liabilities 4,510 3,451
Other accrued expenses 1,520 457
------- -------
$13,269 $ 9,901
======= =======
</TABLE>
5. LONG-TERM DEBT
RPG's original note payable to Gaming of $125,000,000 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. Interest is payable semi-annually on March 31 and
September 30. 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. The last borrowing under this note occurred
in April 1997. The total amount due under this note was $24,400,000 and
$49,400,000 as of December 31, 1998 and 1997, respectively.
Additional borrowings have been evidenced by notes payable to Gaming in the
original amounts of $25,000,000 and $50,000,000. These notes bear interest at
9.39%, are due June 15, 2007 and June 15, 2000, respectively, and require
semi-annual interest payments on June 15 and December 15. As of December 31,
1998, the amounts outstanding under these notes were $25,000,000 and
$16,000,000, respectively. As of December 31, 1997, the amounts outstanding
under these notes were $25,000,000 and $11,000,000, respectively.
Substantially all of the assets of the Partnership serve as collateral for the
repayment of the debt obligations of Gaming. The Partnership guarantees such
debt, which totaled $393,149,000 including accrued interest, at December 31,
1998.
Gaming's debt agreements 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.
As of December 31, 1998, the five year maturities for long-term debt are $0
(1999), $40,400,000 (2000), $0 (2001), $0 (2002) and $0 (2003).
F-37
<PAGE> 65
6. TRANSACTIONS WITH RELATED PARTIES
The due to affiliates balance relates primarily to costs and expenses of the
Partnership paid for by Gaming.
The Partnership conducts a portion of its marketing through an entity that is
owned by the wife of an officer of Gaming. Fees and expenses paid to this
company totaled $1,205,000, $1,047,000 and $736,000 for the years ended December
31, 1998, 1997 and 1996, respectively.
During 1998, the Partnership loaned an officer $100,000. The unsecured note
bears interest at 10% and is due upon termination of the officer. This amount is
included in other current receivables.
7. EMPLOYEE COMPENSATION AND BENEFITS
Employment Agreements
The Partnership has 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 and
the vesting schedule 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, 1998 and 1997.
Compensation expense related to employee ownership interests are included in
corporate expenses. The amount of compensation expense related to redeemable
ownership interest was $2,122,000, $7,533,000 and $2,620,000 as of December 31,
1998, 1997 and 1996, respectively.
401(k) Savings Plan
The Partnership has a 401(k) savings plan 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 $444,000, $333,000 and $299,000 for the years ended December
31, 1998, 1997 and 1996, respectively.
8. 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.
F-38
<PAGE> 66
Proposed Acquisition
On September 2, 1998, Gaming entered into an Agreement and Plan of Merger to
acquire the operating subsidiaries of Empress Entertainment, Inc. ("Empress")
for an estimated $609 million, including assumption of a portion of Empress'
existing debt aggregating approximately $150 million. Empress owns two riverboat
gaming operations: one in Hammond, Indiana; and one in Joliet, Illinois. Gaming
intends to finance the acquisition through new borrowings. Under the terms of
the agreement relating to the Empress acquisition (the "Merger Agreement"),
Gaming made a down payment of $10 million towards the purchase price. The
transactions contemplated by the Merger Agreement are subject to the approval of
the Mississippi Gaming Commission, the Louisiana Riverboat Gaming Commission,
the Illinois Gaming Board and the Indiana Gaming Commission. The Merger
Agreement provides that each party has the right to terminate the agreement
certain circumstances, which in some instances provides for Empress to retain
the $10 million down payment as well as receive other consideration not to
exceed $3 million. There can be no assurance that Gaming will be successful in
obtaining the necessary approvals or additional financing to complete the
Empress acquisition.
F-39
<PAGE> 67
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Horseshoe Gaming, L.L.C.:
We have audited in accordance with generally accepted auditing standards, the
consolidated financial statements of Horseshoe Gaming, L.L.C. included in this
Form 10-K, and have issued our report thereon dated March 8, 1999. Our audits
were made for the purpose of forming an opinion on those statements taken as a
whole. The schedule listed under Item 14(a)2 is the responsibility of the
Company's management and is presented for purposes of complying with the
Securities and Exchange Commission's rules and is not part of the basic
financial statements. This schedule has been subjected to the auditing
procedures applied in the audits of the basic financial statements, and in our
opinion, fairly states in all material respects the financial data required to
be set forth therein in relation to the basic financial statements taken as a
whole.
ARTHUR ANDERSEN LLP
Memphis, Tennessee,
March 8, 1999.
S-1
<PAGE> 68
SCHEDULE II
HORSESHOE GAMING, L.L.C.
CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS
(In thousands)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
Column A Column B Column C Column D Column E
- ------------------------------------------------------------------------------------------
Additions
Balance at Charged to Deductions Balance at
Beginning Costs and from Close
Description of Period Expenses Reserves of Period
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Year Ended December 31, 1998
Allowance for Doubtful
Accounts $8,965 $ 11,937 $(10,556) (A) $10,346
====== ======== ======== =======
Year Ended December 31, 1997
Allowance for Doubtful
Accounts $3,452 $ 7,556 $ (2,043)(A) $ 8,965
====== ======== ======== ========
Year Ended December 31, 1996
Allowance for Doubtful
Accounts $2,663 $ 4,388 $ (3,599)(A) $ 3,452
====== ======== ======== ========
</TABLE>
(A) Uncollectible accounts written off, net of amounts recovered.
S-2
<PAGE> 69
EXHIBIT INDEX
<TABLE>
<CAPTION>
Sequentially
Exhibit Numbered
Number Description Page
------- ----------- ------------
<S> <C> <C>
2.1 # Agreement and Plan of Merger by and among Horseshoe Gaming, L.L.C. and
Empress Entertainment, Inc. dated September 2, 1998.
2.2 ## First Amendment to Agreement and Plan of Merger by and among Horseshoe
Gaming, L.L.C. and Empress Entertainment, Inc. dated March 25, 1999.
2.3 ## First Amendment to Deposit Escrow Agreement by and among Horseshoe
Gaming, L.L.C. and Empress Entertainment, Inc. dated March 25, 1999.
3.1 * Certificate of Formation of Horseshoe Gaming, L.L.C.
3.2 * Articles of Incorporation of Horseshoe Gaming, Inc. (formerly New Gaming
Capital Corporation), as amended to date.
3.3 * Bylaws of Horseshoe Gaming, Inc. (formerly New Gaming Capital Corporation).
3.4 * Certificate of Limited Partnership of Robinson Property Group Limited
Partnership, as amended to date.
3.5 * Articles of Incorporation of Horseshoe GP, Inc., as amended to date.
3.6 * Bylaws of Horseshoe GP, Inc.
4.1 * Second Amended and Restated Limited Partnership Agreement of Robinson
Property Group Limited Partnership, as amended to date.
4.2 * 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.
4.3 * 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.
4.4 * Bossier City Security Agreement and Assignment thereof.
4.5 * 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.
4.6 * 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.
4.7 * Tunica County Security Agreement and Assignment thereof.
4.8 * Intercompany Senior Secured Note due September 30, 2000, executed by
Horseshoe Entertainment in favor of Horseshoe Gaming, L.L.C.
4.9 * Intercompany Senior Secured Note due September 30, 2000, executed by
Robinson Property Group Limited Partnership in favor of Horseshoe Gaming,
L.L.C.
4.10 * Form of Senior Note of Horseshoe Gaming, L.L.C. 12.75% Senior Notes due
2000.
4.11 * 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> 70
<TABLE>
<S> <C> <C>
4.12 * 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.
4.13 * 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.
4.14 * 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.
4.15 * 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.
4.16 * Bossier City Second Security Agreement and Assignment thereof.
4.17 * 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.
4.18 * 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.
4.19 * Tunica County Second Security Agreement and Assignment thereof.
4.20 ** Limited Partnership Agreement of Horseshoe Entertainment, a Louisiana
limited partnership, dated April 20th, 1993.
4.21 ** Second and Amended and Restated Limited Partnership Agreement of
New Gaming Capital Partnership, a Nevada limited partnership, dated as
of October 1, 1995.
4.22 ** Limited Liability Company Agreement of Horseshoe Ventures, L.L.C.,
a Delaware limited liability company, dated as of October 1, 1995.
4.23 ** Limited Liability Company Agreement of Horseshoe Gaming, L.L.C., as
amended to date.
4.24 *** 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.
4.25 + Intercompany Senior Secured Note due September 30, 2000 executed by
Robinson Property Group Limited Partnership in favor of Horseshoe
Gaming, L.L.C.
4.26 + Intercompany Senior Secured Note due September 30, 2000 executed by
Horseshoe Entertainment in favor of Horseshoe Gaming, L.L.C.
4.27 ++ Purchase Agreement for 9-3/8% Series A Senior Subordinated Notes by and
among Horseshoe Gaming, L.L.C. and Robinson Property Group Limited
Partnership, as guarantor, and Wasserstein Perella Securities, Inc. as
Initial Purchaser
4.28 ++ Form of 9-3/8% Senior Subordinated Note due 2007 of Horseshoe Gaming, L.L.C.
</TABLE>
<PAGE> 71
<TABLE>
<S> <C> <C>
4.29 ++ 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.
4.30 ++ 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.
4.31 ++ Intercompany Senior Secured Note due June 15, 2007 executed by
Robinson Property Group Limited Partnership in favor of Horseshoe
Gaming, L.L.C.
4.32 ++ Intercompany Senior Secured Note due June 15, 2007 executed by
Horseshoe Entertainment in favor of Horseshoe Gaming, L.L.C.
4.33 +++ Intercompany Senior Secured Note due June 15, 2000 executed by
Robinson Property Group Limited Partnership in favor of Horseshoe
Gaming, L.L.C.
4.34 +++ Intercompany Senior Secured Note due June 15, 2000 executed by
Horseshoe Entertainment in favor of Horseshoe Gaming, L.L.C.
4.35 +++ Amended and Restated Credit Facility Agreement, dated as of
November 12, 1997, by and among Horseshoe Gaming, L.L.C. and Canadian
Imperial Bank of Commerce as agent for the lenders.
4.36 +++ Form of Revolving Note between Horseshoe Gaming, L.L.C. and Lender pursuant
to the Amended and Restated Credit Facility Agreement.
4.37 +++ Form of Swingline Note between Horseshoe Gaming, L.L.C. and Canadian
Imperial Bank of Commerce pursuant to the Amended and Restated Credit
Facility Agreement
4.38 +++ Security Agreement made as of November 12, 1997 by the Company in
favor of Canadian Imperial Bank of Commerce (the "Bank").
4.39 +++ Guarantee and Security Agreement made by Horseshoe Gaming, Inc. as of
November 12, 1997 in favor of the Bank.
4.40 +++ Guarantee and Security Agreement made by Horseshoe GP, Inc. as of
November 12, 1997 in favor of the Bank.
4.41 +++ Amended and Restated Guarantee and Security Agreement made by
Robinson Property Group LP as of November 12, 1997 in favor of the
Bank.
4.42 +++ Guarantee and Security Agreement made by New Gaming Capital
Partnership as of November 12, 1997 in favor of the Bank.
4.43 +++ Guarantee and Security Agreement made by Horseshoe Ventures as of
November 12, 1997 in favor of the Bank.
4.44 +++ Amended and Restated Note Assignment made by the Company as of
November 12, 1997 in favor of the Bank 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.
4.45 +++ Amended and Restated Pledge Agreement of the Company as of
November 12, 1997 in favor of the Bank.
4.46 +++ Amended and Restated Pledge Agreement of JBB Gaming Investments as
of November 12, 1997 in favor of the Bank.
4.47 +++ Amended and Restated Intercreditor Agreement dated as of November 12, 1997
by and between Horseshoe Gaming, L.L.C. and Canadian Imperial Bank of
Commerce.
10.1 * Employment Agreement dated January 1, 1996 by and between Horseshoe Gaming,
Inc. and Paul Alanis.
</TABLE>
<PAGE> 72
<TABLE>
<S> <C> <C>
10.2 * Employment Agreement dated January 1, 1996 by and between Horseshoe Gaming,
L.L.C. and Loren S. Ostrow.
10.3 * 401(k) Plan of Robinson Property Group Limited Partnership.
10.4 ** Assignment Agreement dated as of October 1, 1995 by and between Horseshoe
Gaming, L.L.C. and Walter J. Haybert.
10.5 ** Assignment Agreement dated as of October 1, 1995 by and between Horseshoe
Gaming, L.L.C. and John J. Schreiber.
10.6 ** Assignment Agreement dated as of October 1, 1995 by and between Horseshoe
Gaming, L.L.C. and John Michael Allen.
10.7 ** 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.
10.8 ++ Second Amended and Restated Employment Agreement dated as of October 1,
1995 by and between Horseshoe Gaming, Inc. and John Michael Allen.
10.9 ++ Second Amended and Restated Employment Agreement dated as of October 1,
1995 by and between Horseshoe Gaming, Inc. and Walter J. Haybert.
10.10++ Second Amended and Restated Employment Agreement dated as of October 1,
1995, by and between Horseshoe Gaming, Inc. and John J. Schreiber.
10.11++ 1997 Unit Option Plan of Horseshoe Gaming, L.L.C.
10.12++ 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/Withtaker, a Joint
Venture.
10.13++ Vessel Construction Agreement dated as of March 6, 1997 between Levac
Shipyards, Inc. and Horseshoe Entertainment
10.14++ Contract for Construction dated as of August 6, 1996 between Robinson
Property Group Limited Partnership and Charles N. White Construction
Company, together with Change Orders Numbered 1 through 6.
10.15## Unit Option Agreement dated as of February 1, 1997 by and between Horseshoe
Gaming, L.L.C. and Larry Lepinski.
10.16## Warrant Purchase Agreement dated as of December 21, 1998 by and
between Hanwa Co., Ltd and Horseshoe gaming, L.L.C.
10.17## Settlement Agreement dated as of December 31, 1998 by and among Horseshoe
Gaming, Inc., Horseshoe Gaming, L.L.C. and Hollywood Park, Inc.
10.18## Settlement Agreement dated as of February 3, 1999 by and among Horseshoe
Gaming, Inc., Horseshoe Gaming, L.L.C. and Mike Allen.
10.19## Letter Agreement dated October 19, 1998 by Horseshoe Gaming, Inc. and
Horseshoe Gaming, L.L.C. and accepted by Walter Haybert.
10.20## Letter Agreement dated January 4, 1999 by Horseshoe Gaming, Inc. and
Horseshoe Gaming, L.L.C. and accepted by Walter Haybert.
10.21## Mutual General Release dated February 23, 1999 by and among Horseshoe
Gaming, L.L.C., Horseshoe Gaming, Inc., Horseshoe GP, Inc., Robinson
Property Group Limited Partnership, New Gaming Capital Partnership,
Horseshoe Entertainment, LP and Nobutaka Mutaguchi.
</TABLE>
<PAGE> 73
<TABLE>
<S> <C> <C>
10.22## Exclusive License Agreement dated July 2, 1998 by and between Horseshoe
Gaming, L.L.C. and Horseshoe License Company.
10.23## Amended and Restated Employment Agreement dated November 23, 1998 by and
between Horseshoe Gaming, Inc. and Gary Border.
10.24## Amended and Restated Employment Agreement dated November 23, 1998 by and
between Horseshoe Gaming, Inc. and Larry Lepinski.
10.25## Amended and Restated Employment Agreement dated October 15, 1998 by
and between Horseshoe Gaming, Inc. and Robert McQueen.
10.26## Amended and Restated Employment Agreement dated November 23, 1998 by and
between Horseshoe Gaming, Inc. and Kirk Saylor.
10.27## Unit Option Agreement dated as of February 1, 1997 by and between Horseshoe
Gaming, L.L.C. and Urs Vogel.
10.28## Unit Option Agreement dated as of February 1, 1997 by and between Horseshoe
Gaming, L.L.C. and Glen Buxton.
10.29## Unit Option Agreement dated as of February 1, 1997 by and between Horseshoe
Gaming, L.L.C. and Cliff Kortman.
20.01# Press Release issued on September 2, 1998 by Horseshoe Gaming, L.L.C.
announcing that it had executed an agreement to acquire the riverboat
gaming operations of Empress Entertainment, Inc.
21.1 ## Subsidiaries of Horseshoe Gaming, L.L.C.
27.1 ## Financial Data Schedule-Horseshoe Gaming L.L.C. and Subsidiaries.
</TABLE>
- -----------
* Filed as an Exhibit to Registration Statement on Form S-4 (No. 333-0214)
filed on January 8, 1996.
** Filed as an Exhibit to Amendment No. 1 to Registration Statement filed
on April 26, 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-Q for the Quarter Ended March 31, 1997,
filed on May 7, 1997.
++ Filed as an Exhibit to Registration Statement on Form S-4 (No.
333-33145) filed on August 7, 1997.
+++ Filed as an Exhibit to Form 10-K for the Year Ended December 31, 1997,
filed on March 30, 1998.
# Filed as an Exhibit to Form 8-K filed on September 12, 1998.
## Filed herewith.
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO SECTION
15(d) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES PURSUANT TO
SECTION 12 OF THE ACT.
No annual report or proxy material has been sent to security holders
during the fiscal year ended December 31, 1998.
<PAGE> 1
EXHIBIT 2.2
FIRST AMENDMENT
TO
AGREEMENT AND PLAN OF MERGER
The First Amendment (this "Amendment") dated as of March 25, 1999 to
the Agreement and Plan of Merger (the "Merger Agreement") dated as of September
2, 1998 by and among Horseshoe Gaming, L.L.C., a Delaware limited liability
company ("Parent"), Horseshoe Gaming (Midwest), Inc., a Delaware corporation
("Horseshoe"), Empress Acquisition Illinois, Inc., a Delaware corporation
("Empress Illinois), Empress Acquisition Indiana, Inc., a Delaware corporation
("Empress Indiana"), Empress Entertainment, Inc., a Delaware corporation
("Empress"), Empress Casino Joliet Corporation, an Illinois corporation
("Empress Joliet"), and Empress Casino Hammond Corporation, an Indiana
corporation ("Empress Hammond"), is entered into by and among Parent, Horseshoe,
Empress Illinois, Empress Indiana, Empress, Empress Joliet and Empress Hammond.
RECITALS
A. Parent, Horseshoe, Empress Illinois, Empress Indiana, Empress,
Empress Joliet and Empress Hammond have heretofore entered into the Merger
Agreement, which provides, among other things, for (i) the merger of Empress
Illinois with and into Empress Joliet; and (ii) the merger of Empress Indiana
with and into Empress Hammond. All capitalized terms used herein and not
otherwise defined herein shall have the meaning ascribed to them in the Merger
Agreement.
B. Parent, Horseshoe, Empress Illinois, Empress Indiana, Empress,
Empress Joliet and Empress Hammond wish to enter into this Amendment to amend
certain provisions of the Merger Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and mutual agreements
herein contained, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. Status of Merger Agreement. Except as specifically set forth herein,
the Merger Agreement and each of the exhibits thereto shall remain in full force
and effect and shall not be waived, modified, superseded or otherwise affected
by this Amendment. This Amendment is not to be construed as a release, waiver or
modification of any of the terms, conditions, representations, warranties,
covenants, rights or remedies set forth in the Merger Agreement, except as
specifically set forth herein.
<PAGE> 2
2. Amendments to the Merger Agreement.
(a) Section 1.05 of the Merger Agreement. The first sentence of Section
1.05 of the Merger Agreement is hereby deleted in its entirety and replaced with
the following:
"Subject to the terms and conditions set forth in this Agreement, the
aggregate consideration to be received by Empress upon the consummation of the
Merger shall be an aggregate amount equal to: (a) Six Hundred Nine Million
Dollars ($609,000,000), plus or minus (as the case may be) (b) Net Working
Capital (or the deficit in Net Working Capital), minus (c) Existing Debt plus
(d) the aggregate amount of the Hammond Payments plus (e) the aggregate amount
of cash expended on or after June 30, 1999 and prior to the Closing by the
Subsidiaries for the purchase of assets or property (except with respect to the
Hammond Payments and those expenditures described on Schedule 2.06(b)) that, in
accordance with GAAP, is capitalized on such Subsidiaries' balance sheet at any
time on or after June 30, 1999 and is made in accordance with Section 4.12 (the
"Merger Consideration")."
(b) Section 1.09 of the Merger Agreement. Section 1.09 of the Merger
Agreement is hereby deleted in its entirety and replaced with the following:
"Section 1.09. Deposit. The Buyers are depositing $10,000,000 (plus any
interest earned thereon, the "Deposit"), with the Escrow Agent (the "Deposit
Escrow") pursuant to an escrow agreement to be substantially in the form of
Exhibit A, as amended from time to time by the parties hereto (the "Deposit
Escrow Agreement," and together with the Adjustment Escrow Agreement, the
General Escrow Agreement, the Supplemental Escrow Agreements, and the Bonus
Escrow Agreement, the "Escrow Agreements"). The Deposit, without any right of
set-off, shall be paid to Empress in the event of termination of this Agreement
pursuant to Sections 10.01(a), (b), (d), (h) or (i) and the Deposit shall be
returned to the Buyers upon termination of this Agreement pursuant to Sections
10.01(c), (e), or (f). In the event of a termination of this Agreement pursuant
to Section 10.01(g), the Buyers and the Sellers shall mutually determine how the
Deposit will be disbursed. In the event of a Closing, the Deposit shall be
credited against the Merger Consideration and distributed to Empress in
accordance with Section 1.05. If the Deposit is paid to Empress as a result of a
termination of this Agreement pursuant to Sections 10.01(a), (b), (d), (h) or
(i), the Deposit and any payments made pursuant to the last sentence of this
Section 1.09 shall be paid as liquidated damages (and not as a penalty) in
recognition of the difficultly to ascertain damages. The receipt of the Deposit
and any payments made pursuant to the last sentence of this Section 1.09 shall
be in lieu of all other rights and remedies available to any of the Sellers and
any of their respective Affiliates, stockholders, representatives and agents, as
a result of a breach of this Agreement by any of the Buyers. Upon a termination
of this Agreement for any reason whatsoever, in addition to the payment of the
Deposit, if applicable, the Buyers agree to pay Sellers one-half of the amount
of the Commercial Payments, not to exceed $3,000,000, such payment to be made
within 10 days after the Sellers have provided to the Buyers reasonable
documentation of the amount and payment of the Commercial Payments."
(c) Section 4.04(xii) of the Merger Agreement. Section 4.04(xii) of the
Merger Agreement is hereby amended by adding the following at the end of such
section:
<PAGE> 3
"; provided that Sellers, in consultation with Buyers, may make one or
more lump sum cash payments to satisfy all or any portion of the $10,000,000
commercial facilities commitment made by Sellers under the license of
suitability development agreement (the "Commercial Payments") of the Hammond
Commitments, which payments, if any, shall be deemed to be included in the
Hammond Payments."
(d) Section 4.12 of the Merger Agreement. Section 4.12 of the Merger
Agreement is hereby deleted in its entirety and replaced with the following:
"Section 4.12. Capital Expenditures. Empress shall and shall cause each
of the Subsidiaries to complete all capital expenditure projects contemplated in
the Budget on Schedule 2.06(b) and to the extent such projects have not been
completed as of the Closing Date, the costs to complete such projects shall be
deemed a Current Liability for purposes of the Closing Statement.
Notwithstanding any other provision of this Agreement, Empress or the
Subsidiaries may spend more on capital expenditures than the amounts provided
for in Schedule 2.06(b), provided that with respect to all such expenditures
over $25,000 Empress or the Subsidiaries, as applicable, shall consult with the
Buyers regarding the details related to such expenditures, prior to making such
expenditures."
(e) Section 6.03 of the Merger Agreement. Section 6.03 of the Merger
Agreement is hereby deleted in its entirety and replaced with the following:
"Section 6.03. Hammond Payments. Schedule 2.27 sets forth all of the
remaining commitments of Sellers to the City of Hammond, Indiana or other
governmental or quasi-governmental agencies thereof (collectively, the "Hammond
Commitments"). All amounts paid by Empress or any Subsidiary from the date of
this Agreement to the Closing in fulfillment of any portion of the Hammond
Commitments or to relieve Sellers of any of their remaining obligations relating
to the Hammond Commitments (collectively, the "Hammond Payments") and, to the
extent necessary, approved by the Buyers in accordance with Section 4.04 (xii),
shall be included in the Merger Consideration as provided in Section 1.05(d)."
(f) Sections 8.08 and 10.01(e) of the Merger Agreement. Sections 8.08
and 10.01(e) of the Merger Agreement are hereby amended by deleting the phrase
"(other than changes directly relating to the Buyers' ability to obtain the
necessary Illinois and Indiana gaming licenses)" from such sections.
(g) Section 10.01 of the Merger Agreement. The first sentence of
Section 10.01 of the Merger Agreement is hereby amended by deleting the phrase
"subparagraphs (g) or (h)" and replacing it with the phrase "subparagraphs (g),
(h) or (i)".
(h) Section 10.01(h) of the Merger Agreement. Section 10.01(h) of the
Merger Agreement is hereby deleted in its entirety and replaced with the
following:
"(h) By either the Buyers or the Sellers, if the Closing has not
occurred on or prior to September 30, 1999; provided, however that the right to
terminate this Agreement under this Section 10.01(h) will not be available to
any party whose failure to timely fulfill any obligation
<PAGE> 4
under this Agreement has been the cause of, or resulted in, the failure of the
Closing to occur on or before such date."
(i) Section 10.01 of the Merger Agreement. Section 10.01 of the Merger
Agreement is hereby amended by adding the following provision immediately after
subparagraph (h) of Section 10.01:
"(i) By Sellers if (i) the Buyers or their Affiliates who have become
parties to and agreed to be bound by this Agreement as a Buyer have not
completed an offering of securities pursuant to Rule 144A under the Securities
Act of 1933, as amended, by May 31, 1999; (ii) the Buyers or their Affiliates
who have become parties to and agreed to be bound by this Agreement as a Buyer
fail to maintain a substantial portion of the funds raised pursuant to the
offering described in Section 10.01 (i)(i) in escrow to be used to complete the
transactions contemplated by this Agreement (as evidenced by monthly balance
sheets of Buyers provided to Sellers within thirty (30) days after the end of
each calendar month prior to Closing, with a certification by the Chief
Financial Officer of Buyers that the escrowed amount is true and correct); (iii)
prior to May 31, 1999, the Buyers or their Affiliates who have become parties to
and agreed to be bound by this Agreement as a Buyer have not entered into a
customary Commitment Letter with one or more financial institutions (in a form
reasonably acceptable to Sellers) to obtain the funds necessary to consummate
the transactions contemplated by this Agreement and such Commitment Letter is
not maintained at all times after the execution thereof until the senior credit
facility described in item (iv) below becomes effective; (iv) prior to June 30,
1999 the Buyers or their Affiliates who have become parties to and agreed to be
bound by this Agreement as a Buyer have not entered into a new senior credit
facility to make available funds adequate to consummate the transactions
contemplated by this Agreement, or such new senior credit facility is not
maintained in place at all times after execution thereof and prior to the
Closing or Buyers fail to maintain sufficient availability under the new senior
credit facility to consummate the transactions contemplated by this Agreement at
any time prior to the Closing; (v) neither the Buyers nor any of their
respective Affiliates have consummated (subject only to payment terms)
transactions with August Robin, Cassandra Piper and Wendell Piper, or any of
their respective Affiliates to purchase or redeem any such parties' equity
interests in Buyers or any of their respective Affiliates by May 31, 1999; or
(vi) the Indiana Gaming Commission has not approved the transfer of ownership of
Empress Hammond to the Buyers pursuant to the Indiana Merger on or before August
31, 1999."
(j) Section 10.02(e) of the Merger Agreement. Section 10.02(e) of the
Merger Agreement is hereby deleted in its entirety and replaced with the
following:
"(e) Whether or not any breach or default by the Buyers with respect to
the provisions of this Agreement is willful or otherwise, the sole and exclusive
remedy of the Sellers against the Buyers shall be to recover the Deposit and
one-half of the Commercial Payments, not to exceed $3,000,000, as liquidated
damages and in no event shall the Buyers or any of their respective directors,
officers, members, managers, representatives, agents or Affiliates be liable to
any of the Sellers, or any of their respective directors, officers,
stockholders, representatives, agents or Affiliates, in any respect for any
amount except for the Deposit, and one-half of the Commercial Payments, not to
exceed $3,000,000, which shall be disbursed in accordance with Section 1.09.
<PAGE> 5
(k) The following definition shall be added to Article XVI of the
Merger Agreement:
"Commercial Payments" has the meaning set forth in Section 4.04(xii)
hereof."
3. Acknowledgment of Reorganization. Each of Empress, Empress Joliet
and Empress Hammond acknowledges, agrees and consents that in connection with
the securities offering to be made by the Buyers pursuant to Rule 144A under the
Securities Act of 1933, as amended, (i) Horseshoe Gaming Holding Corp. ("HGHC")
will be organized as a Delaware corporation to effect the offering; (ii) HGHC
shall replace Horseshoe as a party to the Merger Agreement; (iii) substantially
all of the membership interests in Horseshoe Gaming, L.L.C. will be contributed
to HGHC in exchange for capital stock of HGHC; and (iv) two to-be-formed,
wholly-owned subsidiaries of HGHC will replace Empress Illinois and Empress
Indiana as (x) parties to the Merger Agreement and (y) the entities to be merged
with and into Empress Joliet and Empress Hammond, respectively. In accordance
with the last sentence of Section 1.01 of the Merger Agreement, the Sellers
consent to the foregoing actions and agree to execute appropriate amendments to
the Merger Agreement to reflect such actions.
4. No Waiver. Each of the Buyers acknowledges and agrees that it shall
be obligated to timely perform its obligations contained in the Merger Agreement
after the date hereof irrespective of the fact that Sellers have waived Buyers'
timely performance of certain obligations of the Buyers contained in the Merger
Agreement prior to the date hereof.
5. Representations and Warranties of Entities. Each of Parent,
Horseshoe, Empress Illinois, Empress Indiana, Empress, Empress Joliet and
Empress Hammond represents and warrants that its execution, delivery and
performance of this Amendment has been duly authorized by all necessary
corporate action and this Amendment is a legal, valid and binding obligation of
such entity in accordance with its terms.
6. Counterparts. This Amendment may be executed in any number of
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same instrument.
7. Governing Law. This Amendment shall be a contract made under and
governed by the laws of the State of Delaware, without regard to conflict of law
principles.
IN WITNESS WHEREOF, the parties have executed this Amendment and caused
the same to be duly delivered on their behalf on the day and year first written
above.
HORSESHOE GAMING, L.L.C.
By:
----------------------------------
Title:
----------------------------------
<PAGE> 6
HORSESHOE GAMING (MIDWEST), INC.
By:
----------------------------------
Title:
----------------------------------
EMPRESS ACQUISITION ILLINOIS, INC.
By:
----------------------------------
Title:
----------------------------------
EMPRESS ACQUISITION INDIANA, INC.
By:
----------------------------------
Title:
----------------------------------
EMPRESS ENTERTAINMENT, INC.
By:
----------------------------------
Title:
----------------------------------
EMPRESS CASINO JOLIET CORPORATION
By:
----------------------------------
Title:
----------------------------------
<PAGE> 7
EMPRESS CASINO HAMMOND CORPORATION
By:
----------------------------------
Title:
----------------------------------
<PAGE> 1
EXHIBIT 2.3
FIRST AMENDMENT
TO
DEPOSIT ESCROW AGREEMENT
This First Amendment (the "Amendment") dated as of March 25, 1999 to
the Deposit Escrow Agreement (the "Escrow Agreement") dated as of September 2,
1998 by and among Horseshoe Gaming, L.L.C., a Delaware limited liability company
("Parent"), Horseshoe Gaming (Midwest), Inc., a Delaware corporation
("Horseshoe"), Empress Acquisition Illinois, Inc., a Delaware corporation
("Empress Illinois"), Empress Acquisition Indiana, Inc., a Delaware corporation
("Empress Indiana"), Empress Entertainment, Inc., a Delaware corporation
("Empress"), Empress Casino Joliet Corporation, an Illinois corporation
("Empress Joliet"), Empress Casino Hammond Corporation, an Indiana corporation
("Empress Hammond"), and Chicago Title Insurance Company (the "Escrow Agent") is
entered into by and among Parent, Horseshoe, Empress Illinois, Empress Indiana,
Empress, Empress Joliet, Empress Hammond and the Escrow Agent.
RECITALS
A. Parent, Horseshoe, Empress Illinois, Empress Indiana, Empress,
Empress Joliet and Empress Hammond have heretofore entered into an Agreement and
Plan of Merger, as amended (the "Merger Agreement"), which provides, among other
things, for (i) the merger of Empress Illinois with and into Empress Joliet; and
(ii) the merger of Empress Indiana with and into Empress Hammond. All
capitalized terms used herein and not otherwise defined herein shall have the
meanings ascribed to them in the Merger Agreement.
B. Parent, Horseshoe, Empress Illinois, Empress Indiana, Empress,
Empress Joliet, Empress Hammond and the Escrow Agent have heretofore entered
into the Escrow Agreement which provides that Buyers have deposited $10 million
in escrow with the Escrow Agent to be held and distributed by the Escrow Agent
pursuant to the terms of the Escrow Agreement
B. Parent, Horseshoe, Empress Illinois, Empress Indiana, Empress,
Empress Joliet, Empress Hammond and the Escrow Agent wish to enter into this
Amendment to amend certain provisions in the Escrow Agreement.
AGREEMENTS
NOW THEREFORE, in consideration of the premises and mutual agreements
herein contained, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. Status of Escrow Agreement. Except as specifically set forth herein,
the Escrow Agreement shall remain in full force and effect and shall not be
waived, modified, superseded or otherwise affected by this Amendment. This
Amendment is not to be construed as a release,
<PAGE> 2
waiver or modification of any of the terms, conditions, representations,
warranties, covenants, rights or remedies set forth in the Escrow Agreement,
except as specifically set forth herein.
2. Amendment to the Escrow Agreement. Section 4.1 of the Escrow
Agreement is hereby deleted in its entirety and replaced with the following:
"4.1 The Deposit, without any right of set-off, shall be paid to
Empress in the event of termination of the Merger Agreement pursuant to Sections
10.01(a), (b), (d), (h) or (i). The Deposit shall be returned to Buyers in the
event of termination of the Merger Agreement pursuant to Sections 10.01(c), (e)
or (f). In the event of a termination of the Merger Agreement pursuant to
Section 10.01(g), Buyers and Sellers shall mutually determine how the Deposit
will be disbursed. Except as provided in Section 4.2 below, Escrow Agent shall
release the Deposit only upon receipt of (i) joint written instructions executed
by Buyers and Sellers, (ii) an order of the Arbitrating Accountant pursuant to
Section 4.3 hereof, or (iii) a final non-appealable order of a court of
competent jurisdiction pursuant to Section 8 hereof. Unless the Deposit is
released pursuant to this Agreement prior to the Closing Date (as defined in
Section 9.01 of the Merger Agreement), the Deposit shall be credited against the
Merger Consideration and disbursed by Escrow Agent to Empress in accordance with
Section 1.05 of the Merger Agreement. Upon release of the Deposit as provided
for herein, this Agreement shall terminate, and the Escrow Agent shall be
discharged of any further liability."
3. Representations and Warranties of Entities. Each of Parent,
Horseshoe, Empress Illinois, Empress Indiana, Empress, Empress Joliet and
Empress Hammond represents and warrants that its execution, delivery and
performance of this Amendment has been duly authorized by all necessary
corporate action and this Amendment is a legal, valid and binding obligation of
such entity in accordance with its terms.
4. Counterparts. This Amendment may be executed in any number of
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same instrument.
5. Governing Law. This Amendment shall be a contract made under and
governed by the laws of the State of Delaware, without regard to conflict of
laws principles.
IN WITNESS WHEREOF, the parties have executed this Amendment and caused
the same to be duly delivered on their behalf on the day and year first written
above.
HORSESHOE GAMING, L.L.C.
By:
----------------------------------
Title:
--------------------------
2
<PAGE> 3
HORSESHOE GAMING (MIDWEST), INC.
By:
----------------------------------
Title:
---------------------------
EMPRESS ACQUISITION ILLINOIS, INC.
By:
----------------------------------
Title:
---------------------------
EMPRESS ACQUISITION INDIANA, INC.
By:
----------------------------------
Title:
---------------------------
EMPRESS ENTERTAINMENT, INC.
By:
----------------------------------
Title:
---------------------------
EMPRESS CASINO JOLIET CORPORATION
By:
----------------------------------
Title:
---------------------------
EMPRESS CASINO HAMMOND CORPORATION
By:
----------------------------------
Title:
---------------------------
CHICAGO TITLE INSURANCE COMPANY
By:
----------------------------------
Title:
---------------------------
3
<PAGE> 1
EXHIBIT 10.16
[Execution Counterpart]
WARRANT PURCHASE AGREEMENT
WARRANT PURCHASE AGREEMENT dated as of December 21, 1998 (this
"Agreement"), by and between HANWA CO., LTD., a Japanese corporation (the
"Seller"), and HORSESHOE GAMING, LLC, a limited liability company organized
under the laws of the State of Delaware (the "Purchaser).
W I T N E S S E T H:
WHEREAS, YEWDALE HOLDINGS, LTD. ("Yewdale"), a company controlled
by the Seller and beneficially owned by the Seller, is the registered owner of
the warrants listed on Schedule A attached hereto (the "Warrants") issued by the
Purchaser, representing the right to purchase in the aggregate up to SEVEN
PERCENT (7.0%) of the ownership interests in the Purchaser, and which constitute
all of the warrants issued by the Purchasers to Hanwa, Yewdale and their
respective affiliates;
WHEREAS, pursuant to a Letter of Intent dated May 1998, and
various other letters subsequent thereto and conversations between the Purchaser
and the Seller on which the Purchaser and the Seller reasonably have relied and
were bound, the Seller and the Purchaser were contractually committed to a sale
of the Warrants by the Seller and their purchase by the Purchaser as set forth
in this Agreement; and
WHEREAS, the Seller desires to sell and transfer the Warrants to
the Purchaser, and the Purchaser desires to purchase the Warrants from the
Seller, as previously agreed and as set forth in this Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual
promises, representations, warranties and covenants hereinafter set forth, the
parties hereto agree as follows:
SECTION 1: DEFINITIONS
In addition to the terms defined above, the following terms have
the meanings defined unless the context otherwise requires:
1
<PAGE> 2
"Closing" means the consummation of the warrant sale and purchase
provided for in this Agreement.
"Closing Date" means the date on which the Closing occurs
pursuant to section 7.1 hereof.
"Securities Act" means the Securities Act of 1933, as amended.
SECTION 2: PURCHASE AND SALE
SECTION 2.1 Purchase and Sale of Warrants. Subject to the terms
and conditions of this Agreement, at the Closing the Seller shall sell, assign,
transfer, convey and deliver the Warrants to the Purchaser or to a person or
entity designated by the Purchaser (a "Transferee"), or cause the Warrants to be
sold, assigned, transferred, conveyed and delivered to the Purchaser or
Transferee, by the owner thereof, free and clear of all liens, claims, charges,
security interests, and other encumbrances of any nature. Such sale, transfer,
conveyance and delivery shall be evidenced by delivery of the warrant
certificates duly endorsed in blank.
SECTION 2.2 Purchase Price. (a) The base purchase price for the
Warrants, which represents the previously agreed upon price and an adjustment
for the exercise price of the Warrants, shall be THIRTY-TWO MILLION SEVEN
HUNDRED FORTY-FIVE THOUSAND DOLLARS ($32,745,000) (the "Base Purchase Price"),
which amount shall be delivered in cash at the Closing in full payment for the
Warrants by wire transfer.
(b) In addition to the Base Purchase Price specified in section
2.2(a), which shall be payable at the Closing, the Additional Purchase Price
described in section 2.3, shall be payable if and only if the conditions
described in section 2.3 occur.
SECTION 2.3 Additional Purchase Price. (a) Additional Purchase
Price shall be payable if at any time within twelve months after the Closing of
the sale of the Warrants pursuant to this Agreement, the Purchaser, or any
persons owning or controlling, directly or indirectly, a majority interest in
the Purchaser, shall enter into a binding agreement to be party to a Liquidity
Transaction and, at any time thereafter, such Liquidity Transaction shall occur.
2
<PAGE> 3
(b) A "Liquidity Transaction" shall mean the merger or
consolidation of the Purchaser with any unaffiliated other person, firm,
corporation or other entity as the result of which the owners of the equity of
the Purchaser own less than fifty percent of the combined entity, sale of more
than fifty percent of the ownership interests of the Purchaser to an
unaffiliated third party, or a sale of more than fifty percent, by value, of the
assets of the Purchaser and its subsidiaries to an unaffiliated third party,
provided the aggregate consideration given in such transaction, net of the costs
and expenses of such transaction and net of the indebtedness assumed or taken
subject to, corresponds to a net equity value placed on the Purchaser or its
assets in excess of $470 million. If, for example, 100 percent of the Purchaser
is conveyed in a Liquidity Transaction, the net equity value placed on the
Purchaser in such Liquidity Transaction shall equal the aggregate consideration
paid for the Purchaser, net of the costs and expenses of such transaction and
net of the indebtedness assumed or taken subject to. If, for example, sixty
percent of the Purchaser is conveyed in a Liquidity Transaction, the net equity
value placed on the Purchaser in such Liquidity Transaction shall be the net
aggregate consideration paid, net of the costs and expenses of such transaction
and net of the indebtedness assumed or taken subject to, divided by SIX TENTHS
(0.6).
(c) If Additional Purchase Price is payable pursuant to this
section 2.3, the amount of the Additional Purchase Price shall be ONE AND FOUR
TENTHS PERCENT (1.4%) times the excess of the net equity value over $470
million.
(d) If Additional Purchase Price is payable pursuant to this
section 2.3, it shall be payable on the later of two business days after the
closing of the Liquidity Transaction or the date on which the Purchaser or its
owners, as the case may be, are paid the proceeds of such Liquidity Transaction.
If the purchase price is paid to the Purchaser or its equity owners in
installments, then the Additional Purchase Price shall be paid in parallel
installments..
(e) In determining whether a Liquidity Transaction has occurred
and the aggregate consideration paid in such Liquidity Transaction, noncash
consideration shall be valued at the fair market value thereof, as reasonably
determined by the Purchaser. If Additional Purchase Price is payable in respect
of a Liquidity Transaction in which all or part of the consideration is paid in
stock, securities or other noncash consideration, the Additional Purchase Price
shall include a ratable share of such noncash consideration and shall have a
total value determined in accordance with section 2.3(c).
(f) In determining whether a Liquidity Transaction has occurred
and the aggregate consideration paid in such Liquidity Transaction, if the
aggregate dividends and distributions paid to the equity owners of the Purchaser
after March 31, 1998 and prior to
3
<PAGE> 4
or contemporaneously with the completion of such Liquidity Transaction shall
exceed the net operating income of the Purchaser and its subsidiaries for the
period from the establishment of the Purchaser, then the amount of such excess
shall be treated as part of the aggregate consideration paid in such Liquidity
Transaction.
SECTION 2.4 Payment Instructions. The Base Purchase Price payable
pursuant to section 2.2(a) and the Additional Purchase Price payable pursuant to
section 2.3, if any, shall be paid by wire transfer in accordance with written
instructions given by the Seller.
SECTION 3: REPRESENTATIONS AND WARRANTIES OF SELLER
The Seller represents and warrants to the Purchaser as follows:
SECTION 3.1 Authority; Title to Warrants. The Seller has the full
power and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby without the necessity of any act or consent of
any other person. This Agreement will, when executed and delivered, constitute
the valid and legally binding obligation of the Seller, enforceable against it
in accordance with the terms hereof, except as may be limited by applicable
equitable principles or by bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance or similar laws from time to time in effect affecting
creditors' rights generally. The Seller represents and warrants that the
Warrants are free and clear of all security interests, liens, claims, pledges,
options, equities, charges and encumbrances. As of the Closing Date, and after
giving effect to the sale of the Warrants, by delivery of the warrant
certificates endorsed to the Purchaser or in blank, and assuming that the
Purchaser has given value for the Warrants and is purchasing such Warrants in
good faith and without notice of any adverse claim, encumbrance, defect or lien
in respect of such Warrants, the Seller and/or its affiliates will be
transferring to the Purchaser and/or its designees, good and valid title to the
Warrants free and clear of all security interests, liens, claims, pledges,
options, equities, charges and encumbrances.
SECTION 3.2 Acceptance of Consideration. Acceptance by the Seller
of the cash payment at the Closing shall constitute a confirmation by the Seller
that all agreements and representations made herein by the Seller shall be true
and correct at such time.
SECTION 3.3 Consents and Approvals. Assuming the representations
and warranties of the Purchaser contained in section 4.2 are true and
4
<PAGE> 5
correct, no consent, approval, authorization or order of any court or
governmental body is required to be obtained by the Seller for the consummation
of the sale of Warrants being sold or delivered by the Seller under this
Agreement, provided however, the Seller makes no representation or warranty as
to whether or not approval or other action by any Gaming Authority is required
in connection with the sale of the Warrants.
SECTION 3.4 Additional Representations and Warranties. (a) In
making its decision to enter into this Warrant Purchase Agreement, and sell its
Warrants as contemplated hereby, the Seller confirms to the Purchaser that it
has sought and obtained financial advice from various financial consultants,
including investment bankers, lawyers and accountants and further confirms that
it has not relied upon any such advice from the Purchaser or the Purchaser's
agent in making its decision to enter into this Warrant Purchase Agreement or to
sell its Warrants.
(b) In entering into and carrying out the terms and provisions of
this Warrant Purchase Agreement, the Seller has not relied upon any projections,
statements or other representations from the Purchaser as to the current net
equity value of the Purchaser or the potential future results of operations from
the conduct of the Purchaser's business. In addition, the Purchaser has not made
any other representations, warranties or statements of any kind, whether oral or
written, to the Seller regarding the Purchaser's financial condition, past,
present or future, other than as expressly contained herein or in the
Purchaser's audited and publicly available financial statements.
(c) Prior to entering into this Warrant Purchase Agreement, the
Seller has received and reviewed the Purchaser's most recent financial
statements for the year ended December 31, 1997, for the first three quarters of
1998 and for the month of October, 1998. The Seller understands that the
financial statements for the first three quarters of 1998 and for October, 1998
are not audited or certified by independent certified public accountants, and
thus represent only management's best faith estimates as to the results of
operations for such periods.
(d) The Seller acknowledges that the Purchaser has neither
solicited nor encouraged the Seller to sell the Warrants pursuant to this
Warrant Purchase Agreement and the Seller confirms to the Purchaser that it is
entering into this Warrant Purchase Agreement due to its own desire to dispose
of the Warrants and to achieve its own internal corporate policies and
objectives as a result of such sale.
(e) The Seller acknowledges that the Purchaser has advised and
fully disclosed to the Seller that the Purchaser has been approached and has
considered, at various times over the past year or more, the possibility of
entering into various forms of Liquidity Transactions with entities such as
Players International, Apollo Real Estate,
5
<PAGE> 6
Hollywood Park, Inc. and others. In particular, the Purchaser has recently
engaged in discussions with Hollywood Park, Inc. regarding the possibility of
joint venturing two future casino and hotel developments, one in the State of
Indiana and one in the State of Louisiana, and in connection with such
discussions, Hollywood Park, Inc. has expressed serious interest in exploring
the possibility of a merger, acquisition or other similar transaction with the
Purchaser. To date, however, the Purchaser has not agreed to any merger, sale or
other similar transaction, which would amount to a Liquidity Transaction as
defined herein, with Hollywood Park, Inc. or any other person or entity. The
Seller acknowledges it is aware that the gaming industry is undergoing a
consolidation and that there may be opportunities in the near future for a
Liquidity Transaction or a transaction in which the Purchaser acquires existing
gaming companies or pursues licenses in new gaming jurisdictions which increase
the value of the Purchaser. The Purchaser also has advised the Seller that it
has entered into an agreement with Empress Entertainment to acquire ownership of
its two casinos serving the Chicago market: one in Hammond Indiana and the other
in Joliet, Illinois. The Purchaser has further disclosed to the Seller that
there is nevertheless the possibility that a Liquidity Transaction could take
place within the next twelve (12) months. Accordingly, given the possibility of
such a Liquidity Transaction within the next twelve (12) months and the Seller's
concern that the net equity value of the Purchaser could be in excess of $470
million, the Seller and the Purchaser have negotiated the provisions contained
herein regarding the Additional Purchase Price to be paid to the Seller by the
Purchaser in the event that a Liquidity Transaction is so entered into by the
Purchaser within the next twelve (12) months at a net equity value in excess of
$470 million, and the Seller has accepted such rights to receive the Additional
Purchase Price in lieu of any amounts that the Seller would have been entitled
to in the event of such a Liquidity Transaction had the Seller retained and
exercised the Warrants.
SECTION 4: REPRESENTATIONS AND WARRANTIES OF PURCHASER
The Purchaser represents and warrants to the Seller as follows:
SECTION 4.1 Power and Authority. The Purchaser has the capacity
and authority to execute and deliver this Agreement, to perform hereunder, and
to consummate the transactions contemplated hereby without the necessity of any
act, approval or consent of any other person or entity whomsoever. This
Agreement and each and every other agreement, document and instrument to be
executed, delivered and performed in connection herewith constitutes or will,
when executed and delivered, constitute the valid and binding obligation of the
Purchaser, enforceable against it in accordance with its terms, except as may be
limited by applicable equitable principles, or
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by bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or
similar laws from time to time in effect affecting creditors' rights generally.
SECTION 4.2 Investment Representations. In the event that the
Purchaser designates another person or entity as the Transferee of all or part
of the Warrants, the Purchaser represents and warrants that:
(a) The Transferee is acquiring the Warrants for its own account,
for investment and not with a view to the distribution thereof within the
meaning of the Securities Act.
(b) The Transferee understands that the Warrants and the
underlying interests in the Purchaser have not been registered under the
Securities Act, or registered or qualified under any state securities or blue
sky laws; and that the Warrants and such underlying interests must be held by it
indefinitely unless a subsequent disposition thereof is registered under the
Securities Act and registered or qualified under applicable state securities or
blue sky laws, or is exempt from such registration and/or qualifications.
(c) The Transferee further understands that the exemption from
registration afforded by Rule 144 promulgated under the Securities Act (the
provisions of which are known to it) depends upon the satisfaction of various
conditions, and that, if applicable, Rule 144 may afford the basis for sales
only in limited amounts.
(d) The Transferee has been afforded the opportunity during the
course of negotiating the transactions contemplated by this Agreement to ask
questions of, and to obtain such information from, the Purchaser, its officers
and directors and the Seller and its officers and directors, as it deems
necessary to evaluate the merits of entering into such transactions.
(e) The Transferee has (i) such knowledge and experience in
business and financial matters and with respect to investments in securities of
privately-held companies so as to enable it to understand and evaluate the risks
of such investment and to form an investment decision with respect thereto, and
(ii) no need for liquidity in its investment in the Warrants, and is able to
bear the risk of such investment for an indefinite period and to afford a
complete loss thereof.
(f) The Transferee acknowledges that the certificates
representing the Warrants shall bear a legend concerning restrictions on
disposition until such time as the Company receives an opinion of counsel
reasonably satisfactory to it that the legend on
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such stock certificates may be removed under then applicable federal and state
securities laws.
SECTION 4.3 Acceptance of Warrants. The agreements and
representations made by the Purchaser herein extend to all of the Warrants to be
purchased by it or by Transferees. Acceptance by the Purchaser or one or more
Transferees of the certificates representing the Warrants shall constitute a
confirmation by the Purchaser that all agreements and representations made
herein by the Purchaser shall be true and correct at such time.
SECTION 5: CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER
The obligations of the Purchaser to consummate the transactions
contemplated by this Agreement shall be subject to the satisfaction, on or
before the Closing Date, of each and every one of the following conditions, all
or any of which may be waived by the Purchaser in whole or in part.
SECTION 5.1 Representations True at Closing. The representations
and warranties made by the Seller in this Agreement or any document or
instrument delivered to the Purchaser or its representatives hereunder shall be
true and correct on the Closing Date with the same force and effect as though
such representations and warranties had been made on and as of such time.
SECTION 5.2 Covenants of the Seller. The Seller shall have duly
performed all of the covenants, acts and undertakings to be performed by it on
or prior to the Closing Date.
SECTION 5.3 No Injunction, Etc. No action, proceeding,
investigation, regulation or legislation shall have been instituted, threatened
or proposed before any court, governmental agency or legislative body to enjoin,
restrain, prohibit, or obtain substantial damages in respect of, or that is
related to, or arises out of, this Agreement or the consummation of the
transactions contemplated hereby, or which is related to or arises out of the
business of the Company, if such action, proceeding, investigation, regulation
or legislation, in the reasonable judgment of the Purchaser, would make it
inadvisable to consummate such transactions.
SECTION 5.4 Regulatory Approvals. The execution and the delivery
of this Agreement and the consummation of the transactions contemplated hereby
shall have been approved by all regulatory authorities whose approvals are
required by law.
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SECTION 5.5 Bank Approvals. Payment of the purchase price for the
Warrants as provided in this Agreement shall not be a violation of the agreement
of the Purchaser with its first mortgage lenders.
SECTION 6: CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER
The obligations of the Seller to consummate the transactions
contemplated by this Agreement shall be subject to the satisfaction, on or
before the Closing Date, of each and every one of the following conditions, all
or any of which may be waived by the Seller in whole or in part.
SECTION 6.1 Representations True at Closing. The representations
and warranties made by the Purchaser in this Agreement or any document or
instrument delivered to the Seller or their representatives hereunder shall be
true and correct on the Closing Date with the same force and effect as though
such representations and warranties had been made on and as of such date, except
for changes contemplated by this Agreement.
SECTION 6.2 Covenants of the Purchaser. The Purchaser shall have
duly performed all of the covenants, acts and undertakings to be performed by it
on or prior to the Closing Date.
SECTION 6.3 No Injunction, Etc. No action, proceeding,
investigation, regulation or legislation shall have been instituted, threatened
or proposed before any court, governmental agency or legislative body to enjoin,
restrain, prohibit, or obtain substantial damages in respect of, or that is
related to, or arises out of, this Agreement or the consummation of the
transactions contemplated hereby, or that is related to or arises out of the
business of the Purchaser or the Company, if such action, proceedings,
investigation, regulation or legislation, in the reasonable judgment of the
Seller, would make it inadvisable to consummate the same.
SECTION 6.4 Approvals. The execution and the delivery of this
Agreement and the consummation of the transactions contemplated hereby shall
have been approved by all regulatory authorities whose approvals are required by
law.
SECTION 7: CLOSING
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SECTION 7.1 Time and Place of Closing. The Closing shall be held
at the offices of Breckenridge Law Office on a business day designated by the
Purchaser not more than twenty days after the date of this Agreement (the
"Closing Date"), at such time as the parties shall agree, or, if the parties so
agree, by mail or facsimile transmission on such date, unless another place or
date or manner of closing is agreed to by the Seller and the Purchaser.
SECTION 7.2 Transactions at Closing. At the Closing, each of the
following transactions shall occur:
(a) Performance by the Seller. At the Closing, the Seller shall
deliver to the Purchaser the following:
(i) original certificates representing the Warrants, duly
endorsed in blank or as directed by the Purchaser for transfer or accompanied by
instruments of transfer reasonably satisfactory in form and substance to the
Purchaser and its counsel;
(ii) such other evidence of the performance of all covenants and
satisfaction of all conditions required of the Seller by this Agreement, at or
prior to the Closing, as the Purchaser or its counsel may reasonably require.
(b) Performance by the Purchaser. At the Closing, the Purchaser
shall deliver to the Seller the following:
(i) the amount of Base Purchase Price, by wire transfer in
accordance with the written instructions of the Seller;
(ii) such other evidence of the performance of all the covenants
and satisfaction of all of the conditions required of the Purchaser by this
Agreement at or before the Closing as the Seller or its counsel may reasonably
require.
SECTION 8: GENERAL PROVISIONS
SECTION 8.1 Release. The Seller, on behalf of itself, Yewdale and
all their respective affiliated entities (the "Releasing Parties") hereby
releases and forever discharges the Purchaser, its past, present and future
subsidiaries, affiliates, officers, directors, employees, agents, stockholders,
partners, managers, members, successors and assigns, both individually and in
their official capacities with the Purchaser and such other affiliated entities,
or any subsidiaries or affiliates of any of them as applicable (collectively,
the released parties are herein referred to as the "Released Parties"), of and
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from any and all actions or causes of action, suits, debts, dues, sums of money,
accounts, reckonings, bonds, bills, covenants, claims, charges, complaints,
contracts, agreements, trespasses, damages, judgments, commissions, executions,
demands and promises whatsoever, relating to the Warrants or the sale of the
Warrants, in law or equity, which the Releasing Parties, or their successors or
assigns, may now have or hereafter can, shall or may have against the Released
Parties from the beginning of the world to the date of this Agreement. The
Seller is aware that it is releasing claims as to which it may be currently
unaware and only may come to learn, but is nevertheless willing to enter into
this release. It is the intention of the Seller that, notwithstanding the
possibility that it or its counsel might discover or gain a more complete
understanding of the facts, events or law which, if presently known or fully
understood, would have affected this release, this release shall be deemed to
have fully, finally and forever settled any and all claims without regard to the
existence or subsequent discovery of different or additional facts, events, or
laws.
SECTION 8.2 Notices. All notices, requests, demands and other
communications hereunder shall be in writing and shall be delivered by hand or
mailed by registered or certified mail, return receipt requested, first class
postage prepaid, addressed as follows:
(a) If to the Seller:
Hanwa Co., Ltd.
New Hanwa Building
1-13-10 Tsukiji
Chuo-ku, Tokyo 104-8429
(b) If to the Purchaser:
Horseshoe Gaming, L.L.C.
4024 Industrial Road
Los Vegas, Nevada 80103
(c) If delivered personally or by facsimile, the date on which a
notice, request, instruction or document is delivered shall be the date on which
such delivery is made and, if delivered by mail, the date on which such notice,
request, instruction or document is received shall be the date of delivery.
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SECTION 8.3 Brokers. The Purchaser represents and warrants to the
Seller that no broker or finder has acted for it or any entity controlling,
controlled by or under common control with it or them in connection with this
Agreement other than Mr. Nobutaka Mutaguchi. The Purchaser shall pay the entire
compensation due to Mr. Mutaguchi directly to him. The Seller represents and
warrants to the Purchaser that no broker or finder has acted for it or any
entity controlling, controlled by or under common control with it or them in
connection with this Agreement. The Purchaser agrees to indemnify and hold
harmless the Seller against any fee, loss or expense arising out of any claim by
Mr. Mutaguchi or any other broker or finder employed or alleged to have been
employed by the Purchaser, and the Seller agrees to indemnify and hold harmless
the Purchaser against any fee, loss, or expense arising out of any claim by any
broker or finder employed or alleged to have been employed by it.
SECTION 8.4 Further Assurances. Each party covenants that at any
time, and from time to time, after the Closing Date, it will execute such
additional instruments and take such actions as may be reasonably requested by
the other parties to confirm or perfect or otherwise to carry out the intent and
purposes of this Agreement.
SECTION 8.5 Waiver. Any failure on the part of any party hereto
to comply with any of its obligations, agreements or conditions hereunder may be
waived by any other party to whom such compliance is owed. No waiver of any
provision of this Agreement shall be deemed, or shall constitute, a waiver of
any other provision, whether or not similar, nor shall any waiver constitute a
continuing waiver.
SECTION 8.6 Expenses. All expenses incurred by the parties hereto
in connection with or related to the authorization, preparation and execution of
this Agreement and the Closing of the transactions contemplated hereby,
including without limitation all fees and expenses of agents, representatives,
counsel and accountants employed by any such party, shall be borne solely and
entirely by the party that has incurred the same.
SECTION 8.7 Binding Effect; Assignability. This Agreement shall
be binding upon and inure to the benefit of the parties hereto and their
respective legal representatives, successors and permitted assigns.
SECTION 8.8 Entire Agreement. This Agreement constitutes the
entire agreement among the parties hereto and supersedes and cancels any prior
agreements, representations, warranties, or communications, whether oral or
written, among the parties hereto relating to the transactions contemplated
hereby or the subject matter herein. Neither this Agreement nor any provision
hereof may be changed, waived,
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discharged or terminated orally, but only by an agreement in writing signed by
the party against whom or which the enforcement of such change, waiver,
discharge or termination is sought.
SECTION 8.9 Counterparts. This Agreement may be executed in two
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
SECTION 8.10 Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first written above.
HANWA CO., LTD.
By: ________________________________
Name: ______________________________
Title: _____________________________
HORSESHOE GAMING, LLC
By: HORSESHOE GAMING, INC.
Its General Partner
By:
Name:
Title:
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Schedule A to
Warrant Purchase Agreement
Warrants
1. Horseshoe Gaming, LLC Warrant No. 2, dated October 10, 1995,
to Purchase 1,941,980 Units, issued to Yewdale Holdings Limited for 1.941980%
interest in Horseshoe Gaming, LLC.
2. Horseshoe Gaming, LLC Warrant No. 4, dated October 10, 1995,
to Purchase 1,566,630 Units, issued to Yewdale Holdings Limited for 1.566630%
interest in Horseshoe Gaming, LLC.
3. Horseshoe Gaming, LLC Warrant No. 5, dated October 10, 1995,
to Purchase 1,941,980 Units, issued to Yewdale Holdings Limited for 1.941980%
interest in Horseshoe Gaming, LLC.
4. Horseshoe Gaming, LLC Warrant No. 6, dated October 10, 1995,
to Purchase 1,566,629 Units, issued to Yewdale Holdings Limited for 1.566629%
interest in Horseshoe Gaming, LLC.
<PAGE> 1
EXHIBIT 10.17
AGREEMENT
Agreement dated as of December 31, 1998 (this "Agreement"), by and among
Horseshoe Gaming, Inc., a Nevada corporation (the "Company"), Horseshoe Gaming,
LLC, a Delaware limited liability company (the "LLC"), and Hollywood Park, Inc.,
a Delaware corporation ("Hollywood Park").
R E C I T A L S :
WHEREAS, pursuant to an Employment Agreement dated as of January 1,
1996, by and between Mr. Paul R. Alanis ("Alanis") and the Company (the "Alanis
Employment Agreement"), Alanis has served as President of the Company;
WHEREAS, pursuant to an Employment Agreement dated as of October 1,
1995, by and between Mr. John M. Allen ("Allen") and the Company (the "Allen
Employment Agreement"), Allen has served as Senior Vice President-Operations of
the Company;
WHEREAS, pursuant to an Employment Agreement dated as of December 1,
1995, by and between Mr. Cliff Kortman ("Kortman") and the Company (the "Kortman
Employment Agreement"), Kortman has served as Vice President-Design and
Development of the Company;
WHEREAS, pursuant to an Employment Agreement dated as of January 1,
1996, by and between Mr. Loren S. Ostrow ("Ostrow" and together with Alanis,
Allen and Kortman being collectively referred to herein as the "Employees") and
the Company (the "Ostrow Employment Agreement" and together with the Alanis
Employment Agreement, the Allen Employment Agreement and the Kortman Employment
Agreement being collectively referred to herein as the "Employment Agreements"
and individually as an "Employment Agreement"), Ostrow has served as Senior Vice
President and General Counsel of the Company;
WHEREAS, the Company acts as Manager of the LLC, which is governed by
the Limited Liability Company Operating Agreement dated October 1, 1995 (the
"LLC Agreement");
WHEREAS, the LLC is the owner of Horseshoe Entertainment, a Louisiana
limited partnership ("HE"), which owns and operates Horseshoe Bossier City
Casino located in Bossier City, Louisiana, and Robinson Property Group Limited
Partnership, a Mississippi limited partnership ("RPG"), which owns and operates
the Horseshoe Hotel and Casino located at Casino Center in Tunica County,
Mississippi (the LLC, HE and RPG and their respective subsidiaries and
affiliates are herein sometimes referred to as the "Horseshoe Companies");
WHEREAS, the LLC is party to an agreement pursuant to which it may
acquire the gaming operations of Empress Entertainment, Inc., a Delaware
corporation, and its subsidiaries Empress Casino Hammond Corporation, an Indiana
corporation, and Empress Casino Joliet Corporation
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<PAGE> 2
(collectively, "Empress") in Hammond, Indiana and Joliet, Illinois, and the
Employees were intimately involved in the decision to acquire Empress and in
negotiating the acquisition agreement;
WHEREAS, each of the Employees has entered into a contractual
arrangement with Hollywood Park to commence employment with Hollywood Park upon
the expiration of the term of his respective Employment Agreement, which in the
case of Alanis is December 31, 1998; in the case of Allen is May 11, 1999; in
the case of Kortman is November 30, 1998; and in the case of Ostrow is December
31, 1998;
WHEREAS, the Company has claimed that (i) Hollywood Park has tortiously
interfered with the Company's respective contractual relationship with each of
the Employees and (ii) the Employees have breached their fiduciary duties to the
Company and are subject to termination for "cause";
WHEREAS, Hollywood Park and the Employees have denied the Company's
claims; and
WHEREAS, the Company, the Horseshoe Companies and Hollywood Park desire
to avoid litigation over the claims of the Company and the LLC against Hollywood
Park.
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual agreements contained herein, and for other good and valuable
consideration, the adequacy and receipt of which are hereby acknowledged, the
parties agree as follows:
ARTICLE I
TERMINATION OF THE EMPLOYMENT AGREEMENTS
I.1 Termination. The Company, on the date of this Agreement (the
"Termination Date"), is terminating the Employees from any and
all positions they have held with the Company, the Horseshoe
Companies and any of their respective subsidiaries and
affiliates.
I.2 Employment Opportunities. The Company agrees that the Employees
may pursue employment opportunities with Hollywood Park and
perform their obligations under their respective agreements with
Hollywood Park at any time after the date hereof.
The Company will not assert the non-competition provisions of the
Employment Agreements against the Employees or Hollywood Park.
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<PAGE> 3
ARTICLE II
NON-SOLICITATION AND NON-HIRE
II.1 Non-Solicitation and Non-Hire.
(a) Hollywood Park agrees that from the Termination Date until
December 31, 2001, it will not directly or indirectly
solicit, hire or retain, as an employee, consultant,
independent contractor or otherwise any of the persons
whose names are contained on the Protected List attached
hereto as Exhibit A and by this reference made a part
hereof.
(b) In the event Hollywood Park violates any legally
enforceable provision of this Article II as to which there
is a specific time period during which Hollywood Park is
prohibited from taking certain actions or engaging in
certain activities, then the violation will toll the
running of the time period from the date of violation
until the violation ceases as to the specific employee as
to which a violation is alleged but not as to other
employees whose names are on the Protected List.
(c) Hollywood Park acknowledges that it has carefully
considered the nature and extent of the restrictions upon
it and the rights and remedies conferred upon the Company
and the Horseshoe Companies under this Article II.
Hollywood Park further acknowledges that the same are
reasonable in time and territory and are fully required to
protect the legitimate interests of the Company and the
Horseshoe Companies and do not confer a benefit upon the
Company and the Horseshoe Companies disproportionate to
any detriment to Hollywood Park.
II.2 Remedies. Hollywood Park and the Company acknowledge that the
provisions contained in this Article II are reasonable and
necessary, that the damages which would be suffered by the
Company and the Horseshoe Companies as a result of a breach or
threatened breach by Hollywood Park of any of such provisions may
not be calculable, and that the award of a money judgment to the
Company and the Horseshoe Companies for such a breach or
threatened breach by Hollywood Park would be an inadequate
remedy. Consequently, Hollywood Park agrees that any breach or
threatened breach of any provision of this Article II may be
enforced by the Company and/or the Horseshoe Companies by means
of an action for injunctive or other equitable relief, including
a temporary and/or permanent injunction, filed in a court of
competent jurisdiction. Any such remedy shall be in addition, and
shall not limit the right of the Company or the Horseshoe
Companies, to any other remedy to which it may be entitled in law
or in equity. Due to the financial strength of the
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<PAGE> 4
Company and the Horseshoe Companies, Hollywood Park agrees that
it is not necessary for the Company or the Horseshoe Companies to
post a bond and that they shall not be obligated to post a bond
or other security in seeking such relief. Hollywood Park hereby
waives any right to seek a bond. In connection with the remedies
provided in this Section 2.2, Hollywood Park hereby waives any
objection and consents to the subject matter and personal
jurisdiction of the state and federal courts of the State of
Nevada and hereby waives any and all objections to venue.
ARTICLE III
RELEASE; NON-DISCLOSURE
III.1 Release.
(1) Hollywood Park hereby releases and forever discharges the
Company, the Horseshoe Companies and each of their
respective past, present and future subsidiaries,
affiliates, officers, directors, employees, agents,
stockholders, partners, managers, members, successors and
assigns, both individually and in their official
capacities with the Company, the Horseshoe Companies or
any subsidiaries or affiliates of any of them as
applicable (collectively, the released parties are herein
referred to as the "Horseshoe Released Parties"), of and
from any and all actions or causes of action, suits,
debts, dues, sums of money, accounts, reckonings, bonds,
bills, covenants, claims, charges, complaints, contracts,
agreements, trespasses, damages, judgments, commissions,
executions, demands and promises whatsoever, in law or
equity, which Hollywood Park, or its successors or
assigns, may now have or hereafter can, shall or may have
against the Horseshoe Released Parties, for, upon, or by
reason of any and all matters arising out of or relating
to (i) the cessation of Employee's employment by the
Company, including the termination of the Employment
Agreements; and (ii) the expected employment of the
Employees by Hollywood Park; provided, however, that
notwithstanding any of the foregoing provisions of this
release, Hollywood Park hereby expressly reserves any
rights, claims, or causes of action it may have arising
out of or resulting from the non-performance or breach of
the terms and conditions of this Agreement by the Company
or the Horseshoe Companies. Hollywood Park is aware that
it is releasing claims as to which it may be currently
unaware and only may come to learn, but is nevertheless
willing to enter into this release. It is the intention of
Hollywood Park that, notwithstanding the possibility that
Hollywood Park or its' counsel might discover or gain a
more complete understanding of the facts, events or law
which, if presently known or fully understood, would have
affected this release, this release shall be deemed to
have fully, finally and forever settled
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<PAGE> 5
any and all claims without regard to the existence or
subsequent discovery of different or additional facts,
events or laws.
(2) Each of the Company and the Horseshoe Companies hereby
releases and forever discharges Hollywood Park and its'
past, present and future subsidiaries, affiliates,
officers, directors, employees, agents, stockholders,
partners, members, successors, and assigns, both
individually and in their official capacities with
Hollywood Park, or any subsidiaries or affiliates of any
of them as applicable, of and from any and all actions or
causes of action, suits, debts, dues, sums of money,
accounts, reckonings, bonds, bills, covenants, claims,
charges, complaints, contracts, agreements, trespasses,
damages, judgments, commissions, executions, demands and
promises whatsoever, in law or equity, which the Company
or the Horseshoe Companies, or its successors or assigns,
may now have or hereafter can, shall or may have against
Hollywood Park, for, upon, or by reason of any and all
matters arising out of or relating to (i) the cessation of
Employee's employment by the Company, including the
termination of the Employment Agreements; (ii) the
expected employment of the Employees by Hollywood Park,
including any solicitation or purported solicitation of
the Employees to enter into such employment agreements
with Hollywood Park; (iii) the effect of the Hollywood
Park Press Release dated September 11, 1998 entitled "Four
Top Executives of Horseshoe Gaming Agree to Join Hollywood
Park" (the "Press Release") and other statements made by
Hollywood Park which are consistent with the Press
Release; and (iv) any solicitation, actual or alleged, of
any other employees of the Company and/or any of its
affiliated entities, occurring prior to the execution of
this Agreement; provided, however, that notwithstanding
the foregoing provisions of this release, the Company and
the Horseshoe Companies hereby expressly reserve any
rights, claims, or causes of action they may have against
Hollywood Park arising out of or resulting from the
non-performance or breach of the terms and conditions of
this Agreement. Each of the Company and the Horseshoe
Companies is aware that it is releasing claims as to which
it may be currently unaware and only may come to learn,
but are nevertheless willing to enter into this release.
It is the intention of the Company and the Horseshoe
Companies that, notwithstanding the possibility that the
Company, the Horseshoe Companies or their counsel might
discover or gain a more complete understanding of the
facts, events or law which, if presently known or fully
understood, would have affected this release, this release
shall be deemed to have fully, finally and forever settled
any and all claims without regard to the existence or
subsequent discovery of different or additional facts,
events or laws.
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<PAGE> 6
(3) Each of Hollywood Park, the Company and the Horseshoe
Companies as a Releasor hereby waives the provisions of
Section 1542 of the California Civil Code only to the
extent it applies to the releases given by such Releasor
in this Section 3.1. Section 1542 of the California Civil
Code provides as follows:
A general release does not extend to claims which
the creditor does not know or suspect to exist in
his favor at the time of executing the release,
which if known by him must have materially affected
his settlement with the debtor.
III.2 Disclosure of Agreement. The existence and substance of this
Agreement may be disclosed to any person or organization as the
party disclosing determines, including, without limitation, the
parties' legal counsel and accountants, present and former
employees and affiliates of the Company, the Horseshoe Companies,
Hollywood Park and persons providing financing to the Company,
the Horseshoe Companies, or any of their respective affiliates.
Disclosure of the existence and substance of this Agreement also
may be made to the public as required by law and as otherwise may
reasonably be determined by the disclosing party in the
furtherance of its business interests.
III.3 Knowledge and Consent of the Parties. The parties hereby mutually
warrant and represent that they have read and understand this
Agreement and that this Agreement is executed voluntarily and
without duress or undue influence on the part of or on behalf of
any party hereto. The parties hereby acknowledge that they have
been represented in negotiations and for the preparation of this
Agreement by counsel of their own choice; that they have read
this Agreement; and that they are fully aware of the contents of
this Agreement and of the legal effect of each and every
provision hereof. It is acknowledged and agreed by each party to
this Agreement that each party has participated in the drafting
of this Agreement and that any claimed ambiguity should not be
construed for or against any such party on account of such
drafting.
ARTICLE IV
MISCELLANEOUS
IV.1 Notice. All notices, requests, demands and other communications
required or permitted hereunder, shall be in writing and shall be
deemed to have been duly given when received. Notice shall be
delivered either by hand, facsimile or mailed, certified mail,
return receipt requested with postage prepaid, addressed to the
parties
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<PAGE> 7
at the following addresses, or such other address as may be
designated by notice in accordance with the provisions of this
Section:
(1) If to the Company or the Horseshoe Companies:
4024 Industrial Road
Las Vegas, Nevada 89103
Telephone: (702) 650-0080
Telecopy: (702) 650-0081
Attention: Jack B. Binion
(2) If to Hollywood Park:
P.O. Box 369
Inglewood, California 90306-0369
Telephone: (310) 419-1500
Telecopy: (310) 671-4460
Attention: R. D. Hubbard
IV.2 Entire Agreement; Further Assurances. This Agreement constitutes
the entire agreement between the parties hereto with respect to
the specific subject matter herein and supersedes all prior
agreements and undertakings, both written and oral, with respect
to the specific subject matter hereof. Each of the parties hereto
mutually agrees to deliver all such other documents and to do and
perform all such other acts as may reasonably be required from
time to time in connection with this Agreement or to implement or
carry out the terms hereof.
IV.3 Severability. If any provision (or portion hereof) of this
Agreement would be deemed to be invalid or unenforceable for any
reason, including, without limitation, the geographic or business
scope or the duration thereof, such provision (or portion
thereof) shall be construed in such a way as to make it valid and
enforceable to the maximum extent possible. Any invalidity or
unenforceability of any provision (or portion thereof) of this
Agreement shall attach only to such provision (or portion
thereof) and shall not affect or render invalid or unenforceable
any other provision (or portion thereof) of this Agreement or any
other agreement or instrument.
IV.4 Amendment. This Agreement may be amended, superseded, canceled,
renewed or extended, and the terms hereof may be waived, only by
a written instrument signed by each of the parties hereto, and it
shall not be reasonable for any party to rely on any oral
statements or representations made by any other party.
IV.5 Arbitration. In the event of any dispute or controversy between
the parties with respect to any of the matters set forth herein,
such dispute or controversy shall be
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<PAGE> 8
submitted to binding arbitration, to be conducted in Las Vegas,
Nevada, pursuant to the then prevailing rules and regulations of
the American Arbitration Association. This provision does not, in
any way, affect Section 2.2 of this Agreement.
IV.6 Admission; Evidence. The execution of this Agreement shall not be
deemed an admission of any wrongdoing, liability or unlawful
conduct on the part of Hollywood Park, the Horseshoe Companies
and/or the Company, its affiliates, divisions, officers,
employees, agents, successors or assigns. Neither this Agreement
nor any portion hereof shall be admissible evidence in any
proceeding whatsoever involving any party other than the Company,
the Horseshoe Companies, Hollywood Park or their respective
representatives or successors hereto.
IV.7 Successors and Assigns. This Agreement shall inure to the benefit
of, and be binding upon, the Company, the Horseshoe Companies and
Hollywood Park, and their respective successors and permitted
assigns under Section 4.8.
IV.8 Assignment. This Agreement may not be assigned by the parties
hereto other than, in the case of each party that is an entity,
to a successor to the business of such party or the purchaser of
all or substantially all of its assets; provided, that such
successor or purchaser shall have agreed to assume all of the
transferring party's obligations under this Agreement.
IV.9 Waiver. No waiver of any term or condition of this Agreement
shall be construed as a waiver of any other term or condition;
nor shall the waiver of any default under this Agreement be
construed as a waiver of any other default; nor, unless otherwise
provided in this Agreement as to timing, shall any delay or
omission of any party to exercise any right hereunder in any
manner waive such right or impair the exercise of such right
thereafter.
IV.10 Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
IV.11 Counterparts. This Agreement may be executed in one or more
counterparts, each of which when executed shall be deemed to be
an original, but all of which when taken together shall
constitute one and the same agreement.
IV.12 Legal Fees. Each party to this Agreement agrees to be solely
responsible for its respective legal fees and disbursements and
other expenses in connection with the negotiation and preparation
of this Agreement and in connection with any disputes, claims,
litigation and other matters relating to this Agreement.
Page 8 of 9
<PAGE> 9
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the day and year first above written.
HORSESHOE GAMING, INC.
a Nevada corporation
By: ____________________________________
Jack B. Binion
Chief Executive Officer
HORSESHOE GAMING, LLC.
a Delaware limited liability company
By: Horseshoe Gaming, Inc., Manager
By: ____________________________________
Jack B. Binion
Chief Executive Officer and
Chairman of the Board
HOLLYWOOD PARK, INC.
a Delaware corporation
By: ____________________________________
R. D. Hubbard
Chairman and Chief Executive Officer
Page 9 of 9
<PAGE> 1
EXHIBIT 10.18
AGREEMENT
Agreement dated as of February 3, 1999 (this "Agreement"), by and among
Horseshoe Gaming, Inc., a Nevada corporation (the "Company"), Horseshoe Gaming,
L.L.C., a Delaware limited liability company (the "LLC"), and John M. Allen
("Allen" or the "Employee").
R E C I T A L S :
WHEREAS, pursuant to an Employment Agreement, dated as of October 1,
1995, by and between Allen and the Company (the "Employment Agreement"), Allen
has served as Senior Vice President-Operations of the Company;
WHEREAS, the Company acts as manager of the LLC, which is governed by
the Limited Liability Company Operating Agreement, dated October 1, 1995 (the
"LLC Agreement");
WHEREAS, the LLC is the owner of Horseshoe Entertainment, a Louisiana
limited partnership ("HE"), which owns and operates Horseshoe Bossier City
Casino located in Bossier City, Louisiana, and Robinson Property Group Limited
Partnership, a Mississippi limited partnership ("RPG"), which owns and operates
the Horseshoe Hotel and Casino located at Casino Center in Tunica County,
Mississippi (the LLC, HE and RPG and their respective subsidiaries and
affiliates are herein sometimes referred to as the "Horseshoe Companies");
WHEREAS, the LLC is party to an agreement pursuant to which it may
acquire the gaming operations of Empress Entertainment, Inc., a Delaware
corporation, and its subsidiaries Empress Casino Hammond Corporation, an Indiana
corporation, and Empress Casino Joliet Corporation (collectively, "Empress") in
Hammond, Indiana and Joliet, Illinois;
WHEREAS, the Employee, together with Paul R. Alanis ("Alanis"), the
former President of the Company, Cliff Kortman, the former Vice President -
Design and Development of the Company and Loren Ostrow ("Ostrow"), the former
Senior Vice President and General Counsel of the Company (the "Other
Employees"), has entered into a contractual arrangement with Hollywood Park,
Inc., a Delaware corporation ("Hollywood Park"), to commence employment with
Hollywood Park upon the expiration of the term of his Employment Agreement on
May 11, 1999;
WHEREAS, the Company has claimed that (i) Hollywood Park has tortiously
interfered with the Company's contractual relationship with the Employee and the
Other Employees and (ii) the Employee has breached his fiduciary duty to the
Company and (iii) the Other Employees have likewise breached their fiduciary
duties to the Company;
WHEREAS, Hollywood Park and the Employee have denied the Company's
claims;
<PAGE> 2
WHEREAS, pursuant to an Agreement dated as of December 31, 1998, and in
order to avoid litigation, the Horseshoe Companies and Hollywood Park have
agreed to release each other from all claims which each of such parties may have
against the other in connection with Hollywood Park's hiring of the Employee and
the Other Employees, the Company has agreed to permit the Employee and the Other
Employees to pursue employment opportunities with Hollywood Park and Hollywood
Park has agreed, among other things not to hire or solicit a group of Horseshoe
employees;
WHEREAS, the Employee, the Company and the Horseshoe Companies desire to
avoid litigation over the Company's claims and, in furtherance of that desire,
the Employee and the Company have agreed to an immediate separation of the
Employee from all positions he presently holds with the Company and any of the
Horseshoe Companies in accordance with the terms of this Agreement; and
WHEREAS, the Employee acknowledges that, as a result of his positions in
the Company and related authorities, he has had substantial responsibility with
respect to the business and operations of the Company and the Horseshoe
Companies and, in connection therewith, has had access to confidential
information of the Company, the Horseshoe Companies and their respective
subsidiaries and affiliates (and, in connection with the potential acquisition,
the confidential information of Empress) and has acted in a supervisory capacity
with respect to certain employees of the Company, the Horseshoe Companies, and
their respective subsidiaries and affiliates.
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual agreements contained herein, and for other good and valuable
consideration, the adequacy and receipt of which are hereby acknowledged, the
parties agree as follows:
ARTICLE I
TERMINATION OF THE EMPLOYMENT AGREEMENTS
I.1 Termination. The Company and the Employee hereby agree that,
effective December 31, 1998 (the "Termination Date"), the employment of the
Employee by the Company, the Horseshoe Companies and any of their respective
subsidiaries and affiliates from all positions, shall be deemed to have been
terminated, and the Employment Agreement shall be deemed to have no further
force or effect, except for the following provisions of the Employment
Agreement, which shall survive (subject, however, to the modifications to such
provisions as are made in this Agreement): Section 12-Put/Call Option Upon
Termination, Section 13-Distributions; Public Offering, Section 17-Arbitration,
Section 18-Governing Law, Section 19-Notices (except that notices to the Company
and the LLC shall be to the address provided in Section 5.1 of this Agreement),
Section 20-Assignment, Section 21-Waiver, and Section 22-Construction.
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<PAGE> 3
Notwithstanding the foregoing and any provision in the Employment Agreement to
the contrary, the LLC and the Company agree that the Employee shall be fully
vested in his interests in the LLC as of the Termination Date. Further, Allen
shall be entitled to receive payment for his interest in the LLC on the same
schedule as Alanis and Ostrow are entitled to receive payment for their
interests in the LLC as provided under their respective employment agreements
with the Company (i.e., Allen shall be paid in three (3) equal principal
installments: the first payment shall be due within ten (10) days after
determination of or agreement as to the value of his entire economic interest in
the LLC as provided in Section 2.4 of this Agreement; the second payment of
principal plus accrued interest shall be due and payable on the first
anniversary of the date of termination (provided that the value of such interest
has been fully and finally determined by such date); and the last payment of
principal plus accrued interest shall be due and payable on the second
anniversary of the date of termination (provided that the value of such interest
has been fully and finally determined by such date). It is understood that if no
final determination of value has been made by the anniversary dates referred to
herein, then any payment that would otherwise have been due prior to the date of
determination of value shall be made within 30 days of a final determination of
value. Under certain circumstances, the LLC has the right to extend the payments
over five years. Such obligations shall bear interest at the rate set forth in
the Employment Agreement.
I.2 Employment Opportunities. The Company agrees that the Employee may
pursue employment with Hollywood Park and agrees that from and after the
Termination Date, the non-competition provisions of the Employment Agreement
have been waived by the Company in respect of the Employee's employment with
Hollywood Park.
ARTICLE II
PAYMENTS
II.1 Payments Under the Employment Agreement. The Employee shall be paid
the amounts set forth below (the "Scheduled Amounts") within one week of the
execution of this Agreement:
(i) base salary under the Employment Agreement through the
Termination Date;
(ii) severance benefits in the total amount of $1,810,494,
payable to Employee pursuant to the terms of Section 8(B)
of the Employment Agreement;
(iii) accrued, unused vacation pay in the amount of $26,923; and
(iv) reimbursement for all outstanding reasonable business
expenses (details and evidence of which Employee has
provided to the Company's financial
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<PAGE> 4
department) incurred by Employee and as to which Employee
is entitled to reimbursement pursuant to Section 6(c) of
the Employment Agreement.
The Employee shall also be paid all vested amounts held in a 401(k) account for
the benefit of Employee with the investment firm of Scudder pursuant to the
Company's 401(k) plan (the "401(k) Payment"). The Company, as reasonably
requested, will assist the Employee in transferring the 401(k) Payment in
accordance with the Company's 401(k) plan.
II.2 Fringe Benefits. On or before the execution of this Agreement, the
Employee shall return to the Company all credit cards, cellular phones,
computers and any and all other items of property which were provided to the
Employee by the Company, the Horseshoe Companies or any of their respective
subsidiaries or affiliates.
II.3 Entire Payment. The Employee acknowledges that the Scheduled
Amounts and the 401(k) Payment represent the total compensation and other
benefits payable to him by the Company, including salary, bonuses and any
accrued and unused vacation days, holidays, sick pay and severance pay and other
benefits of any kind; provided, however, that:
(i) the Employee shall continue to retain his interest in the
LLC as described in Section 4.1(d) (which is the subject
of Employees' put option and the Company's call option
pursuant to the terms of his Employment Agreement);
(ii) the Employee (subject to the provisions of this Agreement)
shall continue to enjoy the same rights and privileges of
other members of said LLC; and
(iii) the LLC shall remain obligated to make payment to the
Employee in connection with any purchase of said interest
from the Employee by the LLC pursuant to this Agreement
and Section 12 of the Employment Agreement (as modified by
this Agreement).
The Employee further acknowledges that other than as set forth expressly herein
and in the provisions of the Employment Agreement regarding the Employee's
interest in the LLC which survive this Agreement, as described in Section 1.1
above, there are no other unpaid financial commitments or obligations of any
kind, express or implied, of the Company or any of the Horseshoe Companies to
him or to his heirs, executors, administrators, personal representatives or
members of his family and, except to the extent permitted by law, the Employee
shall have no further right to participate in any employee benefit plan of the
Company or any of the Horseshoe Companies.
II.4 Modification of Put/Call Provisions. The Employee hereby agrees not
to exercise his rights under the Employment Agreement to cause the LLC to
purchase his ownership interest in the LLC (the "Put Right") and the LLC hereby
agrees not to exercise its right under the
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<PAGE> 5
Employment Agreement to purchase the Employee's ownership interest in the LLC
(the "Call Right"). The Employee and the LLC agree that in lieu of exercising
the Put Right or the Call Right, as the case may be, under the Employment
Agreement, the LLC shall pay the Employee for his ownership interest in the LLC
a purchase price to be determined using the average of the valuations of the
LLC, which are fully and finally determined in the arbitration, appraisal or
other proceedings in which the Company and the LLC, on the one hand, and one or
more of the Other Employees on the other, are parties, or pursuant to any
settlement agreement pursuant to which the purchase price of the Other
Employees' entire ownership interests in the LLC are determined ("Valuation
Proceedings"), provided that such value shall be appropriately adjusted to take
into account any adjustments used to fix the purchase price of the Other
Employees' entire ownership interests in the LLC in such Valuation Proceedings
("Valuation Adjustments"). Exhibit A shows an example of how to calculate the
value of the LLC for purposes of valuing the Employee's ownership interest in
the LLC.
If the LLC and all of the Other Employees have not determined, pursuant
to Valuation Proceedings, the value of the ownership interests in the LLC of all
the Other Employees within eighteen (18) months from the date of this Agreement,
then the Employee shall have the option to (1) average the valuations of the LLC
taking into account the Valuation Adjustments determined in Valuation
Proceedings with respect to two of the Other Employees, provided that two of the
Other Employees' Valuation Proceedings have been completed within the eighteen
(18) months, (2) proceed pursuant to Section 12 of the Employment Agreement
(subject to Section 4.1(c) of this Agreement) to exercise his Put Right (and
after the Employee has chosen to proceed pursuant to Section 12 the LLC shall
have the right to exercise its Call Right) or (3) wait until all of the
Valuation Proceedings between the LLC and the Other Employees have been
completed and in such case the LLC shall pay a purchase price for the Employee's
entire ownership interest in the LLC as determined in the preceding paragraph.
The Employee has ten days following the conclusion of the eighteen (18) months
to give written notice of his decision as to which of the options in the
preceding sentence he would like to proceed under. If the Employee does not give
written notice of his decision on how to proceed, within the time specified, by
default it will be assumed that the Employee has chosen to proceed under option
(3).
The determination of or agreement as to the value of the Employee's
entire ownership interest in the LLC is considered complete, for purposes of
making the first payment to the Employee, when the Valuation Proceedings with
respect to each of the Other Employees have been completed, except if the
Valuation Proceedings of all three Other Employees have not been completed
within eighteen (18) months and (i) the Employee elects to proceed under option
(1) of the preceding paragraph, then the determination of or agreement as to
value is considered complete at the end of the eighteen (18) months or (ii) the
Employee elects to proceed under option (2) of the preceding paragraph, then the
determination of or agreement as to value is determined pursuant to the terms of
Section 12 of the Employment Agreement and subject to 4.1(c).
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<PAGE> 6
ARTICLE III
CONFIDENTIALITY; NON-SOLICITATION AND NON-HIRE
III.1 Confidential Information.
(1) The Employee covenants and agrees that from the Termination
Date until December 31, 2001, he will keep strictly confidential and will not at
any time, use or make use of, show, display, reveal, divulge, communicate or
make known, either directly or through another, to any person, firm,
corporation, association or other entity, any Confidential Information (as
herein defined) that was received by him during the course of his employment by
the Company or, after the Termination Date, as a member of the LLC.
(2) Confidential Information means any information that is not
generally known to the public or the gaming industry that relates to the
existing or reasonably foreseeable business of the Company, the Horseshoe
Companies, Empress or any of their respective subsidiaries and affiliates
including, without limitation, any information contained in or relating to
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, new personnel
acquisition plans, the terms of contracts and agreements with customers,
contractors and suppliers, the Company's, the Horseshoe Companies', Empress' or
any of their respective subsidiaries' and affiliates' course of dealings with
any such actual and prospective customers, contractors and suppliers, personal
information, customer and vendor credit information and other proprietary
information of the Company, the Horseshoe Companies, Empress or any of their
respective subsidiaries and affiliates. Confidential Information shall not
include any information which (i) is known generally to the public or the gaming
industry (other than as a result of unauthorized disclosure by the Employees),
(ii) becomes available to the Employees on a non-confidential basis from a
source, other than the Company, the Horseshoe Companies, Empress or any of their
subsidiaries or affiliates, who is not also bound by an agreement of
confidentiality with the Company, the Horseshoe Companies, Empress or any of
their subsidiaries or affiliates or (iii) was available to the Employees on a
non-confidential basis prior to its disclosure to the Employees by the Company,
the Horseshoe Companies, Empress or any of their subsidiaries or affiliates.
(3) The Employee agrees that all documents and other tangible or
intangible property relating in any way to the business of the Company, the
Horseshoe Companies or any of their subsidiaries or affiliates including,
without limitation, those items of tangible or intangible property which may
have been conceived or generated by the Employee or have come into the
Employee's possession prior to the Termination Date are the property of the
Company and may not be used by the Employee. The Company and Horseshoe Companies
acknowledge that the gaming industry is undergoing a consolidation and that many
companies, including Hollywood Park, have considered or may consider business
opportunities relating to the purchase of existing
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<PAGE> 7
gaming companies or properties or pursue licenses for new gaming facilities and
that the pursuit of such opportunities by Hollywood Park with the assistance of
the Employee shall not be violative of this provision.
(4) On or before the execution of this Agreement, the Employee
shall return to the Company, all Horseshoe Property. "Horseshoe Property" shall
include, without limitation, all documents, papers, and other tangible and
intangible property of the Company, the Horseshoe Companies, Empress and each of
their respective subsidiaries and affiliates, 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, whether such materials are confidential or not, which are
property of the Company, the Horseshoe Companies, Empress or any of their
respective subsidiaries or affiliates and which relate in any way to the
business, customers, products, practices or techniques of the Company, the
Horseshoe Companies, Empress or any of their respective subsidiaries or
affiliates, as well as all other practices or techniques of the Company, the
Horseshoe Companies, Empress or any of their subsidiaries or affiliates. The
Employee agrees to immediately return all Horseshoe Property that may come into
Employee's possession after the execution of this Agreement.
III.2 Non-Solicitation and Non-Hire.
(1) The Employee agrees that from the Termination Date until
December 31, 2001, he will not directly or indirectly (whether by
recommendation, disclosure of names and job descriptions of persons on the
Protected List attached hereto as Exhibit B and by this reference made a part
hereof, or participation in the solicitation or hiring process or otherwise,
whether or not he has authority over solicitation and hiring of employees,
consultants, independent contractors or others) solicit, hire or retain, or
cause any other employer of such Employee, or any other person who has retained
him as a consultant or independent contractor to solicit, hire or retain, as an
employee, consultant, independent contractor or otherwise any of the persons
whose names are contained on the Protected List attached hereto as Exhibit A and
by this reference made a part hereof.
(2) In the event the Employee violates any legally enforceable
provision of this Article III as to which there is a specific time period during
which or the Employee is prohibited from taking certain actions or engaging in
certain activities, then the violation will toll the running of the time period
from the date of violation until the violation ceases as to the specific
employee as to which a violation is alleged but not as to other employees whose
names are on the Protected List.
(3) The Employee acknowledges that he has carefully considered
the nature and extent of the restrictions upon him and the rights and remedies
conferred upon the Company and the Horseshoe Companies under this Article III.
The Employee further acknowledges that the same are reasonable in time and
territory and are fully required to protect the legitimate
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<PAGE> 8
interest of the Company and the Horseshoe Companies and do not confer a benefit
upon the Company and the Horseshoe Companies disproportionate to any detriment
to the Employee.
III.3 Remedies. The Employee and the Company acknowledge that the
provisions contained in this Article III are reasonable and necessary, that the
damages which would be suffered by the Company and the Horseshoe Companies as a
result of a breach or threatened breach by the Employee of any of such
provisions may not be calculable, and that the award of a money judgment to the
Company and the Horseshoe Companies for such a breach or threatened breach by
the Employee would be an inadequate remedy. Consequently, the Employee agrees
that any breach or threatened breach of any provision of this Article III may be
enforced by the Company and/or the Horseshoe Companies by means of an action for
injunctive or other equitable relief, including a temporary and/or permanent
injunction, filed in a court of competent jurisdiction. Any such remedy shall be
in addition, and shall not limit the right of the Company or the Horseshoe
Companies, to any other remedy to which it may be entitled in law or in equity.
Due to the financial strength of the Company and the Horseshoe Companies, the
Employee agrees that it is not necessary for the Company or the Horseshoe
Companies to post a bond and that they shall not be obligated to post a bond or
other security in seeking such relief. The Employee hereby waives any right to
seek a bond. In connection with the remedies provided in this Section 3.3, the
Employee hereby waives any objection and consents to the subject matter and
personal jurisdiction of the state and federal courts of the State of Nevada and
hereby waives any and all objections to venue.
ARTICLE IV
RELEASE; NON-DISCLOSURE
IV.1 Release.
(1) Except as provided in Section 4.1(c) and 4.1(d), the Employee
hereby releases and forever discharges the Company, the Horseshoe Companies and
each of their respective past, present and future subsidiaries, affiliates,
officers, directors, employees, agents, stockholders, partners, managers,
members, successors and assigns, both individually and in their official
capacities with the Company, the Horseshoe Companies or any subsidiaries or
affiliates of any of them as applicable (collectively, the released parties are
herein referred to as the "Horseshoe Released Parties"), from any and all
actions or causes of actions, suits, debts, dues, sums of money, accounts,
reckonings, bonds, bills, covenants, claims, charges, complaints, contracts,
agreements, trespasses, damages, judgments, commissions, executions, demands,
and promises whatsoever, in law or equity, which the Employee, or his heirs,
executors and administrators, may now have or hereafter can, shall or may have
against the Horseshoe Released Parties for, upon, or by reason of any and all
matters arising out of or relating to (i) the Employee's employment by the
Company or the cessation of said employment including the termination of the
Employment Agreement, and including, but not limited to, any alleged
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violation of Title VII of the Civil Rights Act of 1964, the Employees Retirement
Income Security Act of 1974, the Age Discrimination in Employment Act of 1967,
the Vocational Rehabilitation Act, the Equal Pay Act of 1963, the National Labor
Relations Act, and any other alleged violation of any local, state or federal
law, regulation or ordinance, and/or public policy, contract or tort law, having
any bearing whatsoever on the terms and conditions and/or cessation of the
Employee's employment; (ii) the expected employment of the Employee by Hollywood
Park; and (iii) Employee's status as a member of the LLC, including, without
limitation, any and all claims arising out of the management of the LLC and the
treatment of members of the LLC; provided, however, that notwithstanding any of
the foregoing provisions of this release, the Employee hereby expressly reserves
any rights, claims, or causes of action he may have arising out of or resulting
from the non-performance or breach of the terms and conditions of this Agreement
by the Company or the Horseshoe Companies; and provided, further that
notwithstanding the foregoing provisions of this release, the Employee expressly
reserves his rights under the provisions of the Employment Agreement (as amended
by this Agreement) which survive after the Termination Date as provided in
Section 1.1. The Employee is aware that he is releasing claims as to which he
may be currently unaware and only may come to learn, but is nevertheless willing
to enter into this release. It is the intention of the Employee that,
notwithstanding the possibility that the Employee or his counsel might discover
or gain a more complete understanding of the facts, events or law which, if
presently known or fully understood, would have affected this release, this
release shall be deemed to have fully, finally and forever settled any and all
claims without regard to the existence or subsequent discovery of different or
additional facts, events or laws.
(2) Except as provided in Section 4.1(c) and 4.1(d), each of the
Company and the Horseshoe Companies hereby releases and forever discharges the
Employee and each of his heirs, successors, employees, agents and assigns, both
individually and in his official capacity with Hollywood Park, or any
subsidiaries or affiliates of any of them as applicable, from any and all
actions or causes of action, suits, debts, dues, sums of money, accounts,
reckonings, bonds, bills, covenants, claims, charges, complaints, contracts,
agreements, trespasses, damages, judgments, commissions, executions, demands and
promises whatsoever, in law or equity, which the Company or the Horseshoe
Companies, or its successors or assigns, may now have or hereafter can, shall or
may have against any of them, for, upon, or by reason of any and all matters
arising out of or relating to (i) subject to the representations of Section 4.5,
Employee's performance or non-performance of his duties as an employee of the
Company and the cessation of said employment, including the termination of
Employee's Employment Agreement; (ii) the expected employment of the Employee by
Hollywood Park; and any violation or purported violation of Employee's
Employment Agreement in connection with his prospective employment by Hollywood
Park; and (iii) any solicitation, actual or alleged, of any other employees of
the Company and/or any of its affiliated entities, occurring prior to the
execution of this Agreement; provided however, that notwithstanding the
foregoing provisions of this release, the Company and the Horseshoe Companies
hereby expressly reserve any rights, claims, or causes of action they may have
against the Employee arising out of or resulting from the non-performance or
breach of the terms and conditions of this Agreement; provided, further, that
notwithstanding the
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foregoing provisions of this release, nothing herein shall be deemed to release
the Employee from his obligation to repay any and all loans made to him by the
Company or the Horseshoe Companies and deficits in his capital account; which
amounts shall be offset against amounts due to the Employee in respect of his
interest in the LLC; provided, further, however, that the Company and the
Horseshoe Companies expressly reserve their rights under the provisions of the
Employment Agreement (as amended by this Agreement) which survive after the
Termination Date as provided in Section 1.1. Each of the Company and the
Horseshoe Companies is aware that it is releasing claims as to which it may be
currently unaware and only may come to learn, but are nevertheless willing to
enter into this release. It is the intention of the Company and the Horseshoe
Companies that, notwithstanding the possibility that the Company, the Horseshoe
Companies or their counsel might discover or gain a more complete understanding
of the facts, events or law which, if presently known or fully understood, would
have affected this release, this release shall be deemed to have fully, finally
and forever settled any and all claims without regard to the existence or
subsequent discovery of different or additional facts, events or laws. For
purposes of determining whether the purchase price for the Employee's entire
ownership in the LLC is due in a lump sum or in installments, the purchase price
shall be considered without taking account of any offset to which the Company or
the Horseshoe Companies are entitled as described above. The Company and the
Horseshoe Companies may elect to offset amounts due to the Company or the
Horseshoe Companies from whichever payments (other then the payments described
in Section 2.1 above) are due to the Employee as the Company or the Horseshoe
Companies shall determine.
(3) Notwithstanding the provisions of Sections 4.1(a) and (b)
above, but subject to Section 2.4 of this Agreement pursuant to which the
Employee and the Company agreed not to exercise the Put Right or the Call Right,
each of the Employee, the Company and the LLC agree that if the Put Right or the
Call Right are exercised pursuant to Section 2.4 or by mutual agreement, that
they shall bring and resolve finally their disputes relating to the
determination of all amounts owed in respect of the Employee's entire interest
in the LLC exclusively in valuation proceedings in accordance with his
Employment Agreement ("Allen's Valuation Proceedings"). The release of claims
pursuant to the provisions of Section 4.1(a) and (b) above is effective so as to
prevent either party from asserting any claim for damages or seeking any relief
as a result of any of the matters released pursuant to this Agreement in any
proceeding other than Allen's Valuation Proceedings or, in the case of the
Company or the LLC, the Valuation Proceedings of the Other Employees, but shall
not render inadmissible in Allen's Valuation Proceedings or, in the case of the
Company or the LLC, the Valuation Proceedings of the Other Employees any
evidence relevant to the issue of value. Each party shall bear his or its own
costs in connection with Allen's Valuation Proceedings and each will split the
costs of any third party appraiser and arbitration. The appraisals shall be
commenced and conducted as provided in the Employment Agreement.
(4) The Employee, the Company and the LLC agree that the LLC
Agreement has not been modified since June 30, 1998 and that the LLC Agreement
as of June 30, 1998 remains in full force and effect. The Company and the
Horseshoe Companies agree that until
10
<PAGE> 11
Employee's interest in the LLC is reacquired by the LLC pursuant to this
Agreement, the Employee shall be entitled to continue receiving his pro rata
portion of distributions, if any, increases in capital accounts, if any, and all
other benefits of ownership (including current information as to said matters)
in a non-discriminatory manner as and when received or conferred upon the other
members of the LLC, and the Employee agrees to continue to be bound by the terms
of the LLC Agreement as in effect from time to time in the same manner as the
other members of the LLC. In connection with the acquisition of Empress, the LLC
will be reorganized as a corporation ("NEWCO") which elects to be treated as an
S corporation for federal income tax purposes pursuant to Section 1362(a) of the
Internal Revenue Code of 1986, as amended. The members of the LLC will
contribute to NEWCO their interests in the LLC in exchange for shares of NEWCO.
The Employee agrees to contribute his interest in the LLC to NEWCO on the same
economic basis as the other members of the LLC. The Employee will obtain the
same percentage of economic interest in NEWCO as he had in the LLC and will not
suffer economic dilution on account of the exchange. The LLC and the Company
agree that NEWCO shall assume the obligations of the LLC to the Employee under
the Employment Agreement and this Agreement.
(5) The Employee, the Company and the Horseshoe Companies as a
Releasor hereby waives the provisions of Section 1542 of the California Civil
Code only to the extent it applies to the releases given by such Releasor in
this Section 4.1. Section 1542 of the California Civil Code provides as follows:
A general release does not extend to claims which the credit does
not know or suspect to exist in his favor at the time of
executing the release, which if known by him must have materially
affected his settlement with the debtor.
IV.2 Disclosure of Agreement. The parties hereto agree that, subject to
Section 4.3, the existence and substance of this Agreement may be disclosed to
any person or organization as the party disclosing determines, including,
without limitation, members of the Employee's immediate family, the parties'
legal counsel and accountants, present and former Employees and affiliates of
the Company, the Horseshoe Companies, Hollywood Park and persons providing
financing to the Company, the Horseshoe Companies, or any of their respective
affiliates. Disclosure of the existence and substance of this Agreement also may
be made to the public as required by law and as otherwise may reasonably be
determined by the disclosing party in the furtherance of its business interests.
IV.3 Non-Disparagement. From the Termination Date until December 31,
2001, the Employee and the Company hereby agree not to make any statements, in
writing or otherwise, that may disparage the reputation or character of the
other or any of the Company's or the Horseshoe Companies' respective
subsidiaries, affiliates, officers, directors, employees, agents, stockholders,
partners, members, successors and assigns, both individually and in their
official capacities with such party at any time for any reason whatsoever,
except as (a) required by law,
11
<PAGE> 12
(b) in connection with any litigation or administrative proceeding by or between
the Company, the Horseshoe Companies and the Employee in which the party making
such statement has been subpoenaed and is required by law to give testimony, (c)
and in any litigation or administrative proceeding by and among the Company, the
Horseshoe Companies, and the Employee or (d) in connection with any competitive
licensing or comparable proceeding in which the Employee in his capacity as an
employee of Hollywood Park or other employer, may testify or otherwise submit
evidence.
IV.4 Knowledge and Consent of the Parties. The parties hereby mutually
warrant and represent that they have read and understand this Agreement and that
this Agreement is executed voluntarily and without duress or undue influence on
the part of or on behalf of any party hereto. The parties hereby acknowledge
that they have been represented in negotiations and for the preparation of this
Agreement by counsel of their own choice; that they have read this Agreement;
and that they are fully aware of the contents of this Agreement and of the legal
effect of each and every provision hereof. It is acknowledged and agreed by each
party to this Agreement that each party has participated in the drafting of this
Agreement and that any claimed ambiguity should not be construed for or against
any such party on account of such drafting.
IV.5 Representations.
(1) The Employee hereby represents that in the course of his
employment by the Company he has not intentionally performed any ultra vires act
and has not intentionally engaged in any intentional misconduct or criminal act
materially adversely affecting the Company or any of the Horseshoe Companies
(collectively, "Bad Actions").
(2) The Company and each of the Horseshoe Companies hereby
represent that other than the actions of the Employee to become employed by
Hollywood Park, which is being released hereby and which the Company and the LLC
contend may constitute "Bad Actions," they have no knowledge that the Employee
has committed Bad Actions.
IV.6 Availability. Employee further agrees that he will submit to a
single pre-hearing deposition, to be taken by counsel to the Company, on a
single business day in Las Vegas, Nevada, in relation to any arbitration,
appraisal or other proceeding or proceedings in which the Company, on the one
hand, and one or more of the Other Employees, on the other, are parties. Such
deposition shall take place on a mutually convenient date, it being agreed that
the deposition will take place no later than one month prior to the scheduled
initiation of the first arbitration proceeding, if any. It is understood that
following such deposition, additional factual disputes may arise in said
proceeding or proceedings, and accordingly, if requested by the Company counsel,
the Employee will, on a reasonable basis, continue to make himself available for
interview.
ARTICLE V
12
<PAGE> 13
MISCELLANEOUS
V.1 Notice. All notices, requests, demands and other communications
required or permitted hereunder, shall be in writing and shall be deemed to have
been duly given when received. Notice shall be delivered either by hand,
facsimile or mailed, certified mail, return receipt requested with postage
prepaid, addressed to the parties at the following addresses, or such other
address as may be designated by notice in accordance with the provisions of this
Section:
(1) If to the Company or the Horseshoe Companies:
4024 Industrial Road
Las Vegas, Nevada 89103
Attn: Jack B. Binion
(702) 650-0080
(702) 650-0081
(2) If to the Employee:
8408 Turtle Creek Circle
Las Vegas, Nevada 89113
With a copy to:
Cox, Castle & Nicholson, LLP
2049 Century Park East, 28th Floor
Los Angeles, CA 90067-3284
Attn: Matthew A. Wyman, Esq.
V.2 Indemnification. The Employee and his heirs, executors,
administrators and family members shall continue to be indemnified and defended
by the Company and the Horseshoe Companies or any of them, from costs, expenses
and liabilities arising out of claims brought against them by third parties in
respect of the actions taken or not taken by the Employee on behalf of any of
the Company and the Horseshoe Companies during and in the course of his
employment or other relationships with any of the Company and the Horseshoe
Companies to the same extent they were entitled to be so indemnified prior to
the Termination Date.
V.3 Entire Agreement; Further Assurances. Except as expressly set forth
herein, this Agreement constitutes the entire agreement between the parties
hereto with respect to the specific subject matter herein and supersedes all
prior agreement and undertaking, both written and oral, with respect to the
specific subject matter hereof and thereof, including, without limitation, the
Employment Agreement. Each of the parties hereto mutually agrees to deliver all
such other
13
<PAGE> 14
documents and to do and perform all such other acts as may reasonably be
required from time to time in connection with this Agreement or to implement or
carry out the terms hereof.
V.4 Severability. If any provisions (or portion hereof) of this
Agreement would be deemed to be invalid or unenforceable for any reason,
including, without limitation, the geographic or business scope or the duration
thereof, such provision (or portion thereof) shall be construed in such a way as
to make it valid and enforceable to the maximum extent possible. Any invalidity
or unenforceability of any provision (or portion thereof) of this Agreement
shall attach only to such provision (or portion thereof) and shall not affect or
render invalid or unenforceable any other provision (or portion thereof) of this
Agreement or any other agreement or instrument.
V.5 Amendment. This Agreement may be amended, superseded, canceled,
renewed or extended, and the terms hereof may be waived, only by a written
instrument signed by each of the parties hereto, and it shall not be reasonable
for any party to rely on any oral statements or representations made by any
other party.
V.6 Arbitration. In the event of any dispute or controversy between the
parties with respect to any of the matters set forth herein, 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. This provision does not, in any way, affect
Section 3.3 or 4.1(c) of this Agreement, or the provisions of the Employment
Agreement that survive.
V.7 Admission; Evidence. The execution of this Agreement shall not be
deemed an admission of any wrongdoing, liability or unlawful conduct on the part
of the Employee, the Horseshoe Companies and/or the Company, its affiliates,
divisions, officers, employees, agents, successors or assigns. Neither this
Agreement nor any portion hereof shall be admissible evidence in any proceeding
whatsoever involving any party other than the Employee, the Company, the
Horseshoe Companies, Hollywood Park or their respective representatives or
successor hereto.
V.8 Successors and Assigns. This Agreement shall inure to the benefit
of, and be binding upon, the Company and the Horseshoe Companies and their
respective successors and permitted assigns under Section 5.9 and the Employee,
his executors, administrators, heirs, and legal representatives.
V.9 Assignment. This Agreement may not be assigned by the parties hereto
other than, in the case of each party that is an entity, to a successor to the
business of such party or the purchaser of all or substantially all of its
assets; provided, that such successor or purchaser shall have agreed to assume
all of the transferring party's obligations under this Agreement. This Agreement
may not be assigned by the Employee.
14
<PAGE> 15
V.10 Waiver. No waiver of any term or condition of this Agreement shall
be construed as a waiver of any other term or condition; nor shall the waiver of
any default under this Agreement be construed as a waiver of any other default;
nor, unless otherwise provided in this Agreement as to timing, shall any delay
or omission of any party to exercise any right hereunder in any manner waive
such right or impair the exercise of such right thereafter.
V.11 Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
V.12 Counterparts. This Agreement may be executed in one or more
counterparts, each of which when executed shall be deemed to be an original, but
all of which when taken together shall constitute one and the same agreement.
V.13 Legal Fees. Each party to this Agreement agrees to be solely
responsible for its respective legal fees and disbursements and other expenses
in connection with the negotiation and preparation of this Agreement and in
connection with any disputes, claims, litigation and other matters relating to
this Agreement.
15
<PAGE> 16
IN WITNESS WHEREOF, the undersigned have executed this Agreement
as of the day and year first above written.
HORSESHOE GAMING, INC.
a Nevada corporation
By:_____________________________________
Jack B. Binion
Chief Executive Officer and
Chairman of the Board
HORSESHOE GAMING, LLC
a Delaware limited liability company
Horseshoe Gaming, Inc., Manager
By:_____________________________________
Jack B. Binion
Chief Executive Officer and
Chairman of the Board
________________________________________
JOHN M. ALLEN
16
<PAGE> 17
EXHIBIT A
HOW TO CALCULATE THE VALUE OF
THE LLC FOR PURPOSES OF VALUING
ALLEN'S OWNERSHIP INTEREST IN THE LLC
For example purposes only, assume that at the end of eighteen months the
Valuation Proceedings for Ostrow and Alanis have been completed and Allen elects
to base his valuation on an average of the valuations of the LLC based on the
value of the ownership interests of Alanis and Ostrow in their completed
Valuation Proceedings. The value of Allen's interest in the LLC will be
determined as follows:
Assume:
Alanis has a 3% interest in the LLC and it is determined in Alanis'
Valuation Proceeding that his 3% interest in the LLC is worth $6,000,000.00,
that means 1% of Alanis' interest in the LLC is worth $2,000,000.00 (the "Alanis
Value").
Ostrow has a 1.5% interest in the LLC and it is determined in Ostrow's
Valuation Proceeding that his 1.5% interest in the LLC is worth $6,000,000.00,
that means 1% of Ostrow's interest in the LLC is worth $4,000,000.00 (the
"Ostrow Value").
Therefore:
The average of the Alanis Value and the Ostrow Value equals
$3,000,000.00 per 1% interest in the LLC. ($2M + $4M = $6M/2= $3M)
The aggregate value of the LLC for purposes of valuing Allen's ownership
interest in the LLC would be $300,000,000.00.
The valuations included in this Exhibit A are used solely for
demonstrating the methodology for determining the value of the LLC for purposes
of valuing Allen's ownership interest in the LLC and are specifically not
intended to reflect any actual valuation of the LLC or any member's interest
therein. Accordingly, none of such valuations shall be admissible in any
arbitration proceeding or Valuation Proceeding, or otherwise used to establish
or impact in any manner the value of the LLC, the Other Employees' interests in
the LLC or Allen's interest in the LLC.
-i-
<PAGE> 18
EXHIBIT B
PROTECTED LIST
Joe Ahern Robin Hamlin
Gary Anderson Robert Horlein
Angela Barrera Zenna Holden
Alex Atchison Charles Hulick
Farris Baughman Jay Jordan
Mark Golding Frank Kersh
Gary Borden Leo Kessler
Brett Borek Miles Lim
Greg Bradley Shawn Matthews
Debbie Brantley Bob McQueen
Pete Brascia John Moran
Johnny Bridges Wesley Nell
Glenn Buxton Kevin O'Sullivan
Kevin Byrd Don Perkins
David Carroll Patrick Quintano
Rich Christian Joe Robertson
Byron Clouarte Mark Sicilia
Rick Cook John Sisinni
George Corchis Shiela Stafford
Issac Dyas Angelus Thompson
Wayne Edwards UrsVogel
Richard Fazio Jerry West
Dennis Gentry Greg Westmorland
Kenneth Gibson Vernon White
Larry Gregson Jon Wolfe
-ii-
<PAGE> 1
EXHIBIT 10.19
October 19, 1998
Mr. Walter J. Haybert
9636 Fox Hill Circle North
Germantown, TN 38139
Dear Mr. Haybert:
Reference is made to the Second Amended and Restated Employment
Agreement, entered into as of October 1, 1995 (the "Employment Agreement"), by
and between Horseshoe Gaming, Inc., a Nevada corporation (the "Company"), and
you, as the "Employee". The Employment Agreement terminated in accordance with
Section 2 thereof on July 31, 1998. Either the Employee or Horseshoe Gaming,
L.L.C. (the "LLC") may exercise the respective options granted to them under
Section 12 of the Employment Agreement within 90 days after the termination of
the Employment Agreement. The LLC and you, as the Employee, hereby agree to
extend the term during which each of the Put Option (as defined in the
Employment Agreement) and the Call Option (as defined in the Employment
Agreement), as set forth in Section 12 thereof, may be exercised through, and
including, July 31, 1999 (the "Extended Term"). Other than as set forth in this
letter, the Employment Agreement shall not be deemed to have been modified.
Please indicate your acknowledgment and agreement with the foregoing by signing
in the space indicated below.
Sincerely,
HORSESHOE GAMING, INC.
By: ____________________________________
Jack B. Binion
Chief Executive Officer and Chairman
HORSESHOE GAMING, L.L.C.
By: Horseshoe Gaming, Inc., Manager
By: ____________________________________
Jack B. Binion
Chief Executive Officer and Chairman
ACKNOWLEDGED AND
ACCEPTED this __ day of October, 1998:
________________________________________________________________________________
Mr. Walter J. Haybert
<PAGE> 1
EXHIBIT 10.20
January 4, 1999
Mr. Walter J. Haybert
9636 Fox Hill Circle North
Germantown, TN 38139
Dear Walt:
Reference is made to the Second Amended and Restated Employment
Agreement (the "Employment Agreement"), entered into as of October 1, 1995, by
and between Horseshoe Gaming, Inc., a Nevada corporation (the "Company"), and
you, as the "Employee," which terminated in accordance with its terms on July
31, 1998.
Pursuant to the Employment Agreement, Horseshoe Gaming, L.L.C., (the
"LLC") had the right, upon the Employee's termination, to purchase (the "Call
Right"), and the Employee had the right to cause the LLC to purchase (the "Put
Right") the Employee's Fully Vested Ownership Interest (as defined in the
Employment Agreement) at a purchase price equal to the fair market value of the
Fully Vested Ownership Interest, calculated in accordance with the Employment
Agreement (the "Purchase Price") (the Call Right and the Put Right are referred
to together as the "Put/Call Options").
The Employment Agreement was modified by letter agreement dated October
19, 1998 (the "Letter Agreement"), between the Employee, the Company and the
LLC, pursuant to which the time for exercising the Put/Call Options was extended
until July 31, 1999.
The LLC and you, as the Employee, hereby agree as follows:
1. The LLC shall not exercise its Call Right and the Employee shall not
exercise his Put Right until January 1, 2001 (the "Termination Date").
2. In consideration of Employee entering into this letter agreement, the
LLC shall make advances to the Employee against the Purchase Price in the sum of
one hundred and fifty thousand dollars ($150,000) per year (the "Advance") for a
period of two years, commencing January 1, 1999. The Advance for calendar year
1999 shall be paid in a lump sum in January 1999 and the Advance for calendar
year 2000 shall be payable in equal installments during the first week of each
month. No later than January 15, 2001, the Employee shall repay to
<PAGE> 2
Walter J. Haybert
January 4, 1999
Page 2
the LLC all outstanding Advances plus accrued interest.
3. All outstanding Advances shall bear interest at a rate of 7.00% per
year, compounded annually.
4. The LLC shall have the right to offset against outstanding Advances
and accrued interest the amount of all cash distributions which otherwise would
have been made by the LLC to the Employee under this letter agreement other than
those amounts distributed to the Employee for payment of taxes due in respect of
his proportionate share of income generated by the LLC.
5. The Employee's Fully Vested Ownership Interest shall be held by the
LLC as collateral for the Advance, and the Employee may not assign, transfer,
pledge or otherwise encumber his interest in the LLC other than as permitted in
the LLC Agreement.
6. After the Termination Date, the Employee may exercise the Put Right
and the LLC may exercise the Call Right pursuant to the exercise terms described
in the Employment Agreement and the Employee's Fully Vested Ownership Interest
shall be acquired by the Company at the Purchase Price. Any Advances and accrued
interest remaining outstanding shall be offset against the Purchase Price and if
the Purchase Price is insufficient to cover such outstanding amounts, the
Employee shall remain liable to the Company for the difference. Nothing herein
shall limit the Employee's obligation to repay his outstanding loans and accrued
interest thereon due to the Company which shall also be offset against the
Purchase Price and the Employee shall remain liable to the Company for any
outstanding balance.
7. In the event that, prior to the Termination Date, the Employee's
Fully Vested Ownership Interest is purchased by the LLC or the Employee sells
his Fully Vested Ownership Interest to a third party under any circumstances
permitted by the LLC Agreement, including, without limitation, in connection
with any sale of the LLC to a third party or a public offering of interests in
the LLC, the proceeds from such purchase or sale which otherwise would have been
paid to the Employee shall be applied first towards repayment of all outstanding
Advances and Company loans and all interest accrued thereon.
Other than as set forth in this letter agreement, the Employment
Agreement and the Letter Agreement shall not be deemed to have been modified.
<PAGE> 3
Walter J. Haybert
January 4, 1999
Page 3
Please indicate your acknowledgment and agreement with the foregoing by
signing in the space indicated below.
Sincerely,
HORSESHOE GAMING, INC.
By: ____________________________________
Jack B. Binion
Chief Executive Officer and Chairman
HORSESHOE GAMING, L.L.C.
By: Horseshoe Gaming, Inc., Manager
By: ____________________________________
Jack B. Binion
Chief Executive Officer and Chairman
ACKNOWLEDGED AND ACCEPTED
this ____ day of January, 1999
______________________________
Mr. Walter J. Haybert
<PAGE> 1
EXHIBIT 10.21
MUTUAL GENERAL RELEASE
KNOW ALL MEN BY THESE PRESENTS, that Mr. Nobutaka Mutaguchi
("Mutaguchi") and any and all organizations and companies Mutaguchi is
affiliated with or has worked for and each of their respective past, present and
future subsidiaries, affiliates, officers, directors, employees, agents,
stockholders, partners, managers, representatives, members, heirs, executors,
administrators, successors and assigns (collectively referred to herein as the
"Mutaguchi Releasing Parties"), in consideration of the sum of One Million One
Hundred and Fifty Thousand Dollars ($1,150,000.00) (the "Horseshoe Payment"),
received by Mutaguchi from Horseshoe Gaming, L.L.C., a Delaware limited
liability company ("Horseshoe"), with its principal office at 4024 South
Industrial Road, Las Vegas, NV 80103, and this Mutual General Release executed
by Horseshoe, Horseshoe Gaming, Inc., a Nevada corporation ("HGI"), Horseshoe
GP, Inc., a Nevada corporation ("HGP"), Robinson Property Group, L.P., a
Mississippi limited partnership ("RPG"), New Gaming Capital Partnership, L.P., a
Nevada limited partnership ("NGCP"), Horseshoe Entertainment, L.P., a Louisiana
limited partnership ("HE") and Mr. Jack B. Binion ("Binion"), hereby releases
and forever discharges to the fullest extent permissible by law Horseshoe, HGI,
HGP, RPG, NGCP, HE, Binion and each of their respective past, present and future
subsidiaries, affiliates, officers, directors, employees, agents, stockholders,
partners, managers, representatives, members, heirs, executors, administrators,
successors and assigns, both individually and in their official capacities
(collectively referred to herein as "Horseshoe Released Parties"), from any and
all actions, causes of action, suits, debts, dues, sums of money, accounts,
reckonings, bonds, bills, specialties, covenants, complaints, charges,
commissions, contracts, controversies, agreements, promises, variances,
trespasses, damages, judgments, executions, liabilities, obligations, claims,
and demands whatsoever, at law, admiralty or in equity, whether known or
unknown, suspected or unsuspected, which the Mutaguchi Releasing Parties or the
Mutaguchi Releasing Parties' heirs, executors, administrators, successors and
assigns, ever had, may now have or hereafter can, shall or may have against the
Horseshoe Released Parties or any of them with respect to events, matters or
transactions occurring from the beginning of the world to the date of this
Mutual General Release (collectively "Horseshoe Released Claims"). Each of the
Mutaguchi Releasing Parties hereby agrees to indemnify and hold harmless each of
the Horseshoe Released Parties against any claim that a Mutaguchi Releasing
Party is owed any amounts by any of the Horseshoe Released Parties on account of
a Horseshoe Released Claim.
Horseshoe, HGI, HGP, RPG, NGCP, HE, Binion and each of their respective
past, present and future subsidiaries, affiliates, officers, directors,
employees, agents, stockholders, partners, managers, representatives, members,
heirs, executors, administrators, successors and assigns (collectively referred
to herein as the "Horseshoe Releasing Parties"), in consideration of the sum of
Ten Dollars ($10.00) (the "Mutaguchi Payment"), received by Horseshoe from
Mutaguchi and this Mutual General Release executed by Mutaguchi, hereby releases
and forever discharges to the fullest extent permissible by law, Mutaguchi and
any and all organizations and companies Mutaguchi is affiliated with or has
worked for and each of their respective past, present and future subsidiaries,
affiliates, officers, directors, employees, agents, stockholders, partners,
managers, representatives, members, heirs, executors, administrators, successors
and assigns (collectively
<PAGE> 2
referred to herein as "Mutaguchi Released Parties"), from any and all actions,
causes of action, suits, debts, dues, sums of money, accounts, reckonings,
bonds, bills, specialties, covenants, complaints, charges, commissions,
contracts, controversies, agreements, promises, variances, trespasses, damages,
judgments, executions, liabilities, obligations, claims, and demands whatsoever,
at law, admiralty or in equity, whether known or unknown, suspected or
unsuspected, which the Horseshoe Releasing Parties or the Horseshoe Releasing
Parties' heirs, executors, administrators, successors and assigns, ever had, may
now have or hereafter can, shall or may have against the Mutaguchi Released
Parties or any of them with respect to events, matters or transactions occurring
from the beginning of the world to the date of this Mutual General Release
(collectively "Mutaguchi Released Claims"). Each of the Horseshoe Releasing
Parties hereby agrees to indemnify and hold harmless each of the Mutaguchi
Released Parties against any claim that a Horseshoe Releasing Party is owed any
amounts by any of the Mutaguchi Released Parties on account of a Mutaguchi
Released Claim.
The Mutaguchi Releasing Parties and Horseshoe Releasing Parties
(collectively referred to herein as the "Releasing Parties") acknowledge that,
in executing this Mutual General Release, they are not relying on any
representations, warranties, assurances, statements, or other information of any
kind provided or made by any of the Released Parties or their counsel. The
Releasing Parties are aware that they are releasing claims as to which they may
be currently unaware and only later may come to learn, but are nevertheless
willing to enter into this Mutual General Release. It is the intention of the
Releasing Parties that, notwithstanding the possibility that the Releasing
Parties or their counsel discover or gain a more complete understanding of the
facts, events or law which, if presently known or fully understood, would have
affected this Mutual General Release, this Mutual General Release shall be
deemed to have fully, finally, and forever settled all Mutaguchi Released Claims
and Horseshoe Released Claims, and the Horseshoe Payment and the Mutaguchi
Payment represents payment in full, of all amounts due to the Mutaguchi
Releasing Parties and the Horseshoe Releasing Parties by the Horseshoe Released
Parties and the Mutaguchi Released Parties, respectively, without regard to the
existence or subsequent discovery of different or additional facts, events or
law.
The Releasing Parties hereby waive the provisions of Section 1542 of the
California Civil Code only to the extent it applies to the releases given by the
Releasing Parties in this Mutual General Release. Section 1542 of the California
Civil Code provides as follows:
A general release does not extend to claims which the creditor
does not know or suspect to exist in his favor at the time of
executing the release, which if known by him must have materially
affected his settlement with the debtor.
This Mutual General Release shall be governed by and construed in
accordance with the laws of the State of New York without regard to provisions
of conflicts of laws.
This Mutual General Release may not be changed orally.
2
<PAGE> 3
IN WITNESS WHEREOF, each of Mutaguchi, on behalf of all of the Mutaguchi
Releasing Parties, and the other persons signatory hereto, on behalf of all of
the Horseshoe Releasing Parties, have executed or caused this Mutual General
Release to be executed on the ____ day of February 1999.
________________________________________
Mr. Nobutaka Mutaguchi
________________________________________
Mr. Jack B. Binion
HORSESHOE GAMING, L.L.C.
By: Horseshoe Gaming, Inc., its Manager
________________________________________
Jack B. Binion
Chief Executive Officer and
Chairman of the Board
HORSESHOE GAMING, INC.
________________________________________
Jack B. Binion
Chief Executive Officer and
Chairman of the Board
HORSESHOE GP, INC.
________________________________________
Jack B. Binion
President
ROBINSON PROPERTY GROUP LIMITED
PARTNERSHIP
By: Horseshoe GP, Inc., its General
Partner
<PAGE> 4
________________________________________
Jack B. Binion
President
NEW GAMING CAPITAL PARTNERSHIP, L.P.
By: Horseshoe GP, Inc., its General
Partner
________________________________________
Jack B. Binion
President
HORSESHOE ENTERTAINMENT, L.P.
By: New Gaming Capital Partnership,
L.P., its General Partner
By: Horseshoe GP, Inc., its General
Partner
________________________________________
Jack B. Binion
President
<PAGE> 1
EXHIBIT 10.22
EXCLUSIVE LICENSE AGREEMENT
EXCLUSIVE LICENSE AGREEMENT dated as of July 2, 1998 (this
"Agreement"), by and between Horseshoe License Company, a Nevada corporation
("Licensor"), and Horseshoe Gaming, LLC, a Delaware limited liability company
("Licensee").
RECITALS
WHEREAS, Becky Binion Behnen ("Behnen") has commenced an action
in her individual capacity and styled in a derivative manner as a representative
of a purported class comprised of shareholders of Horseshoe Club Operating
Company (the "Company") other than Jack B. Binion ("Binion") (such shareholders
being Lonnie Ted Binion and Brenda Binion Michael) in the District Court of the
State of Nevada styled Becky Binion Behnen v. Jack B. Binion, Horseshoe Club
Operating Co.; Does I through X; and Roe Corporations I through X, inclusive,
Case No. A355289 (the "Action"), asserting certain claims arising out of
Binion's positions as President and director of the Company, and its largest
shareholder, including the claim of lost profits on other activities of Binion
in the gaming business, including, without limitation, the formation and
operation of Licensee;
WHEREAS, in order to resolve any and all matters in controversy,
disputes, claims and differences among Binion, Behnen and the Company (as well
as the other members of the purported class), without incurring the expense and
distraction of further litigation, Binion and Behnen have reached a full and
final compromise and settlement of any and all matters in controversy, disputes,
claims and differences between them, including, but not limited to, all claims
that have been asserted in the Action or that could have been asserted in the
Action; and
WHEREAS, as part of such settlement and compromise, the Company
has sold, conveyed, assigned, transferred and delivered to Licensor, an entity
controlled by Behnen, all of the Company's right, title and interest in the
trademarks, service marks and trade names and other proprietary interests more
fully described in the Intellectual Property Assignment Agreement dated as of
July 2, 1998, from and by the Company to the Licensor;
WHEREAS, Licensor owns certain rights in the Property (as defined
below) and as part of the compromise and settlement of all matters in
controversy, Licensor and Behnen desire to grant, and Licensee and Binion desire
to obtain, free and clear of any threat of litigation or loss of the goodwill
built up in its business, an exclusive, perpetual, irrevocable license for the
use of the Property in the Territory (as defined below).
NOW THEREFORE, in consideration of the foregoing premises and the
representations, warranties, covenants and agreements contained herein,
intending to be legally bound hereby, the parties hereto agree as follows:
<PAGE> 2
1. Exclusive License.
a. Grant. Licensor hereby grants to Licensee, and Licensee
accepts, an exclusive, irrevocable, fully paid license to use the Property (the
"License") in perpetuity (the "Term") within the Territory. Such uses shall
include, without limitation, use in connection with (i) the operation of and
services provided by hotels, clubs, restaurants and casinos located in the
Territory (the "Operations"), (ii) the advertising, publicity and promotion (in
any and all media and signage now known or hereafter devised) of the Operations
and (iii) the manufacturing, distribution, marketing, advertising, publicity,
promotion and sale of products under or referencing any of the names, logos, or
other items included within the Property (the uses described in (i) through
(iii) are referred to hereinafter as the "Permitted Uses"). Nothing herein
contained shall be construed as an assignment or grant to Licensee of any right,
title, or interest in or to the Property. All rights relating to the Property,
except for the License, are reserved by Licensor; provided, that it is expressly
understood that such reservation of rights permits Licensor to use (only in a
manner substantially similar to the Permitted Uses) the Property only within the
State of Nevada subject to Licensor's right to advertise within the Territory in
the same manner as set forth in Section 1(b) below (the "Reserved Rights").
For purposes of this Agreement, "Property" means any of
the following, whether presently existing or hereafter created (A) all
registered and unregistered trade names, trademarks, service marks, copyrights,
and rights under or related to copyrights of Licensor, including without
limitation, those listed on Schedule 1(a) hereto and derivatives thereof, but
excluding "World Championship of Poker," "The World Championship of Poker" and
"World Series of Poker;" (B) the Internet domain names of Licensor listed on
Schedule 1(a) hereto; (C) designs, patterns, colors, symbols, art work, logos,
indicia, trade names, corporate names, company names, business names, trade
dress, trade styles, and other source or business identifiers of the Licensor;
(D) all unpatented secret formulas or processes known to a limited number of
affiliates of Licensor who use such formulas or processes, to a competitive
advantage, with respect to business of the Licensor, including, without
limitation, odds making, player tracking systems and customer mailing lists (the
"Trade Secrets"); (E) all registrations and applications for registration that
have been or shall be made or applied for by the Licensor in the United States
Patent and Trademark Office or any such or similar office in any country in the
world and all recordings thereof and all reissues, extensions, or renewals
thereof, and (F) all common law and other rights therein which relate to the
business of the Licensor and including, without limitation, those listed in
Schedule 1(a) hereto. In addition, "Property" includes, without limitation, any
derivations or variations of any of the foregoing.
b. Territory. For purposes of this Agreement, "Territory" means
the universe, except for the State of Nevada; provided that in the event a
Permitted Use by the Licensee relating to advertising, publicity, promotion,
marketing or distribution shall occur within the State of Nevada (whether
through any on-line service, worldwide or other computer network (e.g., the
Internet), etc., or any other form of advertising, publicity, promotion,
marketing or distribution), each such use shall not be deemed a breach of this
Agreement and is expressly permitted.
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<PAGE> 3
c. Royalty. In addition to the compromise and settlement of any
and all matters in controversy, disputes, claims and differences among Binion,
Behnen and the Company, simultaneously with the execution of this Agreement,
Licensee shall pay to the Licensor a one-time license fee of $5,000, and, from
and after the date hereof, Licensee shall have a fully paid-up License to use
the Property as described above.
2. Covenants.
a. Compliance with Laws. Each party agrees to comply in all
material respects with the provisions of applicable law, including without
limitation, the notice provisions of the copyright and trademark law of the
United States and other jurisdictions in the Territory. Each party agrees to
place appropriate notice of any applicable trademark, service mark or copyright
with respect to the Property.
b. Ownership and Goodwill.
i. Each party recognizes the value of the goodwill
associated with the Property and acknowledges that all rights based upon or
derived from the Property, including all rights therein and goodwill pertaining
thereto, belong to Licensor, subject to the License, and that the Property has a
secondary meaning in the mind of the public associated with Licensor and, as
used subject to the License, with Licensee. Each party agrees that it will not,
during the Term, do or permit to be done any act that will invalidate, attack or
affect in any manner whatsoever Licensor's rights based upon or derived from the
Property as well as the goodwill associated therewith.
ii. Each party acknowledges that the name "Jack Binion,"
specifically, and any trade name, trademark, service mark, copyright (and rights
under or related to copyrights) and Internet domain name derivative thereof
which include the letter string "Jack Binion" (the "Jack Binion Mark") are not
included within the meaning of "Property" as such term is defined in this
Agreement. Each party recognizes the value of the goodwill associated with the
Jack Binion Mark and acknowledges that all rights based upon or derived from the
Jack Binion Mark, including all rights therein and goodwill pertaining thereto,
belong exclusively to Binion and that the Jack Binion Mark has a secondary
meaning in the mind of the public associated exclusively with Binion. Each party
agrees that it will not do or permit to be done any act that will invalidate,
attack or affect in any manner whatsoever Licensee's rights based upon or
derived from the Jack Binion Mark as well as the goodwill associated therewith.
iii. Each party recognizes and acknowledges that any
intellectual property developed by the Licensee or on its behalf
("Developments") that is not similar to, variations of or derivatives from the
Property, whether or not used in conjunction with any of the Property and/or the
Operations, shall belong exclusively to the Licensee (the "Licensee Property");
provided, however, that the Licensee shall only own the Developments and not the
Property. Licensor agrees that it will not do or permit to be done any act that
will invalidate, attack or affect any act in any
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<PAGE> 4
manner whatsoever Licensee's rights based upon or derived from the Licensee
Property as well as the goodwill associated therewith.
c. Quality. Each party agrees that it shall use, and shall
authorize the use of, the Property, with such style, appearance and quality as
to be adequate and suited for exploitation to the best advantage and to the
protection and enhancement of the Property and the goodwill pertaining thereto,
and that such uses shall in no manner reflect adversely upon the Property in
Licensor's sole discretion. Licensee shall submit to Licensor a sample of all
uses of the Property to approve the design and quality of such use of the
Property, which approval shall not be unreasonably withheld, conditioned or
delayed and which approval shall be (i) deemed given, and the submission of a
sample shall not be required, if the uses of the Property by the Licensee are
the same as or similar to (x) the Company's past or future practices, (y) the
Licensee's past practices, or (z) uses previously approved by the Licensor, or
(ii) evidenced by written notice executed by Licensor. Licensor's failure to
approve or disapprove any such sample by written notice within thirty (30) days
of receipt of such sample shall be deemed approval of such sample.
d. Advertising and Promotion. Each party agrees that it shall not
engage, participate or otherwise become involved in any activity or course of
action including, without limitation, advertising and promotion, that diminishes
and/or tarnishes the image and/or reputation of the Property in Licensor's sole
discretion.
e. Consultation. The parties agree to consult with each other
whenever either party reasonably deems it necessary regarding all new logos and
designs or any other substantive changes with respect to the Property, which
would materially adversely affect the rights, obligations and benefits of either
party to this Agreement.
f. Noninterference; No Encumbrances. Licensor agrees that it
shall not create, incur or suffer to exist any claim, lien, charge or
encumbrance upon the Property.
g. Cooperation. Each party agrees to cooperate with the other in
obtaining and enforcing copyright, service mark, trade name, trade dress and
trademark protection for the Property, including without limitation, in
connection with suits and claims for infringement of the Property.
h. No Conflicts. The Licensor shall not grant to any third party
a license relating to the Property within the Territory, or authorize or permit
any violation of the rights granted to the Licensee hereunder. The Licensor
shall not, under any circumstances, use or authorize the use of any of the
Reserved Rights within the Territory, or beyond the Permitted Uses.
i. Trade Secrets. Each Party shall not use, disclose or make
accessible the Trade Secrets to any third party, except that each party may
disclose the Trade Secrets only to its personnel and agents that have a need to
know the Trade Secrets. The Licensor shall fully disclose to Licensee any Trade
Secrets, whether now known or hereafter created.
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<PAGE> 5
3. Protection of the Property.
a. Enforcement of Property Rights. Each party agrees to assist
the other in protecting the intellectual property rights with respect to the
Property as follows:
i. Registration. Licensor agrees that it shall seek to
obtain and maintain, with counsel reasonably satisfactory to the Licensee, a
registration from the United States Patent and Trademark Office, the United
States Register of Copyrights, InterNIC, appropriate state agencies within the
United States, or any other comparable agencies in other jurisdictions outside
of the United States with respect to uses of the Property by either the Licensee
or Licensor or any modifications thereto or derivations thereof (the
"Registrations") and shall renew all such registrations, as required, maintain
notices of allowance and otherwise take all appropriate action relating to the
Registrations, including, without limitation, the filing of Statements of Use,
Requests for Extensions of Time to File Statements of Use, Affidavits of Use and
Affidavits of Incontestability. Licensee shall have the right to take all
necessary steps to obtain and maintain the Registrations and take all action
relating to such Registrations as described above where Licensor shall have
failed to do so in a manner satisfactory to Licensee. Except in the case of
Internet domain names, the party obtaining or maintaining any such Registration
shall bear the cost of obtaining and/or maintaining such Registration; however,
Licensor shall reimburse Licensee for half of its out-of-pocket costs and the
fees and expenses of counsel and other professionals incurred in obtaining and
maintaining any Registration on the Property and Licensor shall have the right
to seek reimbursement for its payment from Licensor's other exclusive licensee.
If Licensor fails to maintain the licensed domain names or register additional
domain names when requested to do so by Licensee, Licensee may, at its own
expense, maintain the licensed domain names and/or obtain additional domain
names which shall be registered to Licensor, but licensed only and exclusively
to Licensee. All Registrations shall be obtained and maintained in Licensor's
name. Each party shall furnish the other with copies of each registration
application filed and registration certificate so obtained, as well as copies of
all other papers relating to the Registration including, without limitation,
correspondence to and from government agencies and third parties contesting any
claim to the Property.
ii. Infringement. Licensor may commence or prosecute any
claims or suits with respect to any infringements or possible infringement of
the Property in its own name. If Licensor elects to prosecute any such claim or
suit, Licensor shall notify Licensee of such election and bear all costs and
expenses, including legal fees, incurred in connection with any such suits and
Licensee shall not institute any suit or take any action on account of any
infringements or possible infringements of the Property without first notifying
and consulting with Licensor. If Licensor elects not to prosecute any such claim
or suit within fourteen (14) days after the receipt of written notice of
Licensee requesting it to do so, then Licensee shall have the right to prosecute
any such infringement or possible infringement. If Licensee elects to do so,
costs and expenses, including legal fees, incurred in connection with any such
suits shall be borne by Licensee (subject to paragraph 4, to the extent
applicable). If either party institutes a suit for infringement pursuant to this
Agreement, the other party shall have the right to participate and represent its
interest through
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<PAGE> 6
other counsel of its own choosing and at its cost and expense, including legal
fees, incurred in connection with such participation.
iii. Remedies. In the event that either party obtains any
recovery as a result of any claims or suits commenced, prosecuted or settled,
the allocation of such recovery (net of the cost and expenses, including legal
fees, reasonably incurred in connection with any such suit or claim) shall be
allocated as follows: (i) in the event that either party bears all costs and
expenses, including legal fees, incurred in connection with any such claims or
suit, such party shall receive one hundred percent (100%) of any such recovery,
or (ii) in the event that the Licensor and Licensee each bear a portion of the
costs and expenses, including legal fees, incurred in connection with any such
claims or suits, then such recovery shall be allocated between the Licensor and
Licensee in proportion to costs and expenses so incurred.
b. Damages for Failure to Protect the Property. Neither party
shall have any rights against the other for damages or other remedy by reason of
failure to prosecute, or the settlement of, any alleged infringements by others
of the Property; provided, however, that neither party shall enter into a
settlement of any alleged infringements by others of the Property which in any
way may adversely effect the Property, the License, the Licensor's rights in the
Property or the Licensee's rights granted under the License.
c. Notice of Infringement. Each party agrees to notify the other
promptly in writing of any adverse use of the Property or other designation
similar to the Property of which such party is or becomes aware.
4. Indemnification.
a. Infringement. Licensor covenants and agrees to indemnify and
hold harmless, and to reimburse within thirty (30) days after demand, Licensee
and each subsidiary and affiliate or sub-licensee of Licensee and their
respective successors, assigns, members, partners, stockholders, directors,
officers, agents and employees against any and all liabilities, damages, costs
and expenses (including reasonable attorneys' fees) incident to, arising out of,
resulting from or incurred in connection with any claim that Licensee's use of
the Property in accordance with the terms of this Agreement infringes on the
rights of any third party.
b. Misrepresentation by Licensor. Licensor also agrees to
indemnify and hold harmless Licensee, its subsidiaries, sublicensees and their
respective officers, directors and employees from and against any and all
damages, costs and expenses (including reasonable attorney's fees) incurred by
any of them arising out of or in connection with (i) any misrepresentation or
inaccuracy of Licensor or any of its officers, directors or employees (the
"Licensor Affiliates"), whether contained in the representations and warranties
in this Agreement or otherwise communicated in writing to Licensee, (ii) any
breach of any covenant or agreement of the Licensor or the Licensor Affiliates
with the Licensee, whether contained in this Agreement or otherwise reduced by
writing, and (iii) any use of the Property by the Licensor during the Term.
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<PAGE> 7
5. Remedies Upon Breach.
a. Breach. In the event of any breach of this Agreement, the
party alleging such breach shall give written notice of the breach to the
breaching party and shall specify a reasonable period of time (not less than
ninety (90) days) within which the breaching party is to cure the breach.
b. Remedies. In the event that such breach has not been cured
within the specified period, (i) the exclusive remedies of the Licensor shall be
as follows: (x) in the event of a breach of (a) the quality control provisions
set forth in paragraph 2(c) or (b) the territorial use of the Property
provisions set forth in paragraph 1(b) by the Licensee, then the Licensor shall
have the right to obtain an injunction against the Licensee from any court
having jurisdiction over the matter restraining any further breach of such
quality control provisions or of such territorial use provisions with respect to
the particular service or product involved, the granting of which the Licensee
shall not oppose on the grounds that monetary damages are sufficient and (y) in
the event of any breach by the Licensee, the Licensor shall have the right to
seek and receive monetary damages for breach of contract from the breaching
party; provided, that it expressly agreed that in no event shall the Licensor
have the right to terminate or rescind this Agreement or obtain equitable
relief, except as expressly provided herein; and (ii) Licensee shall have the
right to pursue any remedies it may have in law or equity, including, without
limitation, the right to seek to obtain an injunction against the Licensor from
any court having jurisdiction over the matter restraining any further breach,
the granting of which the Licensor shall not oppose on the grounds that money
damages are sufficient.
c. No Termination of License. In no event shall the Licensor have
the right to terminate the License. Under no circumstances shall the Licensee
forfeit the right to use any of the "Property" or any of its other rights under
this Agreement nor shall the Licensor be relieved of any representations,
warranties, covenants or agreements, or limitations on its rights under this
Agreement.
6. Representations and Warranties of Licensee. Licensee hereby
represents and warrants as follows:
a. Organization; Authority; Enforceability. Licensee is a limited
liability company, duly organized, validly existing and in good standing under
the laws of the State of Delaware, and has all requisite power and authority to
enter into this Agreement and to consummate the transactions contemplated
hereby. This Agreement has been duly executed and delivered by Licensee, has
been duly authorized by all necessary limited liability company action, and
constitutes the legal, valid and binding obligation of Licensee enforceable in
accordance with its terms.
b. No Conflict or Breach. The execution and delivery of this
Agreement, the consummation of the transactions contemplated hereby, and the
fulfillment of the terms hereof, will not (i) constitute, with or without the
giving of notice or passage of time, or both, a breach of any of the terms or
provisions of, or a default under any agreement, indenture or other instrument
to which Licensee is a party or by which it or any of its property is bound,
(ii) cause, or give any person
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<PAGE> 8
grounds to cause, with or without the giving of notice or passage of time, or
both, the maturity of any material liability or obligation of Licensee to be
accelerated, increased or otherwise affected, or (iii) conflict with Licensee's
limited liability company operating agreement, or any judgment, decree, order or
award of any court, governmental body or arbitrator binding upon Licensee, or
any law, rule, or regulation applicable to it.
c. Approvals. No consent, action, approval or authorization
prescribed by any law, rule or regulation, or by any agreement to which Licensee
is a party, is required in order to permit the consummation of the transactions
contemplated by this Agreement.
d. No Legal Bar. Licensee is not prohibited by any order, writ,
injunction or decree from consummating the transactions contemplated by this
Agreement, and no action or proceeding is pending or, to the best of Licensee's
knowledge, threatened against Licensee which questions the validity of this
Agreement or any of the actions which the parties hereto have taken in
connection herewith or which it is contemplated they shall take in connection
herewith.
e. Finder. Licensee has taken no action and has not dealt with
any person in any manner which will result in any liability to Licensor to pay
any brokerage fees or commissions or finder's fees with respect to this
Agreement or the transactions contemplated hereby.
7. Licensor. Licensor represents and warrants as follows:
a. Organization and Authority. Licensor is a corporation, duly
organized, validly existing and in good standing under the laws of the State of
Nevada, and has all requisite corporate power and authority to enter into this
Agreement and to consummate the transactions contemplated hereby. This Agreement
has been duly executed and delivered by Licensor, has been duly authorized by
all necessary corporate action on the part of Licensor, and constitutes the
legal, valid and binding obligation of Licensor, enforceable in accordance with
their respective terms.
b. No Conflict or Breach. The execution and delivery of this
Agreement, the consummation of the transactions contemplated hereby and the
fulfillment of the terms hereof will not (i) constitute, with or without the
giving of notice or passage of time, or both, a breach of any of the terms or
provisions of, or a default under, any agreement, indenture or other instrument
to which Licensor is a party or by which Licensor or any of its property is
bound, (ii) cause, or give any person grounds to cause, with or without the
giving of notice or passage of time, or both, the maturity of any material
liability or obligation of Licensor to be accelerated, increased or otherwise
affected, or (iii) conflict with Licensor's Certificate of Incorporation or
By-Laws, or any judgment, decree, order or award of any court, governmental body
or arbitrator binding upon Licensor, or any law, rule or regulation applicable
to Licensor. To the Licensor's knowledge, there are no license agreements,
arrangements or understandings with respect to the Property other than this
Agreement, and the exclusive license agreement with the Company for the
territory of the State of Nevada, and Licensor has no obligation to grant a
License to or enter into an agreement, arrangement or understanding with any
third party with respect to the Property.
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<PAGE> 9
c. Approvals. No consent, action, approval or authorization
prescribed by any law, rule or regulation or any agreement to which Licensor is
a party is required in order to permit the consummation of the transactions
contemplated by this Agreement
d. No Legal Bar. Licensor is not prohibited by any order, writ,
injunction or decree from consummating the transactions contemplated by this
Agreement, and no action or proceeding is pending or, to the best of Licensor's
knowledge, threatened against Licensor which questions the validity of this
Agreement or any of the actions which the parties hereto have taken in
connection herewith, or which it is contemplated they shall take in connection
herewith. To the Licensor's knowledge, after due inquiry, there is no action or
proceeding relating to the Property, or any legal, administrative or other
proceeding that may adversely affect the License or the Property.
e. Finder. Licensor has not taken any action or dealt with any
person in any manner which will result in any liability to Licensee to pay any
brokerage fees or commissions or finder's fees with respect to this Agreement or
the transactions contemplated hereby or thereby. Licensee is not and shall not
be obligated to make any payments to Licensor or any third party, other than the
consideration recited therein, for its use or exploitation of the Property as
contemplated herein.
f. Solvency; Fraudulent Conveyance. The liabilities of the
Licensor do not exceed its assets. Immediately after giving effect to the
License pursuant to the terms of this Agreement, the Licensor will not (i) be
rendered insolvent, (ii) be left with unreasonably small capital with which to
engage its business or (iii) have incurred indebtedness beyond its ability to
pay such indebtedness as it matures. No transfer of property is being made and
no obligation is being incurred in connection with the transactions contemplated
by this Agreement with the intent to hinder, delay or defraud either present or
future creditors of the Licensor.
8. Miscellaneous.
a. No Waiver. No action taken by any party hereto shall be deemed
to constitute a waiver by such party of compliance with any covenant or
agreement contained in this Agreement; no course of dealing between the parties
hereto and no failure or delay on the part of any party hereto in exercising any
right, power, or privilege hereunder shall operate as a waiver thereof and no
single or partial exercise of any right, power or privilege shall preclude any
other or future exercise thereof or the exercise of any other right, power or
privilege.
b. Entire Agreement; Amendments. This Agreement along with the
Schedules hereto constitute the entire agreement, and supersedes all prior and
contemporaneous agreements and understandings, whether oral or written, between
the parties hereto with respect to the subject matter hereof. No modification,
amendment or waiver of any provision of this Agreement shall be effective unless
in writing and signed by the party or parties against whom enforcement thereof
is sought, and any such waiver or consent shall be effective only in the
specific instance and for the purpose for which given.
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<PAGE> 10
c. Assignment. The parties may assign the License or any of their
respective rights hereunder; provided, however, that any such assignment shall
not become effective until such time as (1) the assignee executes an instrument
binding it to the terms of this Agreement, (2) the assigning party provides
written notice of such assignment to the other party, and (3) in the event of an
assignment by the Licensor, the Licensor provides an opinion of counsel
(reasonably satisfactory to the other party) stating that any such assignment
includes all of the goodwill associated with the Property, that all of the
Property shall be assigned and that any such transaction shall not constitute an
"assignment in gross" or might otherwise adversely affect the Property or the
License.
d. Sublicense. Licensee may sublicense the License or any of its
rights hereunder in its sole discretion; provided, however, that any such
sublicense shall not become effective until such time as the sublicensee
executes an instrument with respect to the Property which shall include, without
limitation, quality control provisions substantially similar to those set forth
in paragraph 2(c) hereof; and the Licensee shall provide written notice of such
sublicense to the Licensor.
e. Power of Attorney. Licensor hereby makes, constitutes and
appoints Licensee its true and lawful attorney, in its name, place and stead, to
execute documents, and take actions on behalf of the Licensor for the limited
purpose of carrying out the terms and conditions of this Agreement, which permit
Licensee to act on behalf of Licensor.
f. Specific Performance; Jurisdiction. Licensor and Licensee each
acknowledge that the License is unique and that Licensor and/or Licensee may
have no adequate remedy at law for the failure by either of them to perform
their respective obligations hereunder. Accordingly, Licensor and Licensee each
agrees that, subject to the provisions of paragraphs 5(a) and 5(c), in the event
of any such failure, the non breaching party shall have the right to obtain an
injunction as set forth in paragraph 5(b). Further, Licensor and Licensee agree
that any action to enforce this Agreement may be brought in any court of
competent jurisdiction in the State of Nevada, and each party hereby consents to
personal jurisdiction in any such action and waives any right to contest such
jurisdiction on the grounds of forum non conveniens.
g. Notices. Any notice, demand, request, waiver, or other
communication under this Agreement shall be in writing (including facsimile or
similar writing) and shall be deemed to have been duly given (i) on the date of
service if personally served, (ii) on the third day after mailing if mailed to
the party to whom notice is to be given, by first class mail, registered, return
receipt requested, postage prepaid, or (iii) on the date sent if sent by
telecopier, to the parties at the following addresses or facsimile numbers (or
at such other address or facsimile number for a party as shall be specified by
like notice):
If to Licensor: Horseshoe License Company
Horseshoe Club Operating Company
128 East Fremont Street
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Las Vegas, Nevada 89101
Attn: Becky Binion Behnen
Fax: (702) 366-7342
with a copy to: Robert D. Faiss, Esq.
Lionel, Sawyer & Collins
300 South Fourth Street - Suite 1700
Las Vegas, Nevada 89101
Fax: (702) 383-8845
If to Licensee: Horseshoe Gaming, LLC
330 S. Fourth Street
Las Vegas, Nevada 89101
Attn: Jack B. Binion
Fax: (__) ______________
with a copy to: Martin Nussbaum, Esq.
Shereff, Friedman, Hoffman & Goodman, LLP
919 Third Avenue
New York, New York 10022
Fax: (212) 758-9526
h. Binding Effect. This Agreement shall be binding upon and shall
inure to the benefit of and be enforceable by the parties hereto and their
respective successors, assigns, heirs and legal representatives.
i. Severability. The invalidity of all or part of any paragraph
of this Agreement shall not render invalid the remainder of such paragraph or of
this Agreement. If any provision of this Agreement is so broad as to be
unenforceable, such provision shall be interpreted to be only so broad as is
enforceable.
j. Headings. The headings of this Agreement are for reference
purposes only and shall not affect the meaning or interpretation of this
Agreement.
k. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original and all of which
taken together shall be deemed to constitute a single instrument.
l. Choice of Law and Venue; Jury Trial Waiver. The validity of
this Agreement, its construction, interpretation, and enforcement, and the
rights of the parties hereto with respect to all matters arising hereunder or
related hereto shall be determined under, governed by, and construed in
accordance with the laws of the State of Nevada, without giving effect to its
conflict
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of laws principles. The parties agree that all actions or proceedings arising in
connection with this Agreement shall be tried and litigated only in the state
and federal courts located in the County of Clark, State of Nevada. The Licensor
and the Licensee waive, to the extent permitted under applicable law, any right
each may have to assert the doctrine of forum non conveniens or to object to
venue to the extent any proceeding is brought in accordance with this Section 1.
The Licensor and the Licensee waive their respective rights to a jury trial of
any claim or cause of action based upon or arising out of this Agreement or any
of the transactions contemplated therein, including contract claims, tort
claims, breach of duty claims, and all other common law or statutory claims. The
Licensor and the Licensee represent that each has reviewed this waiver and each
knowingly and voluntarily waives its jury trial rights following consultation
with legal counsel. Any and all service of process shall be effective against
any party if given personally or by registered or certified mail, return receipt
requested, or by any other means of mail that requires a signed receipt, postage
prepaid, mailed to such party as herein provided. Nothing herein contained shall
be deemed to affect the right of any party to serve process in any manner
permitted by law or to commence legal proceedings or otherwise proceed against
any other party in any other jurisdiction.
m. Franchise. The parties acknowledge and agree that this
Agreement is an intellectual property rights license agreement and does not
constitute, and shall not be construed as, a franchise agreement. The parties
further acknowledge and agree that state and federal franchise laws do not and
will not apply to this Agreement or to the relationship between Licensee and
Licensor and their respective rights and obligations hereunder.
n. Further Assurances. The parties hereto hereby agree to execute
and deliver any further instruments, certificates and documents as may be
reasonably requested from each such party by any of the parties hereto in order
to carry out the terms and conditions of this Agreement.
o. Construction. Neither party shall assert that the other is the
drafting party for purposes of interpretation of this Agreement.
12
<PAGE> 13
IN WITNESS WHEREOF, the parties hereto have executed and delivered, or have
caused this Agreement to be executed and delivered by their duly authorized
representative, as of the date first above written.
HORSESHOE LICENSE COMPANY
By: ____________________________________
Name:
Title:
HORSESHOE GAMING, LLC
By: Horseshoe Gaming, Inc.
By: ____________________________________
Name:
Title:
13
<PAGE> 14
Schedule 1(a)
PROPERTY
The term "Property" as used in this Agreement shall include the
following applications, registrations and Internet domain names:
Marks U.S. Registration Number Registration Date
1. "Try Our Brand of Fun" 1970151 04/23/96
2. "$1,000,000 Free Pull" 1997723 08/27/96
3. "Both Way Royals" 2039502 02/18/97
4. "Where Legends are Made 1978543 06/04/96
and Millions are
Paid"
5. "Gift Horse" 1943260 12/19/95
6. "Horseshoe" 1839688 06/14/94
7. "Horseshoe" 1839764 06/14/94
8. "H and Design" 2141139 03/03/98
Marks U.S. Application Number Filing Date
1. "Double Pay Jackpots" 75/259758 03/18/97
2. "Where Millions are 75/022418 11/20/95
Played and Legends
are Made"
3. "The Value's in the Game" 75/316680 06/25/97
4. "Where Winners Belong!" 75/398989 12/02/97
Nevada
Marks Registration Number Filing Date
1. "Bothway Royals" 28616 11/08/95
2. "Where Legends Are Made 28614 11/08/95
<PAGE> 15
and
Millions Are Paid"
3. "Where Millions Are 28615 11/08/95
Played and Legends
Are Made"
4. "$1,000,000 Free Pull" 28613 11/08/95
5. "Binion's Horseshoe Your 28650 11/21/95
Best Place to Win"
6. "Double Pay Jackpots" 30576 01/12/98
7. "The Value's in the Game" -- --
Louisiana
Marks Registration Number Registration Date
1. "Horseshoe Winners Circle" 941461133 06/27/94
2. "Horseshoe Winners Circle" 941461137 06/27/94
3. "Horseshoe Winners Circle" 941461134 06/27/94
4. "Horseshoe Winners Circle" 941461136 06/27/94
5. "Gift Horse" 941461103 06/27/94
6. "$1,000,000 Free Pull" -- 08/28/95
Louisiana
Marks Application Number Filing Date
1. "Gift Horse" 941461104 05/26/94
2. "Gift Horse" 941481101 05/26/94
Marks for which no federal or state applications or registrations have been
made:
2
<PAGE> 16
1 "Horseshoe Hotel and Casino"
2 "Horseshoe Club"
3 "Horseshoe Hotel"
4 "Horseshoe Casino"
Internet domain names:
1 horsehoe.com
2 horseshoe.net
3 horseshoecasinos.com
<PAGE> 1
EXHIBIT 10.23
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
AMENDED AND RESTATED EMPLOYMENT AGREEMENT (this "Employment Agreement")
entered into as of the twenty-third day of November, 1998, by and between
Horseshoe Gaming, Inc., a Nevada Corporation ("Employer"), and Gary Border
("Employee").
RECITALS
WHEREAS, Employer is the Manager of Horseshoe Gaming, LLC, a Delaware
limited liability company (the "LLC"), whose subsidiaries and affiliates have
developed and are currently operating casino and hotel facilities in Tunica,
Mississippi (the "Tunica Facility"), and in Bossier City, Louisiana (the
"Bossier City Facility" and, together with the Tunica Facility, referred to as
the "Existing Facilities"), and who is party to an agreement to acquire
additional casino and hotel facilities in Hammond, Indiana (the "Hammond
Facility") and Joliet, Illinois (the "Joliet Facility" and, together with the
Hammond Facility referred to as the "To Be Acquired Facilities");
WHEREAS, Employer and Employee are parties to an Employment Agreement
dated as of July 1, 1996, (the "Original Employment Agreement") which is due to
expire on June 30, 1999;
WHEREAS, Employer desires to employ Employee, and Employee desires to
accept such employment, pursuant to the terms of this Employment Agreement, and
in furtherance of such desire Employer and Employee wish to amend and restate
the Original Employment Agreement; and
WHEREAS, Employee is the owner of certain interests in Employer (the
"Vested Member Interests"), certain of such interests fully vesting January 1,
1999 pursuant to the terms of the Original Employment Agreement (the "Unvested
Member Interest," together with the Vested Member Interest, referred herein as
the "Member Interest").
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
Employment Agreement and not specifically defined herein shall have the meaning
set forth on Exhibit A, which is attached hereto and by this reference made a
part hereof.
2. Term. This Employment Agreement shall become effective on the date
first above written (the "Commencement Date") and shall continue in effect for a
period terminating December 1, 2002, 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 Senior Vice President-Marketing for
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 President and Executive Financial Officer of
<PAGE> 2
Employer (the "Supervisor") or such other executive of Employer as directed by
Employer.
4. Duties and Responsibilities.
A. General Duties. In his capacity as Senior Vice President of
Employer, Employee shall have the responsibility for overseeing the development
and execution of the marketing strategy for Employer, the Existing Facilities
and the To Be Acquired Facilities, if acquired, and assisting in the opening of
any casino and hotel facilities to be developed and/or acquired by subsidiaries
or affiliates of the LLC (together with the Existing Facilities and the To Be
Acquired Facilities referred to individually as a "Facility" and collectively as
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
all 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
Supervisor or the Board of Directors of Employer (the "Board").
B. Specific Duties. Employee shall have responsibility for
supervising and directing the day-to-day activities and affairs of the marketing
departments of the Employer, as well as the Facilities. In connection therewith,
Employee shall develop and submit to the Supervisor marketing strategies,
creative strategies, planning and support for all national local markets and
shall provide all database marketing and direct marketing services for Employer
in all of its markets. In addition, Employee shall assist the general managers
of the various properties owned by subsidiaries or affiliates of Employer in
marketing management, including, without limitation, recommending appropriate
marketing staffing. 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 marketing, 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. Employer
maintains, along with the General Managers of each Facility, the power to
approve and bind each Facility with regard to the selection of marketing staff
members, compendium changes, performance reviews, contracts and expenditures in
amounts over $10,000 and maintains a dotted line reporting relationship with
property marketing department heads.
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 Employer. In no event
whatsoever shall Employee enter into any commitments or obligations, written or
verbal, or take or omit to take any other action, the result of which would be
to create a conflict of interest between Employer and Employee, or the result of
which would (directly or indirectly) benefit Employee, or any person associated
with or affiliated with Employee, or in any manner involved in the gaming
industry to the detriment of Employer. In all instances, Employee shall perform
his services and oversee his department in a thorough, competent,
<PAGE> 3
efficient and professional manner. Employer understands and agrees that the use
of Marketing Results Inc. does not constitute a conflict of interest with
employment of Employee. Employee understands that Audits may be requested as
desired when directed by the President and CEO.
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 agrees that he
will not, during the term hereof, enter into (directly or indirectly) any other
business activities or ventures, other than investments which are passive in
nature provided no such investment may exceed 5% of the equity securities of any
entity without the prior approval of the Board.
E. Directives from the Supervisor. In all instances, Employee
agrees to carry out all of his duties and responsibilities as set forth herein
pursuant to the guidance, directives and instructions of the Supervisor and
agrees that at all times his authority shall be subordinate to such Supervisor.
The wishes and directives of the Supervisor shall prevail in all matters and
decisions as to which there is a disagreement between Employee and the
Supervisor, and Employee shall carry out any and all lawful directives from the
Supervisor to the best of his ability.
5. Compensation. As compensation for the services to be rendered by
Employee pursuant to the terms of this Employment Agreement, Employee shall be
entitled to receive the following:
A. a base salary of Three Hundred Fifty Thousand Dollars
($350,000) per year, which may be adjusted annually by a merit increase based
upon Employer's existing policy and an annual performance appraisal of Employee
and Employer and the LLC (the "Base Compensation"), payable in equal
semi-monthly installments;
B. a discretionary bonus in an amount determined in accordance
with Employer's bonus plan (the "Bonus"), which shall not exceed 50% of
Employee's Base Compensation at the time such Bonus is awarded;
C. a one-time signing bonus of One-Hundred Thousand Dollars
($100,000) payable to Employee no later than ten (10) business days following
the execution of this Employment Agreement (the "Signing Bonus"). In the event
Employee terminates his employment with Employer at any time prior to twelve
(12) months from the date of execution of this Employment Agreement, employee
agrees to repay a fraction of the Signing Bonus, the denominator of which is 12
and the numerator of which is equal to the number of months of the 12 month
period remaining upon termination of Employee's employment with Employer.
D. the right to participate in any employee stock option or stock
purchase plan that may be adopted by Employer for
3
<PAGE> 4
its executive level employees and the executive level employees of its gaming
subsidiaries (and possibly for executive level employees of other gaming
operations principally owned or controlled by Jack B. Binion), such
participation to be at a level commensurate with that of other executives
performing similar duties and at a similar compensation level as that of
Employee.
6. Fringe Benefits. 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:
A. reimbursement, on an on-going basis, for all reasonable
entertainment, traveling and other similar expenses incurred in the performance
of his duties and responsibilities hereunder and all reasonable expenses
incurred in commuting to and from Employer, such expenses to be subject to
budgets established for such purpose and the Employer's reimbursement
procedures;
B. participation in Employer's health coverage plan for Employee
and all members of his immediate family, with such plan and the terms of
Employee's participation in such plan to be on terms and conditions determined
solely by Employer; and
C. participation in such pension plans as Employer shall adopt
for all of the employees of Employer; it being understood and agreed that the
only pension plan that Employer has adopted at this time is a Section 401(k)
form of pension plan; and
D. occasional use of a company vehicle as and when needed in
connection with the performance of Employee's duties and responsibilities; and
E. participation in Employer's "Paid Days Off/Vacation" policy.
F. Employee may maintain his residence in Las Vegas, Nevada for
the term of this Employment Agreement.
7. Gaming License. Employer and Employee understand that it may be
necessary for Employee to maintain in full force and effect at all times, gaming
licenses required by various jurisdictions in which subsidiaries or affiliates
of the LLC are conducting gaming operations for persons serving in a similar
capacity as Employee. Accordingly, during the course of his employment, Employee
agrees to use his best efforts to obtain and maintain such licenses, to fully
cooperate in the investigation or investigations to be conducted in connection
therewith and otherwise to fully comply with all requirements of applicable
Gaming Authorities and Governmental Authorities.
4
<PAGE> 5
8. Termination
1. Termination With Cause. Employer may terminate Employee for
"cause" as provided in this Section 8. For purposes of this Employment Agreement
"cause" means the occurrence of one or more of the following events:
i. the revocation, suspension or failure to renew for a
period in excess of ninety (90) days, of any such gaming license due to an act
or omission of Employee (or such alleged act or omission) upon which the Gaming
Authorities or Governmental Authorities have based their determination to
revoke, suspend or fail to renew any gaming license;
ii. failure or refusal by Employee to observe or perform
any of the material provisions of this Employment 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 Employment Agreement or
any other written agreement with Employer;
iii. commission of fraud, misappropriation, embezzlement
or other acts of dishonesty, or conviction for any crime punishable as a felony
or a gross misdemeanor involving dishonesty or moral turpitude or the use of
illegal drugs while on duty for Employer or on premises of any Facility;
iv. unreasonable refusal or failure to comply with the
proper and lawful directives of and/or procedures established by the CEO or the
Board of Directors of Employer (or persons of comparable or senior position);
and/or
v. the death of Employee or the mental or physical
disability of Employee to such a degree that Employee, in the reasonable
judgment of a licensed physician retained by Employer, is unable to carry out
all of his obligations, duties and responsibilities set forth herein for a
period in excess of sixty (60) days.
Termination of Employee's employment for cause under
Subsections 8(A)(i), 8(A)(iii) or 8(A)(v) above shall be effective upon notice
thereof by Employer to Employee. Termination of Employee's employment for cause
under Subsections 8(A)(ii) or 8(A)(iv) above shall be effective upon fourteen
(14) days' prior notice thereof by Employer to Employee. The factual basis for
termination for cause shall be included within any such notice of termination.
B. Termination Without Cause. Employer in its discretion may
terminate Employee at any time without cause.
9. Consequences of Termination or Resignation. Upon termination of
Employee's employment with Employer (i) by Employer with or without cause (ii)
upon the resignation of Employee or (iii) upon the expiration of the term of
this Employment Agreement, the following shall apply:
5
<PAGE> 6
A. Employee shall be paid his Base Compensation through the
effective date of such termination or resignation; and
B. If Employee is terminated by Employer without cause, Employee
shall continue to receive the Base Compensation for a period of six (6) months
(payable as provided in Subsection 5(A)).
C. the covenants not to compete, solicit or hire and the
confidentiality agreements set forth in Sections 10 and 11 herein below shall
apply in the manner and to the extent set forth herein.
10. Covenants Not to Compete, Solicit or Hire.
A. Covenant Not to Compete. During the term of this Employment
Agreement and for a period of six (6) months from and after the date of
termination of Employee's employment with employer by Employer with or without
cause, upon the resignation of Employee or upon the expiration of the term of
this Employment Agreement, Employee agrees that he will not directly or
indirectly, either as principal, manager, agent, consultant, officer, director,
stockholder, partner, investor, lender or employee, or in any other capacity,
carry on, be engaged in or employed by or be a consultant to or to have any
financial interest in any other casino operation conducting business within one
hundred (100) miles of any gaming facility principally owned or controlled by
Jack B. Binion except for any Facility located in Las Vegas, Reno, Lake Tahoe or
Atlantic City.
B. Covenant Not to Solicit or Hire. During the term of this
Employment Agreement and for a period of one (1) year from and after the date of
termination of Employee's employment with Employer by Employer with or without
cause, upon the resignation of Employee or upon the expiration of the term of
this Employment Agreement, Employee agrees that he will not, directly or
indirectly, hire, retain or solicit, or cause any other employer of his or any
other person who has retained Employee as a consultant or independent contractor
to hire, retain or solicit, as an employee, consultant, independent contractor
in a supervisory capacity or otherwise any person who was at any time during the
period commencing on the date three (3) months prior to the Commencement Date
and ending on the date of the termination of Employee's employment hereunder, an
employee of or consultant or independent contractor in a supervisory capacity to
Employer, the LLC or any other gaming operations principally owned or controlled
by Jack B. Binion.
C. Acknowledgment. Employee acknowledges that he has carefully
considered the nature and extent of the restrictions imposed upon him and the
rights and remedies conferred upon Employer under this Section 10, and Employee
further acknowledges that the same are reasonable in time and scope are fully
required to protect the legitimate interests of Employer and do not confer
6
<PAGE> 7
a benefit upon Employer disproportionate to any detriment to Employee.
11. Nondisclosure of Confidential Information.
A. Definition of Confidential Information. For purposes of this
Employment 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. 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 following the termination
of this Employment Agreement, 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 pursuant to this
Employment Agreement.
C. Scope. Employee's covenant in Subsection 11(B) above not to
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
relating in any way to the business of Employer which are conceived or generated
by Employee or come into Employee's possession during the employment period
shall be and remain the exclusive property of Employer, and Employee agrees to
return immediately to Employer, upon its 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 which relate in anyway to the
business, customers, products, practices or techniques of Employer, as well as
all other property of Employer, including but not limited to, all documents
which in whole or in part contain any Confidential Information of Employer which
in any of these cases are in Employee's possession or under Employee's control.
7
<PAGE> 8
E. Compelled Disclosure. In the event 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. In the event that Employer refuses to contest such a
third party disclosure demand under judicial or administrative process, or a
final judicial judgment is issued compelling Employee to disclose Confidential
Information, Employee shall be entitled to disclose such information in
compliance with the terms of such administrative or judicial process or order.
12. Put Option.
A. Employer grants the right, exercisable in the discretion of
Employee by delivery of written notice to Employer, to require Employer to
purchase the Member Interest (the "Put Option") as provided in this Section 12.
B. Employee grants Employer the right, within thirty (30) days of
the termination of Employee's employment with Employer with or without cause or
upon the resignation of Employee or expiration of the term of this Employment
Agreement, to purchase the entire Membership Interest (the "Call Option") as
provided in this Section 12.
C. In the event that Employee notifies Employer of his exercise
of the Put Option pursuant to Subsection 12(A) above or Employer notifies
Employee of its exercise of the Call Option pursuant to Subsection 12(B) above,
the purchase of price payable by Employer therefor (the "Purchase Price") shall
equal the current fair market value thereof. For such purposes, the fair market
value of the Member Interest shall be determined by reference to the value of
Horeshoe as calculated for purposes of Horseshoe's stock option plan for the
calculation period under th stock option plan immediately preceding the
notification of the exercise of either of the Put or Call Options.
D. Employer shall pay the Purchase Price in three (3) equal
principal installments, with the first payment being due on the first
anniversary of the date that is thirty (30) days after the date upon which
notice was delivered as to the exercise of either of the Put or Call Options.
Such obligations 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.
E. Notwithstanding any other provisions hereof to the contrary,
the Put Option shall terminate and be of no further force and effect at such
time as any class of equity securities of Horseshoe are registered pursuant to
the Securities Exchange Act of 1934, as amended.
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<PAGE> 9
13. Representations and Warranties.
Employee hereby represents and warrants to Employer that:
A. the execution, delivery and performance by Employee of this
Employment Agreement will not conflict with, violate the terms of or create a
default under any other agreement by which Employee is bound, including without
limitation Employee's present employment or similar agreements, whether oral or
written;
B. no Gaming Authority or other Governmental Authority has ever
denied or otherwise declined to issue any gaming license or related
authorization applied for by Employee;
C. Employee is not aware of any facts which, if known to any
Gaming Authority or other Governmental Authority, would cause the refusal of his
application for, or renewal of, any gaming licenses required to be obtained by
Employee pursuant to Section 7;
D. Employee is not aware of any mental, physical or emotional
condition 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;
E. Employee understands and agrees that Employer is entering into
this Employment Agreement in strict reliance upon the representations and
warranties of Employee set forth herein, and that a breach of any of said
representations and warranties by Employee would constitute a default hereunder;
and
F. Employee has received and reviewed Employer's "Paid Days
Off/Vacation" policy and understands its terms.
14. Entire Agreement. This Employment 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 with respect to the employment of Employee.
15. All Amendments in Writing. This Employment Agreement may not be
amended orally, but only pursuant to a written instrument executed by Employer
and Employee and it shall not be reasonable for either Employer or Employee to
rely on any oral statements or representations by the other party that are in
conflict with the terms of this Employment Agreement.
16. Arbitration. In the event of any dispute or controversy between
Employer and Employee with respect to any of the matters set forth herein, both
Employer and Employee agree to submit such dispute or controversy 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
9
<PAGE> 10
any award made in such proceeding, to recover all of its costs and expenses
incurred in connection therewith, including, without limitation, attorneys'
fees. This provision does not in any way affect Section 24 of this Employment
Agreement.
17. Laws. This Employment Agreement shall be governed and construed in
accordance with the internal laws of the State of Nevada.
18. Notices. Any notice required or permitted to be given in connection
with this Employment 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, NV 89101
Attn: Jack B. Binion
If to Employee: Mr. Gary Border
6293 S. Industrial, Unit C
Las Vegas, Nevada 89118
19. Assignment. This Employment 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 Employment Agreement is a
personal services agreement, and that Employer is entering into this Employment
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.
20. No Third Party Beneficiaries. This Employment Agreement is solely
for the benefit of Employer and Employee, and in no event shall any other person
or entity by deemed or construed as a third party beneficiary of any of the
provisions or conditions set forth herein.
21. Waiver. No waiver of any term, condition or covenant of this
Employment 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 Employment
Agreement shall be interpreted in such manner as to be effective or valid under
applicable law, but if any provision of
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<PAGE> 11
this Employment 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 Employment Agreement. Without limiting the
generality of the foregoing, if any court determines that the term or the
business or geographic scope of the covenants contained in Subsections 10(A) or
10(B) is impermissible due to the extent thereof, said covenant shall be
modified to reduce its term, business or geographic scope, as the case may be,
to the extent necessary to make such covenant valid, and said covenant shall be
enforced as modified.
23. Withholding. Employer shall withhold from any payments due to
Employee hereunder, all taxes, FICA or other amounts required to be withheld
pursuant to any applicable law.
24. Injunctive Relief. Employee and Employer each acknowledge that the
provisions of Sections 10 and 11 are reasonable and necessary, that the damages
that would be suffered as a result of a breach or threatened breach by Employee
of Sections 10 and/or 11 may not be calculable, and that the award of a money
judgment to Employer for such a breach or threatened breach thereof by Employee
would be an inadequate remedy. Consequently, Employee agrees that in addition to
any other remedy to which Employer may be entitled in law or in equity, the
provisions of Sections 10 and 11 may be enforced by Employer by injunctive or
other equitable relief, including a temporary and/or permanent injunction
(without proving a breach therefor), and Employer shall not be obligated to post
bond or other security in seeking such relief. Employee hereby waives any and
all objections he may have and consents to the jurisdiction of any state or
federal court located in the State of Nevada or Mississippi and hereby waives
any and all objections to venue.
25. Counterparts. This Employment Agreement may be executed in any
number of counterparts, each of which shall be deemed an original but all of
which together shall constitute a single instrument.
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IN WITNESS WHEREOF, the undersigned have executed this Employment
Agreement as of the day and year first above written.
"EMPLOYER" HORSESHOE GAMING, INC.
a Nevada Corporation
By: ___________________________________
Jack B. Binion, Chief Executive
Officer
"EMPLOYEE" ________________________________________
Gary Border
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<PAGE> 13
EXHIBIT A
DEFINITIONS
All capitalized terms referenced or used in this Employment Agreement
and not specifically defined therein shall have the meaning set forth below in
this Exhibit A, which is attached to and made a part of this Employment
Agreement for all purposes.
Gaming Authorities. The term "Gaming Authorities" shall mean all
agencies, authorities and instrumentalities of any state, nation (including
Native American nations) or other governmental entity or any subdivision
thereof, regulating gaming or related activities in the United States or any
state or political subdivision thereof, including, without limitation, the
Mississippi and Louisiana Gaming Commissions.
Governmental Authority. The term "Governmental Authority" means the
governments of (i) the United States of America, (ii)the State of Mississippi,
(iii) Tunica County, (iv) the State of Louisiana, (v) Bossier City, Louisiana
and (vi) any other political subdivision of any state of the United States in
which a casino Facility is located, and any court or political subdivision,
agency, commission, board or instrumentality or officer thereof, whether
federal, state or local, having or exercising jurisdiction over Employer or a
Facility, and including, without limitation, any Gaming Authority.
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 a Facility
including, without limitation, all required permits, approvals and any rules,
guidelines or restrictions created or imposed by any Governmental Authority
(including, without limitation, any Gaming Authority).
<PAGE> 1
EXHIBIT 10.24
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
AMENDED AND RESTATED EMPLOYMENT AGREEMENT (this "Employment Agreement")
entered into as of the twenty-third day of November, 1998, by and between
Horseshoe Gaming, Inc., a Nevada Corporation ("Employer"), and Larry Lepinski
("Employee").
RECITALS
WHEREAS, Employer is the Manager of Horseshoe Gaming, LLC, a Delaware
limited liability company (the "LLC"), whose subsidiaries and affiliates have
developed and are currently operating casino and hotel facilities in Tunica,
Mississippi (the "Tunica Facility"), and in Bossier City, Louisiana (the
"Bossier City Facility" and, together with the Tunica Facility, referred to as
the "Existing Facilities"), and who is party to an agreement to acquire
additional casino and hotel facilities in Hammond, Indiana (the "Hammond
Facility") and Joliet, Illinois (the "Joliet Facility" and, together with the
Hammond Facility referred to as the "To Be Acquired Facilities");
WHEREAS, Employer and Employee are parties to an employment agreement
dated as of October 1, 1995, (the "Original Employment Agreement) which is due
to expire September 30, 1998; and
WHEREAS, Employer desires to continue to employ Employee, and Employee
desires to continue to accept such employment, pursuant to the terms of this
Employment Agreement, and in furtherance of such desire Employer and Employee
wish to amend and restate the Original Employment Agreement; and
WHEREAS, Employee is the owner of a certain member interest in Horseshoe
Gaming, L.L.C. ("Horseshoe"), a limited liability company organized under the
laws of the state of Delaware, such member interest being vested pursuant to the
terms of the Original Employment 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
Employment Agreement and not specifically defined herein shall have the meaning
set forth on Exhibit A, which is attached hereto and by this reference made a
part hereof.
2. Term. This Employment Agreement shall become effective on the date
first above written (the "Commencement Date") and shall continue in effect for a
period terminating December 1, 2002, 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 Senior Vice President and General Manager
of the Bossier Facility, 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 Operating Officer of
Employer (the "Supervisor").
4. Duties and Responsibilities.
A. Duties. In his capacity as Senior Vice President an General
Manager of the Bossier Facility, Employee shall perform in accordance with all
applicable laws and regulations, such duties as may be assigned to him from time
to time by the Supervisor. The authority of Employee to bind Employer shall be
as broad or as limited as may be determined from time to time by the Supervisor
or the Board of Directors of Employer (the "Board").
B. 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 Bossier Facility. In
no event whatsoever shall Employee enter into any commitments or obligations,
written or verbal, or take or omit to take any other action, the result of which
would be to create a conflict of interest between Employer and Employee, or the
result of which would directly or indirectly benefit Employee, or any person
associated with or affiliated with Employee, or in any manner involved in the
gaming industry to the detriment of Employer. In all instances, Employee shall
perform his services and oversee his department in a thorough, competent,
efficient and professional manner.
C. 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 agrees that he
will not, during the term hereof, enter into (directly or indirectly) any other
business activities or ventures, other than investments which are passive in
nature provided no such investment may exceed 5% of the equity securities of any
entity without the prior approval of Employer.
D. Directives from the Supervisor. In all instances, Employee
agrees to carry out all of his duties and responsibilities as set forth herein
pursuant to the guidance, directives and instructions of the Supervisor and
agrees that at all times his authority shall be subordinate to such Supervisor.
The wishes and directives of the Supervisor shall prevail in all matters and
decisions as to which there is a disagreement between Employee and the
Supervisor, and Employee shall carry out any and all lawful directives from the
Supervisor to the best of his ability.
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<PAGE> 3
5. Compensation. As compensation for the services to be rendered by
Employee pursuant to the terms of this Employment Agreement, Employee shall be
entitled to receive the following:
A. a base salary of Two-Hundred Eight Thousand Dollars ($208,000)
per year, which may be adjusted annually by a merit increase based upon
Employer's existing policy and an annual performance appraisal of Employee (the
"Base Compensation"), payable in equal semi-monthly installments;
B. a discretionary bonus in an amount determined in accordance
with Employer's bonus plan (the "Bonus"), which shall not exceed 50% of
Employee's Base Compensation at the time the Bonus is awarded;
C. a one-time signing bonus of Eighteen Thousand Dollars
($18,000) payable to Employee no later than ten (10) business days following the
execution of this Employment Agreement (the "Signing Bonus"). In the event
Employee terminates his employment with Employer at any time prior to twelve
(12) months from the date of execution of this Employment Agreement, employee
agrees to repay a fraction of the Signing Bonus, the denominator of which is 12
and the numerator of which is equal to the number of months of the 12 month
period remaining upon termination of Employee's employment with Employer; and
D. the right to participate in any employee stock option or stock
purchase plan that may be adopted by Employer for its executive level employees
and the executive level employees of its gaming subsidiaries (and possibly for
executive level employees of other gaming operations principally owned or
controlled by Jack B. Binion), such participation to be at a level commensurate
with that of other executives performing similar duties and at a similar
compensation level as that of Employee.
6. Fringe Benefits. 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:
A. reimbursement, on an on-going basis, for 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 and the Employer's reimbursement
procedures;
B. participation in Employer's health coverage plan for Employee
and all members of his immediate family, with such plan and the terms of
Employee's participation in such plan to be on terms and conditions determined
solely by Employer; and
C. participation in such pension plans as Employer shall adopt
for all of the employees of the Bossier Facility; it being understood and agreed
that the only pension plan that
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<PAGE> 4
Employer has adopted at this time is a Section 401(k) form of pension plan; and
D. participation in Employer's "Paid Days Off/Vacation" policy.
7. Gaming License. Employer and Employee understand that it may be
necessary for Employee to maintain in full force and effect at all times, a
Louisiana gaming license required for persons serving in a similar capacity as
Employee. Accordingly, during the course of his employment, Employee agrees to
maintain such license and otherwise to fully comply with all requirements of
applicable Gaming Authorities and Governmental Authorities.
8. Termination.
1. Termination With Cause. Employer may terminate Employee for
"cause" as provided in this Section 8. For purposes of this Employment Agreement
"cause" means the occurrence of one or more of the following events:
i. the revocation, suspension or failure to renew for a
period in excess of ninety (90) days, of any such gaming license due to an act
or omission of Employee (or such alleged act or omission) upon which the Gaming
Authorities or Governmental Authorities have based their determination to
revoke, suspend or fail to renew any gaming license;
ii. failure or refusal by Employee to observe or perform
any of the material provisions of this Employment 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 Employment Agreement or
any other written agreement with Employer;
iii. commission of fraud, misappropriation, embezzlement
or other acts of dishonesty, or conviction for any crime punishable as a felony
or a gross misdemeanor involving dishonesty or moral turpitude or the use of
illegal drugs while on duty for Employer or on premises of the Bossier facility
or any other facility of Employer;
iv. unreasonable refusal or failure to comply with the
proper and lawful directives of and/or procedures established by the Supervisor
or the Board (or persons of comparable position); and/or
v. the death of Employee or the mental or physical
disability of Employee to such a degree that Employee, in the reasonable
judgment of a licensed physician retained by Employer, is unable to carry out
all of his obligations, duties and
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<PAGE> 5
responsibilities set forth herein for a period in excess of sixty (60) days.
B. Termination of Employee's employment for cause under
Subsections 8(A)(i), 8(A)(iii) or 8(A)(v) above shall be effective upon notice
thereof by Employer to Employee. Termination of Employee's employment for cause
under Subsections 8(A)(ii) or 8(A)(iv) above shall be effective upon fourteen
(14) days' prior notice thereof by Employer to Employee. The factual basis for
termination for cause shall be included within any such notice of termination.
C. Termination Without Cause. Employer in its discretion may
terminate Employee at any time without cause.
9. Consequences of Termination or Resignation. Upon termination of
Employee's employment with Employer (i) by Employer with or without cause (ii)
upon the resignation of Employee or (iii) upon the expiration of the term of
this Employment Agreement, the following shall apply:
A. Employee shall be paid his Base Compensation through the
effective date of such termination or resignation;
B. If Employee is terminated by Employer without cause, Employee
shall continue to receive the Base Compensation for a period of six (6) months
(payable as provided in Subsection 5(A)); and
C. the covenants not to compete, solicit or hire and the
confidentiality agreements set forth in Sections 10 and 11 herein below shall
apply in the manner and to the extent set forth herein.
10. Covenants Not to Compete, Solicit or Hire.
A. Covenant Not to Compete. During the term of this Employment
Agreement and for a period of six (6) months from and after the date of
termination of Employee's employment with Employer by Employer with or without
cause, upon the resignation of Employee or upon the expiration of the term of
this Employment Agreement, Employee agrees that he will not directly or
indirectly, either as principal, manager, agent, consultant, officer, director,
stockholder, partner, investor, lender or employee, or in any other capacity
carry on, be engaged in or employed by or be a consultant to or to have any
financial interest in any other casino operation conducting business within one
hundred (100) miles of any gaming facility principally owned or controlled by
Jack B. Binion unless such gaming facility is located in Las Vegas, Reno, Lake
Tahoe or Atlantic City.
B. Covenant Not to Solicit or Hire. During the term of this
Employment Agreement and for a period of one (1) year from and after the date of
termination of Employee's employment with Employer by Employer with or without
cause or upon the resignation
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<PAGE> 6
of Employee or upon the expiration of the term of this Employment Agreement,
Employee agrees that he will not, directly or indirectly, hire, retain or
solicit, or cause any other employer of his or any other person who has retained
Employee as a consultant or independent contractor to hire, retain or solicit,
as an employee, consultant, independent contractor in a supervisory capacity or
otherwise any person who was at any time during the period commencing on the
date three (3) months prior to the Commencement Date and ending on the date of
the termination of Employee's employment hereunder, an employee of or consultant
or independent contractor in a supervisory capacity to Employer, the LLC or any
other gaming operations principally owned or controlled by Jack B. Binion.
C. Acknowledgment. Employee acknowledges that he has carefully
considered the nature and extent of the restrictions imposed upon him and the
rights and remedies conferred upon Employer under this Section 10, and Employee
further acknowledges that the same are reasonable in time and scope are fully
required to protect the legitimate interests of Employer and do not confer a
benefit upon Employer disproportionate to any detriment to Employee.
11. Nondisclosure of Confidential Information.
A. Definition of Confidential Information. For purposes of this
Employment 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. 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 following the termination
of this Employment Agreement, 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 pursuant to this
Employment Agreement.
C. Scope. Employee's covenant in Subsection 11(B) above not to
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
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<PAGE> 7
information in an improper manner or against the wishes of Employer.
D. Title. All documents and other tangible or intangible property
relating in any way to the business of Employer which are conceived or generated
by Employee or come into Employee's possession during the employment period
shall be and remain the exclusive property of Employer, and Employee agrees to
return immediately to Employer, upon its 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 which relate in anyway to the
business, customers, products, practices or techniques of Employer, as well as
all other property of Employer, including but not limited to, all documents
which in whole or in part contain any Confidential Information of Employer which
in any of these cases are in Employee's possession or under Employee's control.
E. Compelled Disclosure. In the event 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. In the event that Employer refuses to contest such a
third party disclosure demand under judicial or administrative process, or a
final judicial judgment is issued compelling Employee to disclose Confidential
Information, Employee shall be entitled to disclose such information in
compliance with the terms of such administrative or judicial process or order.
12. Put Option.
A. Employer grants the right, exercisable in the discretion of
Employee by delivery of written notice to Employer, to require Employer to
purchase the Member Interest (the "Put Option").
B. In the event that Employee notifies Employer of his exercise
of the Put Option pursuant to Subsection 12(A) above, the purchase price payable
by Employer therefor (the "Purchase Price") shall equal to the current fair
market value thereof. For such purposes, the fair market value of the Member
Interest shall be determined by reference to the value of Horseshoe as
calculated for purposes of Horseshoe's stock option plan for the period
immediately preceding the notification of Employer by Employee of the exercise
of the Put Option.
C. Employer shall pay the Purchase Price in three (3) equal
principal installments, with the first payment being due on the first
anniversary of the date that is thirty (30) days after the date upon which
Employee delivers notice to Employer as to his
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<PAGE> 8
exercise of the Put Option. 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 Mississippi, and accrued but unpaid interest
shall be due and payable together with each annual principal installment.
D. Notwithstanding any other provision hereof to the contrary,
the Put Option shall terminate and be of no further force and effect at such
time as any class of equity securities of Horseshoe are registered pursuant to
the Securities Exchange Act of 1934, as amended.
13. Representations and Warranties.
Employee hereby represents and warrants to Employer that:
A. the execution, delivery and performance by Employee of this
Employment Agreement will not conflict with, violate the terms of or create a
default under any other agreement by which Employee is bound, including without
limitation Employee's present employment or similar agreements, whether oral or
written;
B. no Gaming Authority or other Governmental Authority has ever
denied or otherwise declined to issue any gaming license or related
authorization applied for by Employee;
C. Employee is not aware of any facts which, if known to any
Gaming Authority or other Governmental Authority, would cause the refusal of his
application for, or renewal of, any gaming licenses;
D. Employee is not aware of any mental, physical or emotional
condition 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;
E. Employee understands and agrees that Employer is entering into
this Employment Agreement in strict reliance upon the representations and
warranties set forth herein, and that a breach of any of said representations
and warranties by Employee would constitute a default hereunder; and
F. Employee has received and reviewed Employer's "Paid Days
Off/Vacation" policy and understands its terms.
14. Entire Agreement. This Employment 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 with respect to the employment of Employee.
15. All Amendments in Writing. This Employment Agreement may not be
amended orally, but only pursuant to a written instrument
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<PAGE> 9
executed by Employer and Employee and it shall not be reasonable for either
Employer or Employee to rely on any oral statements or representations by the
other party that are in conflict with the terms of this Employment Agreement.
16. Arbitration. In the event of any dispute or controversy between
Employer and Employee with respect to any of the matters set forth herein, both
Employer and Employee agree to submit such dispute or controversy 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. This
provision does not in any way affect Section 23 of this Employment Agreement.
17. Governing Law. This Employment Agreement shall be governed and
construed in accordance with the internal laws of the State of Nevada.
18. Notices. Any notice required or permitted to be given in connection
with this Employment 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, NV 89101
Attn: Jack B. Binion
If to Employee: Mr. Larry Lepinski
595 Fairway Drive
Hernando, MS 38632
18. Assignment. This Employment 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 Employment Agreement is a
personal services agreement, and that Employer is entering into this Employment
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.
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<PAGE> 10
19. No Third Party Beneficiaries. This Employment Agreement is solely
for the benefit of Employer and Employee, and in no event shall any other person
or entity by deemed or construed as a third party beneficiary of any of the
provisions or conditions set forth herein.
20. Waiver. No waiver of any term, condition or covenant of this
Employment 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.
21. Construction. Whenever possible, each provision of this Employment
Agreement shall be interpreted in such manner as to be effective or valid under
applicable law, but if any provision of this Employment 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
Employment Agreement. Without limiting the generality of the foregoing, if any
court determines that the term or the business or geographic scope of the
covenants contained in Subsections 10(A) or 10(B) is impermissible due to the
extent thereof, said covenant shall be modified to reduce its term and/or
business or geographic scope, as the case may be, to the extent necessary to
make such covenant valid, and said covenant shall be enforced as modified.
22. Withholding. Employer shall withhold from any payments due to
Employee hereunder, all taxes, FICA or other amounts required to be withheld
pursuant to any applicable law.
23. Injunctive Relief. Employee and Employer each acknowledge that the
provisions of Sections 10 and 11 are reasonable and necessary, that the damages
that would be suffered as a result of a breach or threatened breach by Employee
of Sections 10 and/or 11 may not be calculable, and that the award of a money
judgment to Employer for such a breach or threatened breach thereof by Employee
would be an inadequate remedy. Consequently, Employee agrees that in addition to
any other remedy to which Employer may be entitled in law or in equity, the
provisions of Sections 10 and 11 may be enforced by Employer by injunctive or
other equitable relief, including a temporary and/or permanent injunction
(without proving a breach therefor), and Employer shall not be obligated to post
bond or other security in seeking such relief. Employee hereby waives any and
all objections he may have and consents to the jurisdiction of any state or
federal court located in the State of Nevada or Louisiana and hereby waives any
and all objections to venue.
24. Counterparts. This Employment Agreement may be executed in any
number of counterparts, each of which shall be deemed an original but all of
which together shall constitute a single instrument.
IN WITNESS WHEREOF, the undersigned have executed this Employment
Agreement as of the day and year first above written.
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<PAGE> 11
"EMPLOYER" HORSESHOE GAMING, INC.
a Nevada Corporation
By: _________________________________________
Jack B. Binion, Chief Executive Officer
"EMPLOYEE" _________________________________________
Larry Lepinski
11
<PAGE> 12
EXHIBIT A
DEFINITIONS
All capitalized terms referenced or used in this Employment Agreement
and not specifically defined therein shall have the meaning set forth below in
this Exhibit A, which is attached to and made a part of this Employment
Agreement for all purposes.
Gaming Authorities. The term "Gaming Authorities" shall mean all
agencies, authorities and instrumentalities of any state, nation (including
Native American nations) or other governmental entity or any subdivision
thereof, regulating gaming or related activities in the United States or any
state or political subdivision thereof, including, without limitation, the
Mississippi and Louisiana Gaming Commissions.
Governmental Authority. The term "Governmental Authority" means the
governments of (i) the United States of America, (ii)the State of Mississippi,
(iii) Tunica County, (iv) the State of Louisiana, (v) Bossier City, Louisiana
and (vi) any other political subdivision of any state of the United States in
which a casino Facility is located, and any court or political subdivision,
agency, commission, board or instrumentality or officer thereof, whether
federal, state or local, having or exercising jurisdiction over Employer or a
Facility, and including, without limitation, any Gaming Authority.
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 a Facility
including, without limitation, all required permits, approvals and any rules,
guidelines or restrictions created or imposed by any Governmental Authority
(including, without limitation, any Gaming Authority).
<PAGE> 1
EXHIBIT 10.25
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (this "Employment
Agreement") is entered into as of this 15th day of October, 1998, by and between
Robinson Property Group Limited Partnership, a Mississippi limited partnership
("Employer"), and Mr. Robert McQueen ("Employee"), and is made with reference to
the following recitals of fact:
RECITALS
WHEREAS, Employer maintains a hotel and casino facility located dockside
in Tunica County, Mississippi (the "Facility" or the "Tunica Facility");
WHEREAS, Employee and Employer have entered into an employment agreement
dated as of June 7, 1994, which was subsequently amended July 1, 1996 and
February 20, 1997 (the "Original Employment Agreement"); and
WHEREAS, Employee is the owner of a 0.144336% member interest in
Horseshoe Gaming, L.L.C. ("Horseshoe"), a limited liability company organized
under the laws of the state of Delaware, such member interest being vested
pursuant to the terms of the Original Employment Agreement; and
WHEREAS, Employer and Employee wish to amend and restate the Original
Employment Agreement and Employer desires to continue to employ Employee, and
Employee desires to continue to accept such employment, pursuant to the terms of
this Employment Agreement; and
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
Employment Agreement and not specifically defined herein shall have the meaning
set forth on Exhibit A, which is attached hereto and by this reference made a
part hereof.
2. Term. This Employment Agreement shall become effective on November
___, 1998 and shall continue in effect for a period terminating October 15,
2001, unless terminated sooner by Employer or Employee pursuant to the terms set
forth herein. Employee's term of employment with Employer shall be deemed to
have commenced, for all purposes, on June 13, 1994, which is the date upon which
such employment commenced pursuant to the Original Employment Agreement (the
"Commencement Date").
3. Position to be Held by Employee. Employee is hereby employed and
hired by Employer to serve and act as the Senior Vice President-General Manager
of the Tunica Facility, and shall perform
<PAGE> 2
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 of Horseshoe Gaming, Inc. (the "Supervisor"). 1.
4. Duties and Responsibilities.
A. General Duties. In his capacity as Senior Vice
President-General Manager of the Tunica Facility, Employee shall have the
responsibility for overseeing the operations of the Tunica Facility and
conducting the day-to-day operations and affairs of the Tunica Facility in a
manner so as to maximize, to the best of his ability, the profitability of the
operation for and on behalf of Employer 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 Supervisor.
B. Specific Duties. Employee shall serve and act as the Senior
Vice President-General Manager of the Tunica Facility, having responsibility for
supervising and directing of 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 and such
other functions as may be delegated from time to time. 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. 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 Tunica Facility. 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, or in any manner involved in the
gaming industry, to the detriment of Employer.
C. 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 agrees that he
will not, during the term hereof, enter into (directly or indirectly) any other
business activities or ventures, other than investments which are passive in
nature (provided no such investment may exceed 5% of the equity securities of
any entity without the prior approval of the Board of Directors).
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D. Directives from Supervisor. In all instances, Employee agrees
to carry out all of his duties and responsibilities as set forth herein pursuant
to the guidance, directives and instructions of the Supervisor, and agrees that
at all times, his authority shall be subordinate to such Supervisor. The wishes
and directives of the Supervisor shall prevail in all matters and decisions as
to which there is a disagreement between Employee and the Supervisor, and
Employee shall carry out any and all lawful directives from the Supervisor to
the best of his ability.
5. Compensation. As compensation for the services to be rendered by
Employee pursuant to the terms of this Employment Agreement, Employee shall be
entitled to receive the following:
1. a base salary of Two-Hundred Thousand Dollars ($200,000) per
year, which may be adjusted annually by a merit increase based upon Employer's
existing policy and an annual performance appraisal of Employee (the "Base
Compensation"), payable in equal semi-monthly installments;
2. a discretionary bonus in an amount determined in accordance
with Employer's bonus plan (the "Bonus"), which bonus for each of calendar years
1998 and 1999 shall be Ninety-Five Thousand Dollars ($95,000). The Bonus for
1999 will accrue per the criteria in the Original Employment Agreement and will
be payable should the Employee leave Employer once it is accrued. For each
calendar year thereafter during the term of this Employment Agreement the Bonus
shall not exceed 50% of the Base Compensation for such year; and
3. the right to participate in any employee stock option or stock
purchase plan that may be adopted by Horseshoe for its executive level employees
and the executive level employees of its gaming subsidiaries (and possibly for
executive level employees of other gaming operations principally owned or
controlled by Jack B. Binion), such participation to be at a level commensurate
with that of other executives performing similar duties and at a similar
compensation level as that of Employee.
6. Fringe Benefits. 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:
A. reimbursement, on an on-going basis, for 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 and the Employee's reimbursement
procedures;
B. participation in Employer's health coverage plan for Employee
and all members of his immediate family, with such plan and the terms of
Employee's participation in such plan to be on terms and conditions determined
solely by Employer;
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C. participation in such pension plans as Employer shall adopt
for all of the employees of the Tunica Facility; it being understood and agreed
that the only pension plan that Employer has adopted at this time is a Section
401(k) form of pension plan;
D. occasional use of a company vehicle as and when needed in
connection with the performance of Employee's duties and responsibilities; and
E. participation in Employer's "Paid Days Off/Vacation" policy.
7. Gaming License. Employer and Employee understand that it will be
necessary for Employee to maintain in full force and effect at all times, a
gaming license required under the provisions of applicable Mississippi law for
persons serving in a similar capacity as Employee. Accordingly, Employee agrees
to maintain such license and otherwise fully comply with all requirements of
applicable Gaming Authorities and Governmental Authorities.
8. Termination with Cause.
A. Employer may terminate Employee for "cause" as provided in
this Section 8. For purposes of this Employment Agreement, "cause" means the
occurrence of one or more of the following events:
i. the revocation, suspension or failure to renew for a
period in excess of ninety (90) days, of Employee's gaming license due to an act
or omission of Employee (or such alleged act or omission upon which the Gaming
Authorities or Governmental Authorities have based their determination to
revoke, suspend or fail to renew the Employee's gaming license;
ii. failure or refusal by Employee to observe or perform
any of the material provisions of this Employment 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 Employment Agreement or
any other written agreement with Employer;
iii. commission of fraud, misappropriation, embezzlement
or other acts of dishonesty or conviction for any crime punishable as a felony
or a gross misdemeanor involving dishonesty or moral turpitude;
iv. unreasonable refusal or failure to comply with the
proper and lawful directives of and/or procedures established by the General
Manager, the Chief Executive Officer, of Horseshoe or the Board of Directors of
Employer or the manager of Employer (or persons of comparable position);
v. the death of Employee or the mental or physical
disability of Employee to such a degree that Employee, in
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the reasonable judgment of licensed physicians retained by Employer, is unable
to carry out all of his obligations, duties and responsibilities set forth
herein for a period in excess of sixty (60) days.
B. Termination of Employee's employment for cause under
Subsections 8(A)(iii) or 8(A)(v) above shall be effective upon notice thereof by
Employer to Employee. Termination of Employee's employment for cause under
Subsections 8(A)(i), 8(A)(ii) or 8(A)(iv) above shall be effective upon fourteen
(14) days' prior notice thereof by Employer to Employee; provided that a factual
basis for termination for cause is included within such notice of termination.
9. Termination Without Cause. Employer in its discretion may terminate
Employee at any time without cause. Following such termination of Employee's
employment without cause Employee shall continue to receive the Base
Compensation for a period of six months (payable as provided in Section 5A).
10. Consequences of Termination or Registration. Upon termination of
Employee's employment with Employer with or without cause or upon resignation of
Employee or expiration of the term of this Employment Agreement, the following
shall apply:
A. Employee shall be paid his Base Compensation through the
effective date of such termination or resignation; and
B. Upon termination of Employee by Employer without cause,
Employee shall continue to receive Base Compensation for a period of six months
as provided in Section 9; and
C. the covenant not to compete, confidentiality and
non-solicitation agreements set forth in Sections 11, 12 and 13 herein below
shall apply in the manner and to the extent set forth herein.
11. Covenant Not to Compete.
1. Covenant. During the term of this Employment Agreement and for
a period of one (1) year from and after the date of such termination of Employee
with or without cause or the resignation of Employee or the expiration of the
term of this Employment Agreement, Employee agrees that he will not directly or
indirectly, either as principal, manager, agent, consultant, officer, director,
stockholder, partner, investor, lender or employee, or in any other capacity
carry on, be engaged in or employed by or be a consultant to or to have any
financial interest in any other casino operation conducting business within one
hundred (100) miles of any Horseshoe facility. Employer and Employee agree that
such covenant not to compete has been given by Employee to Employer for full and
adequate consideration, including, without limitation, Employee's bonus
compensation and stock option plan participation described in Sections 5(B) and
(C) hereinabove.
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2. Modification. In the event that any court of competent
jurisdiction determines that the term or the business or geographic scope of the
covenant contained in Subsection 11(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 said covenant shall be enforced as modified.
3. Injunctive Relief. Employee understands and agrees that it
would be difficult or impossible to ascertain the measure of damages to Employer
resulting from any breach of this covenant not to compete and that injury to
Employer from any such breach may be irreparable, and that 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 11, 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 engaging in such competitive situation with Employer.
12. Disclosure of Confidential Information.
1. Definition of Confidential Information. For purposes of this
Employment 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. 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.
2. Employee Shall Not Disclose Confidential Information. Employee
will not, during the term of Employee's employment and following the termination
of this Employment Agreement, 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 pursuant to this
Employment Agreement.
3. Scope. Employee's covenant in Subsection12(B) above not to
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.
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4. Title. All documents and other tangible or intangible property
relating in any way to the business of Employer which are conceived or generated
by Employee or come into Employee's possession during the employment period
shall be and remain the exclusive property of Employer, and Employee agrees to
return immediately to Employer, upon its 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 which relate in anyway to the
business, customers, products, practices or techniques of Employer, as well as
all other property of Employer, including but not limited to, all documents
which in whole or in part contain any Confidential Information of Employer which
in any of these cases are in Employee's possession or under Employee's control.
5. Compelled Disclosure. In the event 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. In the event that 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.
6. Injunctive Relief. Employee understands and agrees that the
disclosure, use or usurpation of Confidential Information would cause
significant economic detriment to the business of Employer which may be
irreparable and for which monetary damages may be an inadequate remedy.
Accordingly, Employee understands and agrees that 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 the
disclosure, use or usurpation in any manner of any Confidential Information.
13. Non-Solicitation; Non-Hire.
A. Covenant. Employee agrees that for a period of five (5) years
from the date first above written, he will not, directly or indirectly, hire,
retain or solicit, or cause any other employer of his or any other person who
has retained Employee as a consultant or independent contractor to hire, retain
or solicit, as an employee, consultant, independent contractor or otherwise any
person who was at, or within three (3) months prior to, the date hereof, or at
any time subsequent to the date hereof shall be an employee of or consultant or
independent contractor to Employer,
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Horseshoe or any other gaming operations principally owned or controlled by Jack
B. Binion in a supervisory capacity.
B. Acknowledgment. Employee acknowledges that he has carefully
considered the nature and extent of the restrictions upon him and the rights and
remedies conferred upon Employer under this Section 12, and Employee further
acknowledges that the same are reasonable in time and territory and are fully
required to protect the legitimate interest of Employer and does not confer a
benefit upon the Employer disproportionate to any detriment to Employee.
C. Tolling. In the event Employee violates any legally
enforceable provision of this Section 12 as to which there is a specific time
period during which Employee is prohibited from taking certain actions or
engaging in certain activities, then the violation will toll the running of the
time period from the date of violation until the violation ceases.
D. Injunctive Relief. Employee and Employer acknowledge that the
provisions of this Section 13 are reasonable and necessary, that the damages
which would be suffered as a result of a breach or threatened breach by Employee
of this Section 13 may not be calculable, and that the award of a money judgment
to Employer for such a breach or threatened breach by Employee would be an
inadequate remedy. Consequently, Employee agrees that the provisions of this
Section 13 may be enforced by Employer by injunctive or other equitable relief,
including a temporary and/or permanent injunction (without proving a breach
therefor), and Employer shall not be obligated to post bond or other security in
seeking such relief in addition to any other remedy to which it may be entitled
in law or in equity.
14. Put Option.
A. Employer grants the right, exercisable in the discretion of
Employee by delivery of written notice to Employer, to require Employer to
purchase the Member Interest (the "Put Option").
B. In the event that Employee notifies Employer of his exercise
of the Put Option pursuant to Subsection 14(A) above, the purchase price payable
by Employer therefor (the "Purchase Price") shall equal to the current fair
market value thereof. For such purposes, the fair market value of the Member
Interest shall be determined by reference to the value of Horseshoe as
calculated for purposes of Horseshoe's stock option plan for the period
immediately preceding the notification of Employer by Employee of the exercise
of the Put Option.
C. Employer shall pay the Purchase Price in three (3) equal
principal installments, with the first payment being due on the first
anniversary of the date that is thirty (30) days after the date upon which
Employee delivers notice to Employer as to his
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exercise of the Put Option. 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 Mississippi, and accrued but unpaid interest
shall be due and payable together with each annual principal installment.
D. Notwithstanding any other provision hereof to the contrary,
the Put Option shall terminate and be of no further force and effect at such
time as any class of equity securities of Horseshoe are registered pursuant to
the Securities Exchange Act of 1934, as amended.
15. Representations and Warranties.
A. Employee hereby represents and warrants to Employer as
follows:
B. this Employment Agreement, when executed by Employee, will not
conflict with, violate the terms of or create a default under Employee's present
employment or other similar agreements, whether oral or written;
C. Employee has never been denied a gaming application by any
Gaming Authority and Employee currently holds a Mississippi gaming license; and
D. Employee is not aware of any facts which, if known to the
Mississippi Gaming Authorities, would cause the revocation of his license.
E. Employee is unaware of any mental, physical or emotional
condition 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.
F. Employee understands and agrees that Employer is entering into
this Employment Agreement in strict reliance upon the representations and
warranties set forth herein, and that a breach of any of said representations
and warranties by Employee would constitute a default hereunder.
16. Entire Agreement. This Employment 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 the Original Employment Agreement
(including all provisions of such agreement that by its terms survive
termination), with respect to the employment of Employee.
17. All Amendments in Writing. This Employment Agreement may not be
amended orally, but only pursuant to an instrument executed by Employer and
Employee.
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18. Arbitration. In the event of any dispute or controversy between
Employer or Employee with respect to any of the matters set forth herein, then
both Employer and Employee agree to submit such dispute or controversy 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.
19. Governing Laws. This agreement shall be governed and construed in
accordance with the laws of the State of Nevada.
20. Notices. Any notice required or permitted to be given in connection
with this Employment 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: Robinson Property Group Limited Partnership
c/o Horseshoe Gaming, Inc.
4204 Industrial Road
Las Vegas, Nevada 89103
Attn: Jack B. Binion
If to Employee: Mr. Robert McQueen
1992 Tanyard Road
Hernando, MS 38632
21. Assignment. This Employment 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 Employment Agreement is a
personal services agreement, and that Employer is entering into this Employment
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.
22. No Third Party Beneficiaries. This Employment Agreement is solely
for the benefit of Employer and Employee, and in no event shall any other person
or entity be deemed or construed as a third party beneficiary of any of the
provisions or conditions set forth herein.
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23. Waiver. No waiver of any term, condition or covenant of this
Employment 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.
24. Construction. Whenever possible, each provision of this Employment
Agreement shall be interpreted in such manner as to be effective or valid under
applicable law, but if any provision of this Employment 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
Employment Agreement.
25. Withholding. Employer shall withhold from any payments due to
Employee hereunder, all taxes, FICA or other amounts required to be withheld
pursuant to any applicable law.
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IN WITNESS WHEREOF, the undersigned have executed this Employment
Agreement as of the day and year first above written.
"EMPLOYER" ROBINSON PROPERTY GROUP LIMITED
PARTNERSHIP, a Nevada limited
partnership
By: HORSESHOE GP, INC., a Nevada limited
partnership
By:_____________________________________
Jack B. Binion, Chief Executive
Officer
"EMPLOYEE" ________________________________________
Robert McQueen
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EXHIBIT A
DEFINITIONS
All capitalized terms referenced or used in this Employment Agreement
and not specifically defined therein shall have the meaning set forth below in
this Exhibit A, which is attached to and made a part of this Employment
Agreement for all purposes.
Gaming Authorities. The term "Gaming Authorities" or "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 the State of Mississippi, including,
without limitation, the Mississippi Gaming Commission.
Governmental Authority. The term "Governmental Authority" means the
Government of the United States, the State of Mississippi, Tunica County and any
other political subdivision in which the Casino facility is located, and any
court or political subdivision, agency, commission, board or instrumentality or
officer thereof, whether federal, state or local, having or exercising
jurisdiction over Employer or the Facility, including, without limitation, any
Gaming Authority.
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 the Casino and
the related 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).
<PAGE> 1
EXHIBIT 10.26
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
AMENDED AND RESTATED EMPLOYMENT AGREEMENT (this "Employment Agreement")
entered into as of the twenty-third day of November, 1998, by and between
Horseshoe Gaming, Inc., a Nevada Corporation ("Employer"), and Kirk Saylor
("Employee").
RECITALS
WHEREAS, Employer is the Manager of Horseshoe Gaming, LLC, a Delaware
limited liability company (the "LLC"), whose subsidiaries and affiliates have
developed and are currently operating casino and hotel facilities in Tunica,
Mississippi (the "Tunica Facility"), and in Bossier City, Louisiana (the
"Bossier City Facility" and, together with the Tunica Facility, referred to as
the "Existing Facilities"), and who is party to an agreement to acquire
additional casino and hotel facilities in Hammond, Indiana (the "Hammond
Facility") and Joliet, Illinois (the "Joliet Facility" and, together with the
Hammond Facility referred to as the "To Be Acquired Facilities");
WHEREAS, Employer and Employee are parties to an Employment Agreement
dated as of November 6, 1995 (the "Original Employment Agreement") which is due
to expire on November 19, 1997; and
WHEREAS, Employer desires to employ Employee, and Employee desires to
accept such employment, pursuant to the terms of this Employment Agreement, and
in furtherance of such desire Employer and Employee wish to amend and restate
the Original Employment 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
Employment Agreement and not specifically defined herein shall have the meaning
set forth on Exhibit A, which is attached hereto and by this reference made a
part hereof.
2. Term. This Employment Agreement shall become effective on the date
first above written (the "Commencement Date") and shall continue in effect for a
period terminating December 1, 2002, 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 Vice President-Chief Accounting
Officer for 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 Vice President and Chief
Financial Officer of Employer (the "Supervisor") or such other executive of
Employer as directed by Employer.
<PAGE> 2
4. Duties and Responsibilities.
A. Duties. In his capacity as Vice President-Chief Accounting
Officer of Employer, Employee shall have the responsibility for overseeing the
senior accounting operations of the Existing Facilities and the To Be Acquired
Facilities, if acquired, and assisting in the opening of any casino and hotel
facilities to be developed and/or acquired by subsidiaries or affiliates of the
LLC (together with the Existing Facilities and the To Be Acquired Facilities
referred to individually as a "Facility" and collectively as 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 all 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 Supervisor or
the Board of Directors of Employer (the "Board").
B. 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 Employer. In no event
whatsoever shall Employee enter into any commitments or obligations, written or
verbal, or take or omit to take any other action, the result of which would be
to create a conflict of interest between Employer and Employee, or the result of
which would (directly or indirectly) benefit Employee, or any person associated
with or affiliated with Employee, or in any manner involved in the gaming
industry to the detriment of Employer. In all instances, Employee shall perform
his services and oversee his department in a thorough, competent, efficient and
professional manner.
C. 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 agrees that he
will not, during the term hereof, enter into (directly or indirectly) any other
business activities or ventures, other than investments which are passive in
nature provided no such investment may exceed 5% of the equity securities of any
entity without the prior approval of the Board.
D. Directives from the Supervisor. In all instances, Employee
agrees to carry out all of his duties and responsibilities as set forth herein
pursuant to the guidance, directives and instructions of the Supervisor and
agrees that at all times his authority shall be subordinate to such Supervisor.
The wishes and directives of the Supervisor shall prevail in all matters and
decisions as to which there is a disagreement between Employee and the
Supervisor, and Employee shall carry out any and all lawful directives from the
Supervisor to the best of his ability.
5. Compensation. As compensation for the services to be rendered by
Employee pursuant to the terms of this Employment Agreement, Employee shall be
entitled to receive the following:
<PAGE> 3
A. a base salary of One Hundred Fifty Thousand Dollars ($150,000)
per year, which may be adjusted annually by a merit increase based upon
Employer's existing policy and an annual performance appraisal of Employee and
Employer and the LLC (the "Base Compensation"), payable in equal semi-monthly
installments;
B. a discretionary bonus in an amount determined in accordance
with Employer's bonus plan (the "Bonus"), which shall not exceed 50% of
Employee's Base Compensation at the time such Bonus is awarded; and
C. the right to participate in any employee stock option or stock
purchase plan that may be adopted by Employer for its executive level employees
and the executive level employees of its gaming subsidiaries (and possibly for
executive level employees of other gaming operations principally owned or
controlled by Jack B. Binion), such participation to be at a level commensurate
with that of other executives performing similar duties and at a similar
compensation level as that of Employee.
6. Fringe Benefits. 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:
A. reimbursement, on an on-going basis, for 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 and the Employer's reimbursement
procedures;
B. participation in Employer's health coverage plan for Employee
and all members of his immediate family, with such plan and the terms of
Employee's participation in such plan to be on terms and conditions determined
solely by Employer; and
C. participation in such pension plans as Employer shall adopt
for all of the employees of Employer; it being understood and agreed that the
only pension plan that Employer has adopted at this time is a Section 401(k)
form of pension plan; and
D. occasional use of a company vehicle as and when needed in
connection with the performance of Employee's duties and responsibilities; and
E. participation in Employer's "Paid Days Off/Vacation" policy.
7. Gaming License. Employer and Employee understand that it may be
necessary for Employee to maintain in full force and effect at all times, gaming
licenses required by various jurisdictions in which subsidiaries or affiliates
of the LLC are conducting gaming operations for persons serving in a similar
capacity as Employee.
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Accordingly, during the course of his employment, Employee agrees to use his
best efforts to obtain and maintain such licenses, to fully cooperate in the
investigation or investigations to be conducted in connection therewith and
otherwise to fully comply with all requirements of applicable Gaming Authorities
and Governmental Authorities.
8. Termination
1. Termination With Cause. Employer may terminate Employee for
"cause" as provided in this Section 8. For purposes of this Employment Agreement
"cause" means the occurrence of one or more of the following events:
i. the revocation, suspension or failure to renew for a
period in excess of ninety (90) days, of any such gaming license due to an act
or omission of Employee (or such alleged act or omission) upon which the Gaming
Authorities or Governmental Authorities have based their determination to
revoke, suspend or fail to renew any gaming license;
ii. failure or refusal by Employee to observe or perform
any of the material provisions of this Employment 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 Employment Agreement or
any other written agreement with Employer;
iii. commission of fraud, misappropriation, embezzlement
or other acts of dishonesty, or conviction for any crime punishable as a felony
or a gross misdemeanor involving dishonesty or moral turpitude or the use of
illegal drugs while on duty for Employer or on premises of any Facility;
iv. unreasonable refusal or failure to comply with the
proper and lawful directives of and/or procedures established by the CEO or the
Board (or persons of comparable or senior position); and/or
v. the death of Employee or the mental or physical
disability of Employee to such a degree that Employee, in the reasonable
judgment of a licensed physician retained by Employer, is unable to carry out
all of his obligations, duties and responsibilities set forth herein for a
period in excess of sixty (60) days.
Termination of Employee's employment for cause under
Subsections 8(A)(i), 8(A)(iii) or 8(A)(v) above shall be effective upon notice
thereof by Employer to Employee. Termination of Employee's employment for cause
under Subsections 8(A)(ii) or 8(A)(iv) above shall be effective upon fourteen
(14) days' prior notice thereof by Employer to Employee. The factual basis for
termination for cause shall be included within any such notice of termination.
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<PAGE> 5
B. Termination Without Cause. Employer in its discretion may
terminate Employee at any time without cause.
9. Consequences of Termination or Resignation. Upon termination of
Employee's employment with Employer (i) by Employer with or without cause (ii)
upon the resignation of Employee or (iii) upon the expiration of the term of
this Employment Agreement, the following shall apply:
A. Employee shall be paid his Base Compensation through the
effective date of such termination or resignation; and
B. If Employee is terminated by Employer without cause, Employee
shall continue to receive the Base Compensation for a period of six (6) months
(payable as provided in Subsection 5(A)).
C. the covenants not to compete, solicit or hire and the
confidentiality agreements set forth in Sections 10 and 11 herein below shall
apply in the manner and to the extent set forth herein.
10. Covenants Not to Compete, Solicit or Hire.
A. Covenant Not to Compete. During the term of this Employment
Agreement and for a period of six (6) months from and after the date of
termination of Employee's employment with employer by Employer with or without
cause, upon the resignation of Employee or upon the expiration of the term of
this Employment Agreement, Employee agrees that he will not directly or
indirectly, either as principal, manager, agent, consultant, officer, director,
stockholder, partner, investor, lender or employee, or in any other capacity,
carry on, be engaged in or employed by or be a consultant to or to have any
financial interest in any other casino operation conducting business within one
hundred (100) miles of any other gaming facility principally owned or controlled
by Jack B. Binion unless such gaming facility is located in Las Vegas, Reno,
Lake Tahoe or Atlantic City.
B. Covenant Not to Solicit or Hire. During the term of this
Employment Agreement and for a period of one (1) year from and after the date of
termination of Employee's employment with Employer by Employee with or without
cause, upon the resignation of Employee or upon the expiration of the term of
this Employment Agreement, Employee agrees that he will not, directly or
indirectly, hire, retain or solicit, or cause any other employer of his or any
other person who has retained Employee as a consultant or independent contractor
to hire, retain or solicit, as an employee, consultant, independent contractor
in a supervisory capacity or otherwise any person who was at any time during the
period commencing on the date three (3) months prior to the Commencement Date
and ending on the date of the termination of Employee's employment hereunder, an
employee of or consultant or independent contractor in a supervisory capacity to
Employer, the LLC or any other gaming operations principally owned or controlled
by Jack B. Binion.
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<PAGE> 6
C. Acknowledgment. Employee acknowledges that he has carefully
considered the nature and extent of the restrictions imposed upon him and the
rights and remedies conferred upon Employer under this Section 10, and Employee
further acknowledges that the same are reasonable in time and scope are fully
required to protect the legitimate interests of Employer and do not confer a
benefit upon Employer disproportionate to any detriment to Employee.
11. Nondisclosure of Confidential Information.
A. Definition of Confidential Information. For purposes of this
Employment 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. 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 following the termination
of this Employment Agreement, 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 pursuant to this
Employment Agreement.
C. Scope. Employee's covenant in Subsection 11(B) above not to
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
relating in any way to the business of Employer which are conceived or generated
by Employee or come into Employee's possession during the employment period
shall be and remain the exclusive property of Employer, and Employee agrees to
return immediately to Employer, upon its 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,
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which are the property of Employer and which relate in anyway to the business,
customers, products, practices or techniques of Employer, as well as all other
property of Employer, including but not limited to, all documents which in whole
or in part contain any Confidential Information of Employer which in any of
these cases are in Employee's possession or under Employee's control.
E. Compelled Disclosure. In the event 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. In the event that Employer refuses to contest such a
third party disclosure demand under judicial or administrative process, or a
final judicial judgment is issued compelling Employee to disclose Confidential
Information, Employee shall be entitled to disclose such information in
compliance with the terms of such administrative or judicial process or order.
12. Representations and Warranties.
Employee hereby represents and warrants to Employer that:
A. the execution, delivery and performance by Employee of this
Employment Agreement will not conflict with, violate the terms of or create a
default under any other agreement by which Employee is bound, including without
limitation Employee's present employment or similar agreements, whether oral or
written;
B. no Gaming Authority or other Governmental Authority has ever
denied or otherwise declined to issue any gaming license or related
authorization applied for by Employee;
C. Employee is not aware of any facts which, if known to any
Gaming Authority or other Governmental Authority, would cause the refusal of his
application for, or renewal of, any gaming licenses required to be obtained by
Employee pursuant to Section 7;
D. Employee is not aware of any mental, physical or emotional
condition 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;
E. Employee understands and agrees that Employer is entering into
this Employment Agreement in strict reliance upon the representations and
warranties of Employee set forth herein, and that a breach of any of said
representations and warranties by Employee would constitute a default hereunder;
and
F. Employee has received and reviewed Employer's "Paid Days
Off/Vacation" policy and understands its terms.
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13. Entire Agreement. This Employment 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 with respect to the employment of Employee.
14. All Amendments in Writing. This Employment Agreement may not be
amended orally, but only pursuant to a written instrument executed by Employer
and Employee and it shall not be reasonable for either Employer or Employee to
rely on any oral statements or representations by the other party that are in
conflict with the terms of this Employment Agreement.
15. Arbitration. In the event of any dispute or controversy between
Employer and Employee with respect to any of the matters set forth herein, both
Employer and Employee agree to submit such dispute or controversy 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. This
provision does not in any way affect Section 23 of this Employment Agreement.
16. Governing Law. This Employment Agreement shall be governed and
construed in accordance with the internal laws of the State of Nevada.
17. Notices. Any notice required or permitted to be given in connection
with this Employment 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, NV 89101
Attn: Jack B. Binion
If to Employee: Mr. Kirk Saylor
_______________________________
_______________________________
_______________________________
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18. Assignment. This Employment 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 Employment Agreement is a
personal services agreement, and that Employer is entering into this Employment
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.
19. No Third Party Beneficiaries. This Employment Agreement is solely
for the benefit of Employer and Employee, and in no event shall any other person
or entity by deemed or construed as a third party beneficiary of any of the
provisions or conditions set forth herein.
20. Waiver. No waiver of any term, condition or covenant of this
Employment 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.
21. Construction. Whenever possible, each provision of this Employment
Agreement shall be interpreted in such manner as to be effective or valid under
applicable law, but if any provision of this Employment 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
Employment Agreement. Without limiting the generality of the foregoing, if any
court determines that the term or the business or geographic scope of the
covenants contained in Subsections 10(A) or 10(B) is impermissible due to the
extent thereof, said covenant shall be modified to reduce its term and/or
business or geographic scope, as the case may be, to the extent necessary to
make such covenant valid, and said covenant shall be enforced as modified.
22. Withholding. Employer shall withhold from any payments due to
Employee hereunder, all taxes, FICA or other amounts required to be withheld
pursuant to any applicable law.
23. Injunctive Relief. Employee and Employer each acknowledge that the
provisions of Sections 10 and 11 are reasonable and necessary, that the damages
that would be suffered as a result of a breach or threatened breach by Employee
of Sections 10 and/or 11 may not be calculable, and that the award of a money
judgment to Employer for such a breach or threatened breach thereof by Employee
would be an inadequate remedy. Consequently, Employee agrees that in addition to
any other remedy to which Employer may be entitled in law or in equity, the
provisions of Sections 10 and 11 may be enforced by Employer by injunctive or
other equitable relief, including a temporary and/or permanent injunction
(without proving a breach therefor), and Employer shall not be obligated to post
bond or other security in seeking such relief. Employee hereby waives any and
all objections he may have
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and consents to the jurisdiction of any state or federal court located in the
State of Nevada or Mississippi and hereby waives any and all objections to
venue.
25. Counterparts. This Employment Agreement may be executed in any
number of counterparts, each of which shall be deemed an original but all of
which together shall constitute a single instrument.
IN WITNESS WHEREOF, the undersigned have executed this Employment
Agreement as of the day and year first above written.
"EMPLOYER" HORSESHOE GAMING, INC.
a Nevada Corporation
By: ____________________________________
Jack B. Binion, Chief Executive
Officer
"EMPLOYEE" ____________________________________
Kirk Saylor
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EXHIBIT A
DEFINITIONS
All capitalized terms referenced or used in this Employment Agreement
and not specifically defined therein shall have the meaning set forth below in
this Exhibit A, which is attached to and made a part of this Employment
Agreement for all purposes.
Gaming Authorities. The term "Gaming Authorities" shall mean all
agencies, authorities and instrumentalities of any state, nation (including
Native American nations) or other governmental entity or any subdivision
thereof, regulating gaming or related activities in the United States or any
state or political subdivision thereof, including, without limitation, the
Mississippi and Louisiana Gaming Commissions.
Governmental Authority. The term "Governmental Authority" means the
governments of (i) the United States of America, (ii)the State of Mississippi,
(iii) Tunica County, (iv) the State of Louisiana, (v) Bossier City, Louisiana
and (vi) any other political subdivision of any state of the United States in
which a casino Facility is located, and any court or political subdivision,
agency, commission, board or instrumentality or officer thereof, whether
federal, state or local, having or exercising jurisdiction over Employer or a
Facility, and including, without limitation, any Gaming Authority.
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 a Facility
including, without limitation, all required permits, approvals and any rules,
guidelines or restrictions created or imposed by any Governmental Authority
(including, without limitation, any Gaming Authority).
<PAGE> 1
EXHIBIT 10.27
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 Urs
Vogel ("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 126,245 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 November 1, 1995. Notwithstanding the foregoing, in the event
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Jack B. Binion (including any entities through which Jack B. Binion holds his
ownership interest in the 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,
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Optionee's, designee, legal representative, or legatee, the successor trustee of
Optionee's inter 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); Unless Optionee has
simultaneously, with such exercise of the Option, also
exercised his "put" right set forth in Section 13 hereinbelow,
in which case no consideration need be paid by Optionee, but
the exercise price shall be deducted from the proceeds to be
received by the Optionee upon determination of Fair Market
Value through agreement or completion of the appraisal process
set forth herein;
(c) unless the "put" right has been exercised by Optionee, 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
(d) unless the "put right has been exercised by Optionee, 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 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
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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 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
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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:
Urs Vogel
8576 Grandview Lake Drive
Walls, MS 38680
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. Put/Call Option Upon Termination. In the event of the termination
of Optionee's employment with Company, for whatever reason, then the Company
shall have the right to purchase (the "Call right") the Units of Optionee,
acquired pursuant to the terms of this Agreement, at the Fair Market Value of
such Units as determined pursuant to the terms of this Agreement (the "Purchase
Price"). In a similar fashion, Optionee shall have a right to require the
Company to purchase back his Units in the Company (the Put right") at the
Purchase Price. The Company or the Optionee, as the case may be, may exercise
their respective rights provided for in this Section 13 by tendering written
notice to the other party of its exercise of such right within thirty (30) days
after the termination of Optionee's employment an/or consulting relationship
with the Company. In the event that either right described herein should be
exercised by the Optionee or the Company, then the Optionee and the Company
agree to promptly convene and attempt in good faith to determine the Fair Market
Value of the Units to be purchased by the Company from Optionee. In the event
that the Company and the Optionee
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<PAGE> 6
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 a 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 on the Fair market Value of the
Units to be purchased by the Company. If unable to agree, then each appraiser
shall, within thirty (30) days thereafter, prepare his own independent appraisal
report and such report shall be submitted to the Company and the Optionee.
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 Company's acquisition of
Optionee's Units.
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
Optionee's Units 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, each of the appraisers
shall be entitled to submit their appraisal report and testify on behalf of the
Company or the Optionee. The arbitration panel, after hearing all evidence
desired to be submitted by the Company and the Optionee, shall determine said
Fair Market Value and such decision by said arbitration panel shall be binding
upon the Company and the Optionee. The cost of the arbitration shall be borne
equally by the Company and the Optionee.
The Purchase Price to be paid by the Company, 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 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 third payment shall be due
and payable two (2) years thereafter; provided, however, that if the Purchase
Price is less than $750,000 then the entire Purchase Price shall be paid to
Optionee in one lump sum within ten (10) days after determination or agreement
as to Fair Market Value.
Notwithstanding the foregoing , in the event that any of the Company's loan
agreements prohibit payment of the Purchase Price to be made over the period set
forth above, then the Optionee agrees that the Purchase Price shall be paid in
equal principal installments over the time period permitted by such loan
agreements, but in no event in excess of five (5) years, with such principal
payments to be made on an annual basis. In addition, such obligation shall bear
interest at the prime rate of interest, as quoted from time by the largest
commercial bank, in terms of
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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 the Optionee agree that all 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
similar types of partnerships or corporations.
The Company shall bear the cost of its appraiser, the Optionee shall bear the
cost of its appraiser, and the Company and the Optionee shall each bear on-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.
IN WITNESS WHEREOF, the Company and Optionee have executed this
Agreement as of the date first above written.
HORSESHOE GAMING, L.L.C.
By:
------------------------------------------
OPTIONEE
------------------------------------------
URS VOGEL
7
<PAGE> 1
EXHIBIT 10.28
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
Glenn Buxton ("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 126,245 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 March 1, 1996. Notwithstanding the foregoing, in the event Jack
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B. Binion (including any entities through which Jack B. Binion holds his
ownership interest in the 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,
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<PAGE> 3
Optionee's, designee, legal representative, or legatee, the successor trustee of
Optionee's inter 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); Unless Optionee has
simultaneously, with such exercise of the Option, also
exercised his "put" right set forth in Section 13 hereinbelow,
in which case no consideration need be paid by Optionee, but
the exercise price shall be deducted from the proceeds to be
received by the Optionee upon determination of Fair Market
Value through agreement or completion of the appraisal process
set forth herein;
(c) unless the "put" right has been exercised by Optionee, 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
(d) unless the "put right has been exercised by Optionee, 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 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
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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 Option or this Agreement, and any determination with respect
thereto or hereto by the Committee, shall be final, conclusive and binding on
all parties.
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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:
Glenn Buxton
1000 Sutton Place, #123
Horn Lake, MS 38637
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. Put/Call Option Upon Termination. In the event of the termination
of Optionee's employment with Company, for whatever reason, then the Company
shall have the right to purchase (the "Call right") the Units of Optionee,
acquired pursuant to the terms of this Agreement, at the Fair Market Value of
such Units as determined pursuant to the terms of this Agreement (the "Purchase
Price"). In a similar fashion, Optionee shall have a right to require the
Company to purchase back his Units in the Company (the Put right") at the
Purchase Price. The Company or the Optionee, as the case may be, may exercise
their respective rights provided for in this Section 13 by tendering written
notice to the other party of its exercise of such right within thirty (30) days
after the termination of Optionee's employment an/or consulting relationship
with the Company. In the event that either right described herein should be
exercised by the Optionee or the Company, then the Optionee and the Company
agree to
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promptly convene and attempt in good faith to determine the Fair Market Value of
the Units to be purchased by the Company from Optionee. In the event that the
Company and the Optionee 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 a 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 on the Fair market Value of the
Units to be purchased by the Company. If unable to agree, then each appraiser
shall, within thirty (30) days thereafter, prepare his own independent appraisal
report and such report shall be submitted to the Company and the Optionee.
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 Company's acquisition of
Optionee's Units.
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
Optionee's Units 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, each of the appraisers
shall be entitled to submit their appraisal report and testify on behalf of the
Company or the Optionee. The arbitration panel, after hearing all evidence
desired to be submitted by the Company and the Optionee, shall determine said
Fair Market Value and such decision by said arbitration panel shall be binding
upon the Company and the Optionee. The cost of the arbitration shall be borne
equally by the Company and the Optionee.
The Purchase Price to be paid by the Company, 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 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 third payment shall be due
and payable two (2) years thereafter; provided, however, that if the Purchase
Price is less than $750,000 then the entire Purchase Price shall be paid to
Optionee in one lump sum within ten (10) days after determination or agreement
as to Fair Market Value.
Notwithstanding the foregoing , in the event that any of the Company's loan
agreements prohibit payment of the Purchase Price to be made over the period set
forth above, then the Optionee agrees that the Purchase Price shall be paid in
equal principal installments over the time period permitted by such loan
agreements, but in no event in excess of five (5) years, with such principal
payments to be made on an annual basis. In addition, such obligation
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<PAGE> 7
shall bear interest at the prime rate of interest, as quoted from 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 the Optionee agree that all 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
similar types of partnerships or corporations.
The Company shall bear the cost of its appraiser, the Optionee shall bear the
cost of its appraiser, and the Company and the Optionee shall each bear on-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.
IN WITNESS WHEREOF, the Company and Optionee have executed this
Agreement as of the date first above written.
HORSESHOE GAMING, L.L.C.
By:
--------------------------------------------
OPTIONEE
--------------------------------------------
GLENN BUXTON
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<PAGE> 1
EXHIBIT 10.29
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
Clifford D. Kortman ("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 126,245 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 December 1, 1995, as amended by that certain First Amendment to
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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 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
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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 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); Unless Optionee has
simultaneously, with such exercise of the Option, also
exercised his "put" right set forth in Section 13 hereinbelow,
in which case no consideration need be paid by Optionee, but
the exercise price shall be deducted from the proceeds to be
received by the Optionee upon determination of Fair Market
Value through agreement or completion of the appraisal process
set forth herein;
(c) unless the "put" right has been exercised by Optionee, 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
(d) unless the "put right has been exercised by Optionee, 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 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
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Company may reasonably 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 Option or this Agreement, and any determination with respect
thereto or hereto by the Committee, shall be final, conclusive and binding on
all parties.
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<PAGE> 5
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:
Clifford D. Kortman
1722 Chestnut Grove Lane
Kingwood, TX 77345
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. Put/Call Option Upon Termination. In the event of the termination
of Optionee's employment with Company, for whatever reason, then the Company
shall have the right to purchase (the "Call right") the Units of Optionee,
acquired pursuant to the terms of this Agreement, at the Fair Market Value of
such Units as determined pursuant to the terms of this Agreement (the "Purchase
Price"). In a similar fashion, Optionee shall have a right to require the
Company to purchase back his Units in the Company (the Put right") at the
Purchase Price. The Company or the Optionee, as the case may be, may exercise
their respective rights provided for in this Section 13 by tendering written
notice to the other party of its exercise of such right within thirty (30) days
after the termination of Optionee's employment an/or consulting relationship
with the Company. In the event that either right described herein should be
exercised by the Optionee or the Company, then the Optionee and the Company
agree to
5
<PAGE> 6
promptly convene and attempt in good faith to determine the Fair Market Value of
the Units to be purchased by the Company from Optionee. In the event that the
Company and the Optionee 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 a 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 on the Fair market Value of the
Units to be purchased by the Company. If unable to agree, then each appraiser
shall, within thirty (30) days thereafter, prepare his own independent appraisal
report and such report shall be submitted to the Company and the Optionee.
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 Company's acquisition of
Optionee's Units.
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
Optionee's Units 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, each of the appraisers
shall be entitled to submit their appraisal report and testify on behalf of the
Company or the Optionee. The arbitration panel, after hearing all evidence
desired to be submitted by the Company and the Optionee, shall determine said
Fair Market Value and such decision by said arbitration panel shall be binding
upon the Company and the Optionee. The cost of the arbitration shall be borne
equally by the Company and the Optionee.
The Purchase Price to be paid by the Company, 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 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 third payment shall be due
and payable two (2) years thereafter; provided, however, that if the Purchase
Price is less than $750,000 then the entire Purchase Price shall be paid to
Optionee in one lump sum within ten (10) days after determination or agreement
as to Fair Market Value.
Notwithstanding the foregoing , in the event that any of the Company's loan
agreements prohibit payment of the Purchase Price to be made over the period set
forth above, then the Optionee agrees that the Purchase Price shall be paid in
equal principal installments over the time period permitted by such loan
agreements, but in no event in excess of five (5) years, with such
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<PAGE> 7
principal payments to be made on an annual basis. In addition, such obligation
shall bear interest at the prime rate of interest, as quoted from 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 the Optionee agree that all 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
similar types of partnerships or corporations.
The Company shall bear the cost of its appraiser, the Optionee shall bear the
cost of its appraiser, and the Company and the Optionee shall each bear on-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.
IN WITNESS WHEREOF, the Company and Optionee have executed this
Agreement as of the date first above written.
HORSESHOE GAMING, L.L.C.
By:
--------------------------------------------
OPTIONEE
--------------------------------------------
CLIFFORD D. KORTMAN
7
<PAGE> 1
EXHIBIT 21.1
HORSESHOE GAMING, L.L.C.
SUBSIDIARIES OF THE REGISTRANT
AS OF DECEMBER 31, 1998
SUBSIDIARY STATE OF INCORPORATION
Horseshoe GP, Inc. (1) Nevada
New Gaming Capital Partnership (2) Nevada
Horseshoe Entertainment L.P. Louisiana
Bossier City Land Corporation (3) Louisiana
Robinson Property Group, Limited Partnership Mississippi
Horseshoe Ventures (4) Nevada
Red Oak Insurance Company Ltd. (5) Barbados
(1) 100% owned by Horseshoe Gaming, L.L.C. and is the 1% General Partner of
both New Gaming Capital Partnership and Robinson Property Group Limited
Partnership.
(2) New Gaming Capital Partnership is the 89% General Partner and a 2.92%
Limited Partner of Horseshoe Entertainment L.P.
(3) Bossier City Land Corporation is 100% owned by Horseshoe Entertainment.
(4) Horseshoe Ventures is owned 50% by Horseshoe Gaming, L.L.C.
(5) Red Oak Insurance Company Ltd is owned 100% by Horseshoe Gaming, L.L.C.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1998 AND IS QUALIFIED IN ITS ENTIRITY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 42,238
<SECURITIES> 41,913
<RECEIVABLES> 9,653<F1>
<ALLOWANCES> 0<F1>
<INVENTORY> 3,548
<CURRENT-ASSETS> 101,836
<PP&E> 436,637
<DEPRECIATION> 61,330
<TOTAL-ASSETS> 560,448
<CURRENT-LIABILITIES> 50,025
<BONDS> 388,718
0
0
<COMMON> 0
<OTHER-SE> 71,151
<TOTAL-LIABILITY-AND-EQUITY> 560,448
<SALES> 15,913<F2>
<TOTAL-REVENUES> 461,176
<CGS> 18,057
<TOTAL-COSTS> 279,888
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 39,861
<INCOME-PRETAX> 25,912
<INCOME-TAX> 0
<INCOME-CONTINUING> 25,912
<DISCONTINUED> 0
<EXTRAORDINARY> 787
<CHANGES> 0
<NET-INCOME> 25,125
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>Notes and accounts receivable-trade are reported net of allowances for doubtful
accounts.
<F2>Net sales are reported net of promotional allowances applicable to tangible
items.
</FN>
</TABLE>
